Business Partners are the Worst! And How to Fix That If You Still Want One
I’ve never had a business partner, so how do I know this? Simple – I’ve seen dozens (hundreds?) of businesses break up over partnership issues and way, way fewer partnerships actually thrive.
In fact just yesterday in the news was the story of the bitter break up of a thirty-year partnership between the guy who brought Sriracha to the US and the man he partnered with to grow the peppers he needed to make it. If they couldn’t make it work after all the time spent and money made together then how does anyone stand a chance?
Business partnerships are like marriages but harder and they work out less often. And generally for the same reasons – lack of communication and a broken power dynamic. One person wants it more. One person needs it more. One person can walk away and the other one can’t. There are lots of reasons but it usually comes down to the same few general principles.
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Almost all the partnerships not working out stories I’ve been privy to revolve around one or more of these issues:
- One person puts in way more time and effort (or at least feels like they do) than the other and they don’t think the ownership or profit split they started with is fair anymore
- They have different ideas about how to grow or how much to grow
- One person feels like they can do it all without the other person
- One person feels like they are providing more than their share of financial support or sacrificing more to keep things going than the other person
- One person loses interest or motivation in the business or moves away or is otherwise no longer engaged like they were
Most of these are really two sides of the same coin and all basically boil down to the partnership created on paper no longer reflects the reality of how the business runs.
The problem is these issues can quickly create a situation where an otherwise viable and healthy business goes under only because the people who created it can no longer get along. Either because everyone walks away or the partners get into such a battle that the time, energy, and money spent on fighting each other consumes the business from within.
The unfortunate part is that this is highly preventable. The truth is most partnerships should never have formed in the first place! Very often the business started with two or more people when really it should have been just a one-person effort. But the person who really should be solo recruits a partner because:
- They need the money
- They are scared to go it alone
- they need some connection, resource, or skill they don’t have but see in or can get from someone else
As it turns out though, these are two terrible and one often bad reasons to have a partner in business.
Let me explain!
How to Avoid Recruiting a Partner for the Wrong Reasons OR How to Do It Right
So why are these bad reasons? Here we go:
- Need Money: If you recruit a partner just because they have money, you will soon resent them. Because if the business works, it will become self-sustaining and it won’t need money anymore. But the person who gave it to you will still want a say in everything and will often remind you that without their cash you wouldn’t be where you are. Don’t saddle yourself with a long-term partner to solve a short-term cash need. Borrow or take an investment with strict parameters, or find a lower-cost way to start. Giving up ownership forever just for short-term funding is a recipe for disaster.
- Scared: Yes, starting a business is scary. But that’s no reason to drag someone else into it with you! Because once you get past the butterflies and do it, what are they there for? However, they will still want to share the profits and have input on decisions. Don’t do it! Instead, connect with other business owners who are also solo and starting. You’ll have more in common and give up nothing to get their feedback and support.
- Missing Resource: Like money, this is usually a short-term need you’ve filled with a forever equity position. Beg, borrow, or steal this before deciding to partner for it. The only time this works and the only kind of partnership that really lasts is when people come together where there is an even distribution of skills where each needs the other to make the business work at all and these are long-term needs, not something you can quickly just hire.
OK, so what we’ve determined is the only time you should bring in a partner is when you both have complementary skill sets and are bringing equal value to the table. It also helps (in my experience) if you aren’t particularly friends outside of work and that you have both already sat down and discussed your long-term vision and goals and have at least a five-year plan for the business that you both agree on.
If you are then determined to go ahead with this, before anything else is discussed or started, the next conversation to have is how you break up.
Often people don’t want to do this – they think talking about failing is “bad luck” or jinxing it. But trust me, it’s much worse not to talk about it and go through it than to talk about it at the start.
You need to spell out how each person can leave and if one leaves how the business is valued at that point and how the other partner can buy them out. This needs to be a simple, easy formula that will work in week one and also in year five. If it’s super complicated, then even if agreed to now it might be disputed later.
What each person is going to put in to start, what each person is going to work (hours and responsibilities), how the business will be valued, and how one person can buy the other out should all be agreed upon first before anything else. The worst time to be doing this is once you’re already mad at each other and hundreds of thousands of dollars are on the line.
If you can agree on how to break up, what the future looks like for years out, and that each person is bringing equal value (not just money) to the deal and that neither can make it if the other backs out, then you have a better than most chance of success.
Like I said, most partnerships shouldn’t have formed in the first place. If yours already did but it’s breaking any of the rules above, you might want to have that hard conversation now before it’s really ugly.
If you haven’t started one yet, think long and hard about who you are looking at to be by your side on this and why and if you really need that person or if it’s just their money or connections you want (or your potential partner wants from you!).
Go into considering a partnership slowly and say no quickly and only say yes carefully after you’ve read this article a few more times and you’re still sure it’s a good idea. And if you do partner up, best of luck!
