Business partnerships are in many ways similar to marriages. In fact, they require the same, if not even greater, amount of trust, shared values and strong commitment to a balanced, cordial and long-lasting relationship. In both cases it is crucial for potential partners to learn as much as possible about one another before signing off on the deal; partnerships really work only when the parties involved complement one another well, and all partners have something unique to bring to the table, something that enables them to build on and play off each other’s strengths.
The many benefits which partnerships have to offer make them a really attractive form of owning a business. Their popularity has been steadily increasing since 1980, according to the IRS Statistics of Income Division (SOI) study of partnerships that was based on Forms 1065 and 1065-B filed during the 2013 calendar year. While they do add extra complexity into managing a business, partnerships carry potential for reaching business objectives at a higher rate due to their multiple advantages: low start-up costs, versatile funding options, greater borrowing capacity, limited external regulation and a richer pool of creative resources, just to name a few.
Thriving partnerships share the following major traits:
- Partners have shared vision, goals and expectations
- Partners trust in and rely on one another
- Partners share similar beliefs, approaches to business and sense of work ethic
- Partners possess complementary skills and unique knowledge
- Partners are able to balance out power and control in their business relationship
- Partners have no hidden agendas
- Partners understand and embrace the importance of change and adaptability
- Partners understand the value of and practice effective communication
- Partners are ready and willing to deal with conflict
Successful partnerships are built on the premise of equality, mutual collaboration and shared responsivity. In theory, they are supposed to equitably benefit all parties involved. However, if partners don’t share the same goals, expectations or ways of doing business, their partnership is destined for failure, which will have devastating effects on both the business and personal relationships of the partners.
Any partnership is in trouble when:
- One partner feels like he or she is in it alone
- One partner feels that he or she would rather be in it alone or with a different partner
- Partners don’t see eye to eye on the majority of the aspects of the partnership or the business
- One partner doesn’t hear, or purposely ignores, the voice of the other partner
- One of the partners feels and acts like the “leader” of the partnership
- Partners refuse to acknowledge when they have problems
If any of these warning signs have surfaced in your business relationship, it is vital to take effective and prompt measures. To safeguard a sustainable and profitable future for your partnership, you first need to critically and honestly evaluate the state it is in right now. In some cases partnerships become so corrupted that the relationship is not worth saving, since much bad blood has been spilled and the damage done to the business or personal relationships is irreversible.
If your partnership is not perfect but is still mendable, you need to have an open discussion with your partners about what is working and what is not; reassess your priorities, goals and ways in which you do business; and start off again with a clean slate.
- Don’t assume. In order to prevent future headaches, take the guesswork and ambiguity out of the equation and put things into writing. Just because you think you know each other doesn’t necessarily mean that you do. Before you and your partner enter into an agreement, you should collaboratively draft and agree upon a document that specifies how the partnership will be organized and how it will progress: partnership’s mission and vision; each party’s expectations, duties, inputs and rights; how decisions will be made; how conflicts will get resolved; what will happen to the business in case the partnership is not working and needs to be terminated, etc.
- Allocate roles and responsibilities to each party. Partnerships imply that everything should be “equal” and “equitable” in the business relationship. However, in practice, oftentimes one party has a particular set of skills and unique knowledge and the other party has some different valuable qualities. Don’t try to be each other – recognize the strengths that can help you empower the business, and be what you are good at. It is best for the business, and a sure way to guarantee its long-term success, if the partners have complementary and not competing skills, behaviors and motivations. There are multiple psychometric assessment tools available that can help partners to map out their individual strengths and weaknesses. Having discussed these together, partners will have a greater understanding of each other’s way of doing business, and realize where synergies can be created and pitfalls formed. Consequently, all interested parties can then re-evaluate the initial idea of what their roles in the partnership would have been and take on duties and responsibilities that suit their expertise better.
- Communicate. Communicate. Life gets busy, the business gets busy, and there is never enough time to check in and make sure you are talking with one another. Communication between the partners is one of the most important facets of the relationship; as much as it is essential to have a lucid and open dialog with business clients or customers, it is important to communicate regularly with each other. If the warning signs indicate that your partnership may be in trouble, make effective communication your top priority. In this day and time there really are no excuses for not communicating – e-mail, call, video-conference; the technology is available and you should exercise its advantages. Communication yields the best results when it is carried out in a structured and efficient fashion; inundating your partners with torrents of information is just as counterproductive as having no communication at all.
- Have regular scheduled meetings to check in on how the business is doing and how your vision or priorities might have shifted. Partnerships are not stagnant in their nature; they evolve and morph over time. Therefore, even if you and your partners have signed all the legal paperwork and agreed on everything in the initial stages of the business relationship, you must regularly revise your agreement in order to prevent any misunderstandings or falling-outs from happening. During these sit-downs, discuss with your partners what success looks like to each of you and what obstacles you are facing. If you sense that the conflict might be threatening to jeopardize the partnership, attend to it with utmost urgency; make sure that everyone is aware of the tension and is willing to commit to making changes and resolving issues. Tackling challenging topics and undergoing changes can be difficult, but has to be done if you want to keep your partnership flexible and enable it to thrive long-term. In addition to the communication outlined above, have formal check-ins scheduled with agendas and follow-ups.
- Prepare for problems before they happen. Unforeseen problems and conflicts in partnerships are inevitable, and it would be most careless to assume otherwise. You can hope for the best, but be prepared to manage the worst if it happens. There are many stumbling blocks that have the potential to ruin your partnership, but it doesn’t mean that your business relationship is doomed from the start. You and your partners must be proactive and have a plan as to how you will handle difficult situations. So, just like you buy insurance hoping you’ll live to a ripe old age, but wanting to protect your family in case you don’t, have “insurance” plans for your partnership. Talk about everything that could go wrong and what will happen if it does – and then hope you’ll never have to implement those plans.