Are You Ready For A Partnership?Posted: April 17, 2013
Have you considered forming a partnership with someone who has complementary skills and/or the financial strength that can help your business? In my 30 years of business experience, I have seen both the positive and negative aspects of partnerships. They are always formed with the right intentions, but unfortunately they do not always result in the desired outcome. In fact, over half of partnerships fail.
I have outlined below four of what I believe are the primary reasons partnerships do not succeed.
1. Unclear Roles
When the role of each partner isn’t clearly laid out from the beginning, conflict is bound to arise down the line. When everyone has the “boss mentality”, it only leads to trouble.
Partners must understand each other’s strengths and learn to trust each other. Open communication is crucial to a successful partnership. It is important that partners are transparent in all of their activity within the business and feel comfortable sharing their thoughts and opinions.
2. Unclear Long Term Goals
Before a partnership is even formed, both parties must discuss their long-term objectives; if these do not match up, there is bound to be a problem in the future.
For a partnership to be successful, each side must clearly define their expectations and aspirations for the business. It does not stop there however. These expectations and goals must be reviewed regularly. All partners should be on the same page throughout their partnership, or at least in the same chapter!
3. Dispute Resolution
Undoubtedly there will be disagreements in any partnership, so it is necessary to instill a procedure to follow for quick resolution. Whether the partner with the most experience has the final say, a compromise can be made, or a third party decision maker is involved, there must be a defined resolution strategy.
4. Disregarding the Formal Agreement
Having a formal shareholders agreement is often overlooked in many partnerships, but it could not be more necessary! Do not disregard these because of their cost or time commitments, you will regret it if something goes seriously wrong.
The document should cover compensation, exit options, death, and other important topics. Everyone’s interest should be protected. Alternatively, it can prove to be very beneficial to develop a charter: a non-legally binding document that creates a structure for the working relationship of both parties.
If you’re entering a partnership, be sure to take all the right precautions to ensure that the relationship will be a healthy and sustainable one!
What are your experiences with partnerships? Let me know what you think in the comments!