Just as with a marriage, no one ever enters into a business partnership expecting it to fail. Yet, also like many marriages that end in divorce, many business partnerships are also unable to weather the storms and go the distance.
By one account, as many as 70% of business partnerships wind up failing. Read on to see whether yours shows any of these common red flags.
Your partner is your spouse, an in-law, relative or friend
It’s only natural to look to your close circle of family and friends when starting a business. After all, these people know and love you and will have your best interests at heart, right?
Until they don’t, that is. The problem of mixing business with family and friends is that your primary relationship with your business partner is susceptible to rifts. These rifts can then adversely affect your business partnership.
What do both you and your partner value most in your business? If one partner is focused more on growth and expansion into new markets and the other expects large profit margins, the competing goals will eventually cause friction.
One partner doubts the other’s commitment
Some partnerships have one partner contributing the funding, while the other puts in “sweat equity.” The partner who is in the trenches every day may come to resent the partner who breezes in whenever they please to drop off a check or question the day-to-day operations.
Alternatively, the partner who is funding the company may question the stewardship skills of the partner who is running the business. Either scenario can lead to bad blood between the partners.
Even if the monetary and work contributions are evenly matched, situations can develop in either partners’ lives where they become distracted from the business — to its peril. The other partner can rightly come to resent this distraction and their partner as well.
Partners get frustrated with lack of success
Very few companies begin earning money hand over fist soon after opening their doors. It takes perseverance and commitment to grow a successful business and begin turning a profit. One or both partners could have unrealistic expectations of the company’s initial revenue stream. They may become unwilling to wait for the business to start turning a profit.
What happens when partnerships fail?
Just as some of the best marriages have the strongest prenups in place, having an exit strategy in the event of a failed partnership is vital. Your Vienna business law attorney can draft a partnership agreement that clearly details a viable path to dissolve the partnership and go your separate ways.
Failing a peaceable resolution, they can represent you in any partnership disputes that arise from your business.