6 Top Reasons Business Partnerships Fail

Business partnerships entail different entities coming together towards achieving a goal. So, this partnership comes with several merits because they make partners come together with complementing skills and share startup costs and the associated risks. However, it is essential to know the top reasons business partnerships fail as this would help to prevent eventualities.

Besides, the merits of business partnerships can also become demerits, because reports have it that between 50% to 80% of these partnerships ends up as a failed venture. This is a high failure rate. The reasons business partnerships fail might differ between partners but a pattern might emerge after talking to people who have experienced the same.

Business Partnerships

Here Are The Top Reasons Business Partnerships Fail;

Bringing In Personal Relationships Into Business

It’s discovered that partnerships among friends or family businesses turn out successful, so, coming into partnership with someone known to you can be very attractive. Therefore, the money factor changes everything like in a marital relationship. The money issue happens from time to time and this is usually never resolved.

So, any business partnership that would be successful must be hinged on the talents, personalities, experiences, and strengths of the prospective partners. For instance, a friend or family member must bring a lot more into a partnership than just a personal relationship.

Your business lives must be isolated from your personal life because this would enable you to present open and serious discussions with partners about difficult goals, financial decisions.

Also, it’s important to have a detailed partnership agreement so that issues like job roles and finances are clearly defined before establishing the business. Know that when your reputation and finances are on the line in a business partnership, a simple handshake between friends and family members is not sufficient.

A business partnership with friends or family members if arranged well can be profitable and rewarding, but partnership can lead to chaos among family members and destroy friendship permanently.

If There Is No Success In View

It takes perseverance and patience for any business to be successful, so partners must be ready to make a long-term commitment. However, seasons of dwindling revenue or lack of business can affect the psychological impact on partners and eventually lead to conflict especially if the business is taking its toll on the finances of the partners.

If for example a partner has previously been employed having a steady paycheck and benefits might be tempted to withdraw on their decision of becoming an entrepreneur if the business investment is not successful. At this juncture, there must be something to boost morale and examine hindrances to success

Certainties of success do not happen in business, and the advantages of a partnership venture cannot be a substitute for an unrealizable business idea.

Therefore, for any business partners to succeed in the long-term, thorough business planning is encouraged before and after startup – these include reasonable cash flow, revenue projection, proper research, and availability of sufficient equity and debt financing.

Having Different Value System

A partnership does not succeed because the partner’s values are not in tandem with the values and/or goals of the organization. As the business grows, these differences in value systems continue to evolve and become a source of friction among partners.

Before entering into partnership business, individuals must come together and agree on the following;

  • Their vision for the company
  • The long-term objectives

The Reason For Becoming An Entrepreneur

Hating your jobs or the craving to become rich could be motivating factors for starting a business but these can blindfold one to the realities of becoming an entrepreneur. Individuals embarking ongoing into their first business venture must be realistic about the prospect of the business and lower their expectations in the case of disappointment.

Potential partners can disagree on their visions for the organization and have divergent views on the long-term goals of the organization. For instance, a partner may view the business as an alternative way of earning a living without plans for future expansion while another partner may have expansion plans for the company with branches around, large staff, and taking the company public.

Therefore, to prevent conflict in the long-run, partners must agree on the visions of the company through the vision statement and in the sections of the business plan. This would help to formalize the long-term goals of the company. 

Absence Of Trust

Any business partnership that would be successful must be established on an honest and open relationship between partners. So, nothing breaks down a partnership faster than the absence of trust. Because of the shared liabilities in the partnership venture, unethical practices from any of the partners would put every other at risk.

The following are some questions that you can ask about partners that you are not familiar with before going into any partnership arrangement;

  • Do they have good reputations in the community?
  • Any previous legal difficulties
  • Have they handled any business before? If yes, how were they perceived by partners, employees, customers, suppliers, and so on?
  • Any previous marital or employment issues
  • Any history of bankruptcy, an issue with tax authorities, or poor credit rating
  • Would they be willing to agree to a written partnership agreement where all the important areas of the business are outlined?

Therefore, chances are that anyone with a history of stability and good behavior would make a partner that can be trusted any day and any time.

Clash Of Personalities

Part of the merits of a business partnership is risk-sharing and complementary skills from partners but if there is a clash of personalities among members, trouble might be inevitable. Often, there is bound to disagreement but when there is a contrast in personality resentment and chaos is bound to happen.

However, business partnerships fail if there is a lack of proper interviewing and evaluation of a potential partner. Their skills, experiences, and talents must be evaluated with questions such as;

  • Are you motivated?
  • Are you good at taking risks?
  • Would you persevere and be patient in handling challenges associated with a new business?
  • Do you have expectations for me and the business?
  • How would you handle challenging situations from customers, employees, and vendors?

Besides, personality differences can be beneficial provided you respect the opinions of partners and share the same vision for the company.

In conclusion, it is advisable to embark on a thorough evaluation of partners before coming up with a detailed written partnership agreement; this would help to necessitate having a successful business partnership venture. Also, the plan should include exit strategies if partners come up with any of the above issues.

 

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