Top 4 Reasons Business Partnerships Fail
Posted by Michael Gunther on Tue, Jun 09, 2009 @ 05:11 PM
By Michael Gunther, President of Collaboration, Business Growth
Specialists
Over the last 14 years of consulting small businesses, I have had the privilege of working with many partnerships. In fact, over 60% of our consulting clients have been partnerships - whether they were family partnerships, married partners or friends. Almost 100% of the time the company has come to us because the partnership was now hindering the growth and the success of the business.
These partnerships could have prevented the pain, lost opportunity and profit if they would have defined some clear partnership parameters at the beginning of their working relationship. Often these partners who were once good friends or had strong family bonds, are now operating their business without speaking to one another, or working with a veil of suspicion and with no clear direction or purpose other than to protect themselves.
Here are some key areas that typically are missing from these organizations:
No Clear Communication Structures
What is required for partners in terms of meetings and types of communications that need to be shared with partners?
What are the steps to resolve conflicts?
No Methodology for Business Decisions
How compensation is determined for each partner's role verses their level of ownership?
How are financial decisions made within the organization?
Are roles & responsibilities clearly defined for partners? What are the consequences for non-performance?
No Clear Legal/Financial Documents
What legal documents exist to support the partnership?
What is the financial commitment of each partner?
What happens if one partner does not want to participant in a financial outlay?
No Exit Strategies Clearly Identified
How can the termination of the partnership happen?
What behaviors or actions constitute a mandatory leave or termination?
What does each partner want from this business besides a financial gain?
Partnerships can be highly successful. They can also be a huge impediment to the success of the company if the partners have different agendas and are headed in different directions.
By sitting down with your potential partner or current partner and answering the questions above, you will begin the necessary communication process and structures to build a solid partnership and thus, a solid business. To download an expanded version of these tips, please click here.