Partnerships - Should You Form One?
For many business owners and prospective business owners, there often comes a time when you consider the possibility of forming a partnership with another entity. This entity may be another business, an individual, or group of individuals. This article discusses the issues of forming a partnership with another individual.
Whether you are an existing business owner, or are thinking of starting a new business, at some stage, consideration is often given to going it alone, or forming a partnership. There are many reasons people form partnerships; generally there is a shared goal, or shared recognition of the potential of a particular opportunity.
For a partnership to be successful there has to be more than a shared goal for those involved. An important component is trust on both sides, in conjunction with sound communication between the parties. Below is a list of the advantages of forming a partnership.
Advantages
- Financial - investment and loans can be spread
- Workload - workload is reduced by sharing between two
- Planning - planning can be improved by having two heads looking at ideas
- Stress reduction - stress of running a business can be reduced
- Focus - better focus can be provided by separating responsibility for different areas
- Opportunity - better position to look at opportunities
- Growth - business can grow faster as a result of the above advantages
While each of the points in the above list has merit, the last three, which I like to call FOG provide the greatest advantage to the success of the business and should be a primary consideration when forming a partnership. In relation to FOG and a potential partnership, these are the questions you need to ask yourself.
Questions
- Will the partnership allow me to focus on specific areas of the business, thus improving the operation of these areas?
- Will the partnership enhance the ability to identify and move on new opportunities?
- Will the partnership provide opportunities for greater growth then is presently possible?
If you cannot answer yes to each of these questions, I would suggest that you do not proceed with any potential partnership, as it would not be providing any advantage for the ongoing success of your business.
In an ideal scenario, a successful partnership can provide far greater opportunities and a faster realization of both business and financial growth. There are however disadvantages to forming a partnership and it is worth being aware of some of the pitfalls before embarking on a joint venture. You will notice that the points listed as an advantage also form the disadvantages list.
Disadvantages
- Financial - partners may not agree on financial matters, such as level of investment and remuneration
- Workload - may not be evenly spread between the partners
- Planning - partners may not agree on the direction of the business
- Stress - can increase due to differences mentioned above
- Focus - lack of focus and completion of tasks by a partner
- Opportunity - as with focus, one partner may always be chasing the next big thing rather then the tasks at hand
- Growth - business lacks growth due to the above issues
So why are the two lists the same? There is a dichotomy between the advantages and disadvantages in partnerships. What can be an advantage on one hand, can, if not implemented correctly become a disadvantage.
Why Partnerships Fail
It is a well known fact that many partnerships fail, even ones that are successful. The reasons for the failure are as numerous as the number of failures, but I’ll give you one here that I think is the primary reason for the majority of partnership failure; Perception.
When things are going well, perception is not such an issue, but when problems arise, even little ones, there is the perception that the other party is at fault. One or both partners may feel that the other partner is not pulling their weight, is not committed enough, has lost interest, has lost the hunger, is holding them back, etc, resulting in a breakdown of trust. As I said the reasons are numerous, but the perception is the key.
How To Avoid Failure
There is no simple answer to this, but to avoid the problems of perception, the key component is communication. There needs to be clear and open channels between both parties so that issues can be addressed before they fester into something far more damaging.
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Comments
Hi Michael, good comment. In my own experience and with observing others, I agree with what you have said. Partnerships often begin with good intentions but later degenerate, which doesn’t help either party.
There is often the issue that even though people form partnerships, what they really want is to be their own boss, without having to be accountable to anyone other then themselves.
thanks for the expertise. But if I may ask how can one find PARTNERS online that will be committed to work or how can one make a team that will be successful if one have a marketing oppotunity that will need expert to handle people coming together to achive a common goel in terms of partners were every body have its own specialities.
please I need contrebutors from all expert.
Thanks
Anderson kex E.
kex_ng@yahoo.com
I’ve had many many partnerships over he last 15 years. They never ever work out as one person always ends up doing the most work and being taken advantage of. A partnership from my experience has to be well defined, the roles, and what expected. From what I’ve seen it is only when two or more people have completely different functions or roles, or if the partnership is for a limited job or function - only then do they work.
Example - one of my companies is a call center /virtual office company. I form partnerships weekly to assist new businesses ( many with little or no money). But here we would supply office addresses, a full staff, toll free numbers and so on. Their part of the deal we negotiate - usually links, services etc.
These partnerships last as long as roles and limits are defined.
Example of bad partnerships that never work are when I was a stockbroker. Brokers would partner up and split all revenue 50/50 ( usually) but one person (usually me) would end up working harder and longer and responsible for 80% of the income after a few months. That’s when the partnership dies, when you then are feeling held back by the partner who seems to be milking the situation.