Tag Archives: partnership

Why Most Partnerships Fail

It is often recommended that budding entrepreneurs consider partnerships to establish strong businesses. It is seen as a solution to the ills that befall the “one person”, show. Different skills are combined when are partnership is forged.

Many successful partnerships have been going for years, especially in legal, accounting and medical firms. And businesses benefit greatly from the diversity of skills, as well as the injection of capital.

Unfortunately it is not all smooth sailing. For smaller firms, a substantial amount of partnerships have turned out to be nothing, but disasters. No binding partnership agreement, nor any other amount of counselling or consulting will save a partnership if it starts to unravel.

Business Partnership divorces can be even more traumatic and stressful than a marital divorce. Prolonged, subsequent court battles also takes its toll on the affected individuals.

Unlike bigger firms, partnerships in smaller businesses come about,almost always, as a result of friendship and family relations. Its with this “taking on”, of friends and family, where most of the problems lie.

SCENARIO 1

An established sole proprietorship business, decide to appoint a partner. This partner has never worked in the business since its inception. He is nevertheless, elated to part own a business.
Of course, the new partner is entitled to a salary and demand all the other perks that comes with running a company. When the partner learns that he must forgo his total or part of salary in tough times, the tension starts to mount, inevitably leading to a collapse of the partnership.

SCENARIO 2

A business owner is approached by an “influential deal maker with all the corporate or government contacts”. Out of desperation for business, the current owner gives the deal maker a share of his business. But as months go by, no new business transpires. But our new partner demands a salary and perks. Conflict erupts and that spells the end of the partnership.

The two scenarios, above are not exhaustive, but just two examples of typical, causes of partnership break ups.

In most, but not all, partnerships are people who want the benefits, without the responsibility that goes with running a business. Since we are social beings, we want to extend that friendship into our business lives. Beware, nothing destroys a friendship, like a business relationship, gone sour!Running a business is stressful and demanding, dont add to the pressure by taking on a partner,who cannot handle these challenges. Develop a management team, and delegate, but retain your equity in the company.

It is a fallacy, to think that you need a partner in your business to make it a success. Yes you need help, but does it really warrant taking on a partner?

Take on a partner as your very last resort, when you close to retirement for instance.