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There are a lot of good reasons to take on a business partner – you need an infusion of cash, adding a product line will strengthen your customer relationships and profitability, or you want to enter new markets. The list goes on.
So why do good reasons turn into bad business partnerships?
I’ve worked with numerous business partners, usually after they’ve decided to partner and are now heading for a break-up. Over the years, I’ve uncovered several avoidable causes of bad business partnerships.
Take the case of Tom and Mary. They had worked together before and respected each other’s work. When Tom left the company and decided to go into business for himself, he encountered a prospective client that wanted Mary to be on their account. So what did Tom do? He invited Mary to join his company as a 50% partner and figured it was a small price to pay for this first stellar client.
Fast-forward 3 years and Tom is angry and resentful because Mary is a great account manager, but a lousy business partner. As the company has grown and gained new accounts, the value of that first account has lessened and now Tom is wondering how to get back a majority of the equity in the firm. He has become increasingly belligerent to Mary and Mary epitomizes the walking wounded.
There is rarely just one reason for a faltering or failed business partnership. In Tom and Mary’s case, the first wrong turn came when Tom didn’t ask himself how else he could get Mary, get the account and not give up 50% of the company. He was too excited and too eager to sign the deal. Would Mary have come over as an employee or for less equity? No one can say for sure now.
Lesson #1: Whatever your reason is for considering a business partnership, ask yourself, “How else can I accomplish it?”
Below are some common reasons people take on a partner and a few of the questions they might ask themselves before deciding.
• Need for a specific expertise (sales, financial, etc). “Would hiring someone, outsourcing or creating a strategic alliance be as or more effective?”
• Feeling lonely and disconnected. Wanting to be part of a team. “How else can I get connected? Will a Mastermind group, strategic alliance or an advisory board fill that void?”
• Geographic or product expansion. “Will a strategic alliance, outsourcing or acquisition work as well or better?”
Lesson #2: Don’t assume, just because you’ve worked together before, that you know your prospective partner on a deep enough level to create a successful business partnership.
You’re thinking of partnering with a former coworker – someone you’ve worked with in another company. You reason that you got along well then, he’s a hard worker and he brings an expertise to the business that you don’t have, so it will be a perfect match.
Will that be enough to create a successful and sustainable business partnership? Not necessarily.
Take the case of Richard and Bill. After leaving their former company several years ago, each formed their own company, in a similar field but with unique niches. Two years later, while they were both successful, each wanted to take their company to the next level so they began a conversation about partnering.
They reasoned that by merging their two companies they would be able to offer their market “one stop shopping” in the field of communications. They also assumed that having worked together before, they knew enough about each other to make it work so they took the plunge. Richard and Bill made it legal, created a new name for the company and sent notices out to their clients and industry.
Two years into the new partnership I was called in because frustrations were on the rise and things weren’t going “according to plan”. After two meetings they discovered that they were not at all on the same page when it came to their personal visions for the business and their individual expectations for roles and responsibilities were completely different. They decided to dissolve the partnership.
Author of “Creating New Business Partnerships – A Workbook for Success,” Barri Carian has over 17 years of expertise on what it takes to create a sustainable business partnership, from choosing wisely to feeding and nurturing the relationship. Most of this knowledge has come from conducting dozens of what Barri calls “partnership interventions”, all in an effort to save the relationship, partnership and thus the business. In determining the root cause of partnership problems, Barri realized that most conflicts could have been prevented had the partners invested the time upfront to uncover their own motivations and expectations, get clarity on the values and expectations of their potential partner, and had the courage to have the fierce conversations to come to mutual agreement and understanding.
Her workbook is a culmination of Barri’s experience and contains the methodologies and tools she used in my work with business partners. It is designed as a self-help workbook and is filled with tons of valuable exercises, checklists and tools. In sharing this work it is Barri’s hope to make accessible to the millions of entrepreneurs thinking about a partnership, the information to make better decisions and create successful business partnerships.