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business partner

Business Partner – photo credit: eva.pébar via photopin cc

What seems to be the illusion of a business partnership?

They read like odd love stories that start with perfection and warm fuzzy feelings…then end in divorce-like hatred. Regardless of the size of your company, a failed partnership will end up with you feeling like Harold Hamm.

Partnerships can explode for a number of reasons. And most people can cite someone or some company they knew, that folded because of a poor partnership.

The single biggest thorn is based around “perceived expectations”.

So what are the five biggest reasons to NEVER enter into a business partnership? Thought you’d never ask.

Expectations in work equity: Partners end up having a different view on what is expected out of each other. Has every task possible been designated to the right partner? If there are no clear cut outlines of duties and responsibilities, expect storms to brew.

Expectations in ownership equity: 50/50 style organizations can have a difficult time making decisions if no one is willing to budge. So 51/49 must be better, right? Well, the person with 49% might end up feeling like a 50% owner but will not have the right to vote equally.

Money: How to make it, save it, spend it and dole it out can be a serious stumbling block to a partnership. Rarely, do two (or more) people see eye to eye on how to handle money.

Compensation: Again, perception can rule. Which partner is making the business the most money? Do they have a comparable percentage of ownership? Do both partners have an equal salary? Did one inject money and the other sweat equity? *shudder* Money can be nasty!

Legal Documents: Ok, so you have talked through, and totally nailed, the previous 4 “partnership-killers”. But if you don’t take legal action to have your partnership set up properly, they mean nothing. Spend the money on an attorney to help organize all of these aspects of your business, to include an exit strategy.

Bonus cautionary measure: Many aspects of business can be spelled out in an organizational agreement. But vision is much more difficult to quantify. No one has exactly the same vision for your company as you do. If you do enter into a partnership, talk through the short and long term vision for your company. Be aware of your partner’s vision and drive.

Obviously, the last article 5 Reasons You Should ALWAYS Have a Business Partner and this article have conflicting arguments. There is not cut and dried answer to partnerships.

But do your due diligence. Don’t leave any of it to chance and enter into a prospective partnership with as much confidence as possible.

If there are ANY signs of problems before you seal the deal…STOP. Either back out of the deal or get them ironed out. Do not attempt to fix it later. Later will never come, until it’s too late.

Bottom Line: Do your due diligence…and then do it again, BEFORE you start your partnership.


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About Brian Richardson

Entrepreneur, father, grandfather, Christian, start-up fanatic