Do Business Partnerships Work?

Over the years I’ve been asked that many times if business partnerships work that I could write a book on the subject!  The answer isn’t as black and white as it may seem.  Let’s put some context around the question – do business partnerships work?

I was in a board room last Thursday with a group of business owners. We were having a social discussion as part of our mastermind group.  As all of you UK-based readers know, that was one of the hottest days for many years.  The air conditioning in the room was on full and we all had a cold drink to help.

One topic generated a lot of discussion, some of it became pretty heated and emotional.  That topic was of course ‘do business partnerships work? We talked about the ups and mostly downs of having a business partner.

The Rise and Fall of a Business Partnership

As the discussion progressed it became very clear that there are some common stories to the rise and fall of a business partnership. Here’s what we talked about:

The Rise of a Business Partnership

Imagine the scene:

A couple of enthusiastic people get talking, often over a drink, about some problem in their current job.  They talk about the inefficiency, wasted opportunities and how they would do it much better if they were in charge.  Maybe something triggers their move to set up their own business: redundancy, being approached by a client to go it alone, not getting a promotion, etc. Next, its working from the dining room table, renting an office or factory space. Calling in favours, asking for help, doing whatever is necessary to win work and get paid. The partners share the workload, maybe one focuses on soles, the other on operations.

The business grows, employees come on board and the business is no longer a start-up.  What happens next?

The Fall of a Business Partnership

Our discussion in that air-conditioned board room highlighted a major failing of new partnerships…not putting effort into getting a shared view of the future on important points such as:

  • What the purpose of the business is, the vison, mission and values stuff
  • The business model to follow
  • How the partners will share workloads and responsibilities
  • How the partners will work on resolving any differences.

Preparation is Key To Success

In fact that up-front preparation is like a pre-nuptual for a marriage!  I read somewhere that break-ups in new businesses can be 30% higher than marriage divorce rates!

And just like a marriage the effort in up-front preparation usually improves the success of the relationship.

Shareholders Agreements

One part of that preparation should be getting a shareholders agreement sorted. A shareholders agreement is a contract between the owners of a company that defines their roles, rights and obligations as shareholders in the company.

I hear from too many business partners that they don’t have an agreement in place. Saying that, an agreement isn’t the silver bullet to resolving a relationship breakdown.

The Causes of Failed Business Partnerships

As the cold beers/soft drinks helped cool us down, we shared our thoughts and experiences on the many causes of failed business partnerships. Here are a few typical ones:

  1. Different expectations of the business – such as one partner looking for a lifestyle business and the other looking for high-growth and exit. One common feature of different expectations seemed to come from the partners being significantly different in ages or experience
  2. Resentment about workload and of responsibility sharing – when one party feels things aren’t fair. If the partners don’t communicate and express their views and feelings, that resentment will create irreparable problems. So, stay in contact, keep talking
  3. Different behaviour styles and personality traits. When times get tough opposing working styles can worsen problem areas. The best answer is to seek to understand each others strengths and weaknesses and behavioural styles. Very often though, partners with different styles can work really well together because they recognise how to exploit those differences
  4. Disagreement on critical business decisions. If the partners can’t collaborate and compromise then unresolved disagreements will deepen rifts

The Termination of Business Partnerships

As we concluded our discussion we agreed the termination of a business partnership should have the following features:

  • Make a clean break. Don’t drag things out and let things fester
  • Remain professional. Show respect, stay calm, try to separate emotion from business choices…it’s tough!
  • Use a 3rd party facilitator to ease the process of the break-up and be ready for financial advisors to sort out the nitty gritty
  • Say “thank you” to your partner(s) for the good times you had together
  • Be open and honest, don’t rely on assumptions
  • Don’t be vindictive or penny-pinching…it’s not worth the stress
  • Focus on the best outcome for the businesss and it’s employees
  • Finally…try to be graceful!  It can be hard but that mindset will set you up for your next opportunity

Do Business Partnerships Work?

I took a poll of everybody’s views on whether business partnerships work and these were the summarised answers:

  • When a partnership works, it can be great – motivating, sharing the highs and lows, being in sync and taking on the world
  • Everybody said – before getting together, be careful, get more things sorted up front, if in doubt DON’T do it!
  • When in a business partnership accept the ups and downs, appreciate not working on your own and think about fairness
  • Keep talking to each other, none of us are good at mind-reading!

Another thing we all agreed was that we loved being in a mastermind group.  Sharing problems and genuinely supporting each other is a valuable activity.  If you would like to come along to a peer group taster, click here and I will contact you arrange a date.

Many of the business owners I work with describe me using words like, trusted, giving confidence, supportive, partner, friend. Words are good but working closely with someone on your business needs that ‘know, like, trust’ approach.  Read more about me and if you’d like to come along to a taster session of my peer group, let me know.

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