Partnerships - A Necessary Evil

I have reviewed some of my earlier writing from my book, Lessons from the Edge, and from my Profit Magazine columns and have decided to share some of what I consider to be the "best of". Here's one on partners:

It’s said that business partnerships are like marriage: easy to get into, messy to get out of. Surely you’ve heard horror stories about breakups that nearly ruin the business, if not the divorcees. When Jana Matthews and I polled entrepreneurs about their worst mistakes for our book, Lessons from the Edge, well over half the stories involved partnerships.

It’s also often said that partnerships are a necessary evil. Whoever came up with that one got it half right. Partnerships are often necessary, but they are not necessarily evil. Whether a partnership goes bad depends largely on what its participants invest in managing it. In fact, there are many simple ways to foster the productivity and longevity of even the most unlikely alliances.

Why does anyone choose to have partners at all? Usually, an entrepreneur requires something only a partner can bring to the table (in exchange for equity, that is), such as money, contacts or a skill set. Sometimes an entrepreneur needs the confidence that can only be provided by working with someone else. Having someone to bounce ideas off can be very helpful—after all, running your own business can get lonely.

You can trace the roots of most failed partnerships to the beginnings of a business. The partners become so enamoured with the potential of their venture that they jump into bed before determining whether they share the same values and expectations. In some cases, entrepreneurs spend more time interviewing and checking the references of prospective employees than they do of their future partners.

Even if they’ve met their perfect match, many partners fail to discuss their respective responsibilities and contributions, such as what happens if more money or resources are needed, how decisions will be made and how they will get out the partnership. And they neglect to put it all in writing. (I’ll grant you that a shareholders’ agreement can be very expensive, but far less expensive than a litigated breakup.)

But some partnerships fail despite their solid foundations. Differences in ambition, work ethic or simply the stage of life can result in the relationship changing midstream.

As in marriage, don’t take your partnership for granted. Renew your partnership vows at least once a year. Go on periodic retreats to review your goals, roles and expectations. And if you don’t? Inevitably, problems and frictions arise that require patience and understanding to resolve. Employing a facilitator or coach to mediate a partners’ retreat can help resolve issues that have percolated to the surface.

Face it: partnerships take a lot of work. To make it a little easier, I’ve compiled a list of my favourite tips and tactics for making alliances fruitful and long-lasting:

1. Check out your prospective partner. Make sure that you share the same values, your skills are complementary and you have the same timelines. A 50-something partner will want to retire when the 30-something partner is just coming into his or her own. Don’t hesitate to conduct a background check: investigate references, do a credit search. Create some conflict during your “courtship” to see how your prospective partner reacts.

2. Put it in writing. Ideally, you should have a shareholders’ or partners’ agreement drafted by a lawyer. The pact should address all aspects of the partnership: what you are contributing, how decisions are made, how disputes are resolved, who is responsible for future capital injections and, most importantly, how you get out of the relationship. Even if you can’t afford a lawyer, at least write something down on the back of a napkin!

3. Have an annual retreat. Get away from the office once a year to review where you’ve been and where you’re going. Revisit your mission statement, business plan, etc. Address any issues or festering problems. Don’t be afraid to have it facilitated by a professional moderator or coach. It may help you resolve some issues or reach higher goals.

4. Get out more. Talk to businesspeople outside of the partnership. An EO or YPO forum or discussion group can provide a useful venue for exploring issues before you are ready to raise them with your partners. After all, your fellow entrepreneurs may have already been there and done that. Better yet, they won’t be afraid to tell you when the problem isn’t your partners, but you.