Did you know that around 70% of business partnerships fail in the United States?
Running a company with a partner can be a challenging task, however, when done right can lead to major success. If you want your company to do well and want to bring in a partner, be prepared to address issues along the way.
Continue reading to discover the worst business partnership mistakes you can make and how to avoid them!
Table of Contents
Trusting Too Easily
One of the most important business partnership mistakes to avoid is trusting too easily.
If you just met someone and want to go into business with them, take the time to see if they are a trustworthy person. You can often find out about their work history and experience with others to see if they are trusting. Otherwise, this will be a gut feeling that you have to follow.
Make sure that your potential partner has all of the resources and skills they require to do their job. If this doesn’t add up with what you are seeing while working with them, they may have fibbed about their experience.
Do your research and spend time with your partner-to-be. This time will help you identify if you trust them and want to do business together.
Assuming You Are On the Same Page
Even with goals, plans, and timelines, business partners can easily find themselves on different pages.
It is never a good idea to assume that your partner is on the same page about an issue or topic. Always talk to your partner and ask them about their opinions and how they would like to proceed. Even if they have a different answer, share your responses as well.
Sharing two perspectives is more beneficial than one. You will be able to think outside of the box with each other and find solutions.
Not Focusing on Financial Planning
Timelines and financial planning play an important role in any business.
Neglecting to focus on these aspects with your partner can lead to major issues down the road. If you want to have a successful company, talk to your partner about where you are getting money from, how much, and what it is going towards.
Breaking financial planning down into smaller parts can help make it easier to talk about and find a solution. Sit down with your partner and discuss budgeting for the year and the upcoming future. Keep in mind that you should also account for accidents and surprise expenses along the way.
By creating a strong financial plan, you can stay on track with goals and easily monitor them with your partner.
Neglecting to Create a Contract
Even if you trust the person with your life, a business partnership agreement on paper is recommended.
Legal contracts are binding and help hold both of you accountable for your actions. This is important if you want to ensure that everything will be followed through on, and they won’t be able to rob you of your business. If you want to learn more about how businesses come together, here is an example of the Upstart Group and Pilot Automotive partnering.
A business contract is essentially the rule that you must follow while working with someone. It will also define how much of the company each of you owns and what happens if someone wants out of the business.
Lack of Communication & Transparency
Communication between businesses and their leadership is crucial for a successful company.
If you are considering working with a partner, make sure that it is someone you can talk to. You should be in constant communication with this person and both of you should be transparent. Fluidly sharing information will keep everyone on the same page and moving forward.
Neglecting to communicate with each other can lead to frustration between both of you and your employees. Never withhold information, as this can delay work progress.
Communication and transparency are essential to building a strong foundation of trust.
Different Goals or Expectations
Goals and expectations help drive the business to future success and progression.
Talk to your partner about where you each see the business heading in the short and long term. This will also help identify expectations that you both have. If your partner wants to open up other locations in the upcoming year, make sure that the goals you discuss are in alignment.
Always make sure that the goals you create a realistic, measurable, and achievable. Having too high of expectations can lead to disappointment and confusion on both ends.
Taking Too Little
At the beginning of the partnership, you and the other person will need to discuss ownership.
Ownership can be 50/50 or anything else. Depending on the resources and time that the partner can commit to, you may earn more or less of the business. Think closely about what you have to offer and ensure that you get a proper portion of the business to account for your additions.
Taking too little of the business can leave you feeling like you have no control or say over things. If you aren’t able to find a reasonable percentage on your own, you can get professional help to identify who should own what.
Avoid These Business Partnership Mistakes
Many business partnership mistakes can occur that make life difficult and money hard to come by.
By utilizing this guide, you can avoid making rookie mistakes. Working with a partner requires communication, trust, and transparency. Focusing on these aspects will help you both stay on the same page and run a successful company.
Don’t be afraid to talk to your partner about expectations of each other. This will help you determine the next steps.
Check out our blog for more articles about the benefits of partnerships and how to successfully manage your business!