Corporate Intranet

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.