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Picking a Partner
The old saying goes that a partnership is a sinking ship. In my experience, this is often true. In a lot of ways, forming a business partnership is a lot like getting married. It starts with high hopes and dreams, reality sets in, one partner thinks the other isn’t working or trying hard enough (or they both think that of each other most likely), and they either work on it or sooner or later the whole thing ends in disaster.
Even the statistics back up this comparison. For example, the often repeated statistic on marriage is that 50% end in divorce, which is about what the failure rate is for business after the first four years (56%). However if we look closer there are some things to learn here. First, the divorce rate is actually much LOWER than most people think and much lower than the failure rate for business partnerships.
Well, actually what I just said is true for college graduates where the divorce rate is 25% and declining. Among non-college graduates it is 50% and holding steady. So what does that tell us about business partnerships? Just a thought but perhaps the answer is that the more educated partners are the more chance that they will succeed. Or putting this in clearer terms, make sure that all the partners have a real expertise that contributes to the business’ success and don’t just take them along because they are your friend.
I made the mistake of making my best friend a partner in a venture and he brought absolutely nothing substantial to the table in terms of either experience or money. Predictably it all ended in a messy disaster including a court case. And speaking only for myself, my divorce was a lot friendlier! Lesson: No partners unless they are vital. Otherwise you can just find and hire the talent that you need to make your business successful.
Here are the four major reasons that I think partnerships (and marriages) fail:
1. Selfishness- One partner insisting that they have to have it their way all the time.
2. Lack of Communication- ignoring a conflict will only make it grow worse, not disappear. Trust me.
3. Lack of Shared Vision- One partner has one goal in mind for the company, and the other something very different. This can only come to no good.
4. Splitting Up is seen as the Easy Answer- No business partnership is likely to end easy, just like the near universal myth of easy divorce. Lawyers are going to get involved and mixed with hurt feelings, well, look out!
Bottom line lesson: If you can avoid partners, great. If you can’t, clearly define all issues in advance, codify them in an agreement (not unlike a pre-nuptial), communicate clearly and directly, and hope for the best!
Posted by Herb Kay on Friday, April 18, 2008
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