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Starting a business might be daunting. The statistics back this up, with a high failure rate inside the first five years and others closing their doors inside five to 10 years. There are many reasons for failure, including a lack of money, insufficient research, and poor marketing. But there is one reason that doesn’t get enough attention: bad partnership.
Most potential business owners are good at what they do or create, but may not have all the skills vital to succeed in the long run. That’s why they give the impression of being for opportunities to open doors with a partner.
How do people find a business partner? Some people use their networks of friends and family to get recommendations. Professionals network at industry events or conferences and find people with similar interests.
People often turn to current coworkers or people they’ve worked with in the past when it comes time to start a business. After all, you know them. You know the quality of their work. You know their goals and aspirations. Or perhaps you do?
I assumed so when I teamed up with a coworker to start a media production company. The idea was that I could handle the sales and creative elements of the company, and my partner would manage the operations and technical elements. On paper, it sounded good. It sounded good to those we approached for loans.
As a bonus, when we worked together at the TV station, we appeared to be in agreement and like-minded in business matters. However, working with one other person is different than running a business with them. That is why some partnerships fail. This is exactly what happened to mine, and as a result, I developed a (*3*) to assist others avoid the mistakes I made. It is vital to approach partnerships properly, or you might have to get a business divorce.
An idea I first explained in my book Small business for big thinkers in 2013 goes beyond the typical issues discussed when considering a partnership, similar to business structure, compensation, and buyout. These are vital, but conflicts often arise from these unclear, gray areas that ought to have been considered but weren’t because you thought you knew the person. This is often the case in partnerships with current or former colleagues.
In my latest book Small business. Big success, I have expanded the concept of a business prenuptial agreement to incorporate several additional areas.
Before you open the door to a potential partner, you need to think about three things.
1. Ownership orientation
Some people are great at their jobs, but may not have what it takes to be an owner. Being an owner means you take responsibility for every part, not only the work in your field. An owner has to be willing to place in the hours, make the tough decisions, and get results. It’s a lot different than being an worker. Some can make that transition. Others cannot.
My ex-partner was more interested in filing reports and mundane tasks than working on vital tasks that will yield results. He liked to “work while you’re bored.” To see if your potential partner has the “right stuff,” ask a few questions. What is your role as a business owner? What is your vision for the company in the first five years? Beyond that? Are there tasks you won’t do for the company? How do you envision our working relationship?
2. Personal and stylistic differences
Family background and upbringing affect how people behave in business. It’s one thing to work side by side with a coworker in someone else’s business, but it’s quite one other to spend a lot of time together building a business. Little things which may have annoyed you suddenly turn out to be problematic. For example, each person’s idea of ideal work hours could be barely different. What one person considers work-life balance might sound lazy to a different. What if one person has a “glass half full” mentality and one other is consistently negative? That can put a strain on a relationship.
When working for someone else, the structure is set by the organization. In a partnership, personalities take control. Unforeseen power plays can occur to realize control. That coworker who seemed gentle suddenly becomes unrecognizable. Or downright controlling. It’s hard to predict how people will react when it involves money and power. That’s why taking the time to find potential issues or differences is so vital before joining forces.
Here are some questions to ask: Do you have complementary personalities? Does your potential partner lead a healthy lifestyle? Is there anything irritating or disturbing about them?
3. Trust
Think about it. When you partner with someone, the way forward for your loved ones and your funds is inextricably linked to them. And it goes beyond money. Your fame is also at stake. If your partner engages in dangerous behavior or acts on the fringe of honesty, it affects your enterprise and your life.
If you can’t communicate with your potential partner on every topic — run, don’t walk away. Communication is key to building trust and the foundation of a successful partnership. Here are some questions to ask in this area. Is your potential partner a good communicator? Are there things he or she seems hesitant to debate? Do they exaggerate the truth?
Collaborating with a colleague or colleague can bring out the best in each parties. The old saying goes, “two heads think better than one.” It’s true. With a partner, you get support and additional expertise. However, it may even be a nightmare if you don’t share common values and open communication. Ask plenty of questions and listen openly before you form a partnership.