Have you ever seen – or experienced – a business partnership ending badly?
I’ve seen it often. My experience is that out of every ten business partnerships, eight don’t work, one works very well, and one is just okay.
Often, the ones that don’t work have run into problems with each partner’s expectations of the business. In other words, the partners have key differences in their vision, in their targets and what they are trying to achieve in the business and in their risk tolerance. There is conflict in the partnership when one partner wants to go faster than the other, one partner wants to take it easy, or one partner has a higher appetite for risk than the other.
That can mean that a couple of years down the track, one partner is working a bit harder than the other and resentment is starting to build. Or, the business needs a cash injection and one partner has the money and the other doesn’t. One wants to invest time and money in going after a new contract or market share, while the other is happy with a steady, reliable business. That’s when problems start to show up.
The trouble is that there is so much emotion and excitement in starting a new business that the partners often just didn’t talk about these kinds of issues before they got started. A successful partnership needs – clear communication, a lot of what-if planning, and a written set of goals and overarching strategies.
- What if one of the partners wants to leave the business? How will you manage a buy out?
- What if you need a lot of capital suddenly? Whose personal assets will and will not be available?
- How do each of you define “success” in the business? Is there a particular milestone you each want to reach?
- How will you know when the business is “finished”? Do you intended to sell it? Run it forever and keep it in the family?
- How many hours a week are you really comfortable working? What about after the first few years of intense work are over?
- How much of a financial return are you each expecting? Now, and ultimately? If you each have different skills, do you value your time equally?
- How much personal or business debt can you each cope with, before you begin losing sleep over it?
These are the kinds of questions you need to discuss, and put down in writing, to form the basis of a successful partnership. When you’re working together, you need to know what to expect from one another. If you can see from this exercise that your expectations are not aligning on a lot of points, then you may need to consider other options rather than going into partnership.
To find out more about how to become aligned with your partner or team, get in touch with me.