Partnerships are amazing! Until they’re not…

There are numerous ways to structure a business and one of them is to form a ‘partnership’ and partnerships can be amazing until they’re not!

I have had a few business partnerships, some of them were great and some weren’t so great. So here’s 4 important lessons that I’ve learned along the way…

1. The first one is to recognise that not all partnerships will last!

The first mistake most people make is that they enter into a partnership with someone they already have a good relationship with, and while that may be a good thing, it often leads to them taking short cuts that will usually come back to haunt them when things aren’t working out.

Think of it like getting married, you meet someone, you fall in love and one day one of you ‘pops’ the question. He or she says, “yes” and that’s the beginning of a lifetime of harmonious wedded bliss… or not!

2. The second lesson is to understand that the relationship will change!

People change, relationships change, circumstances change, financial situations change, needs change, values change, work ethics change, your health changes, people grow apart, and all those changes have an impact on the relationship.

As things change the relationship or business partnership is put under pressure and what started out as love and undying commitment often turns into frustration, disillusion, and sometimes anger or even hate and irreparable damage can be done to both parties.

3. The third lesson is, ‘it’s important to give the partnership the best chance of succeeding at the beginning’

You don’t go into a marriage thinking it’s not going to work, and you don’t go into a business partnership thinking it’s not going to work.

To give the partnership the best possible chance of succeeding it’s important that you set it up properly at the beginning. Don’t take short cuts in the belief that the trust and relationship between the partners is all that is needed and so in the interest of saving a bit of money you do it all on a handshake and verbal agreement.

In a business, a proper legal partnership agreement is essential, and if it’s done at the beginning when you are both sane and rational people you can avoid a lot of angst and financial loss when there are problems.

I don’t mean to be negative about it, but I also don’t want you to walk ‘starry eyed’ into a disaster that with a little forward planning can be avoided.

4. And the 4th lesson is, ‘it’s not if, it’s ‘when’…

It’s not a case of ‘if there’s a problem’ it’s a case of ‘when there’s a problem or disagreement’ it is inevitable, you can’t avoid it, that’s life! So why not prepare for it at the beginning? At least then you can rationally arrive at an agreed process of the best way to deal with situations before they happen.

To do this you have to ask some really confronting questions of each other. Questions like:

  • What roles and responsibilities will each partner have?
  • In the event that the partners disagree on something what is the process to move forward?
  • Who has the final word with managing staff issues? You can’t have a situation where one partner is undermining the authority of the other in front of the staff.
  • How will the partners be remunerated?
  • If one partner is more productive behind the chair, but the other has other areas of expertise and responsibility, how will that affect remuneration?
  • How and when will partners take holiday?
  • How much money will each partner contribute to setting up the business?
  • In the event that more money is needed to be put in at a later stage, who put’s it in, and how does that affect shareholdings?
  • Who is the financial controller?
  • What happens if one partner wants to buy the other out, what is the formula for how the business will be valued?
  • If one partner is unable to work for long periods of time due to illness, how does that affect the partnership and financial relationship?
  • In the event, that one partner dies what happens to their shareholding in the business?

This is not a finite list of questions but I am sure you get the idea.

I know that some of these questions are confronting but often just asking them is a great learning exercise in itself and sets the partnership and the budding entrepreneurs up for the best chance of success when they experience challenges. Because they will!

Now because this newsletter is longer than usual I have decided to split it into two parts, part 2 will be next week and will address what to do when it’s not working and you’re in the thick of it!

In the meantime please feel free to ask a question or leave a comment in the box below.

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4 responses to “When partners don’t get on. Part 1”

  1. alexander says:

    hi thanks for your advice ,i wish i saw the partnership one 20 years ago ,your advice,is right on,prevention is the best cure,cheers Alexander,

  2. Mark says:

    Yeah really good advice that Anthony, like Alexander wish i’d listend to that 14 years ago. keep up the good work your books are great.

    • Thank’s Mark, I always appreciate the feedback. There are some lessons that need to be learned the hard way, some partnerships are genuinely amazing and last forever, but it’s too much of a gamble to not set things up properly at the beginning.

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