Starting a business with partners can provide immense benefits, from combining complementary skills to raising sufficient capital. However, partnerships also come with unique challenges that can sink promising ventures if not navigated carefully.
According to a study by CB Insights, 23% of failed startups cited issues with cofounders as the main reason for shutting down. Personality conflicts, differing visions, egos, and lack of communication frequently plague partnerships.
To boost the chances of an effective, successful alliance, beware of these frequent partnership mistakes:
Check these out!
- 13 Ways to Save Money by Canceling Unnecessary Monthly Subscriptions
- 5 Innovation Strategies: Stop Falling Behind Your Competitors But Crush Them
Common Partnership Mistakes
Failing to Outline Partnership Structure and Terms
One of the biggest partnership mistakes is jumping into a new venture without first outlining the partnership structure, responsibilities, and terms.
Taking the time upfront to draft partnership agreements and operating agreements is essential.
These documents should clearly define crucial aspects such as:
- Ownership percentages and profit-sharing
- Partner roles, duties, and decision-making powers
- Contribution amounts, vesting schedules, funding terms
- Standards for work quality and ethics
- Alignment on long-term vision and values
Partners must have frank discussions about expectations for contributions, work standards, ethics, values, and more.
Getting all policies and expectations in writing early on avoids misunderstandings later.
The partnership agreement should also outline processes for changing terms down the road, adding or removing partners, and dissolving the partnership if needed.
Setting these rules and boundaries from the start makes it much easier to handle changes or disputes professionally.
Not Vetting Potential Partners Thoroughly
Entering into a partnership with someone you don’t know well or haven’t properly vetted can be a recipe for disaster.
Before tying your fortunes together, potential partners should thoroughly research each other, including:
- Reviewing work histories, skills, and areas of expertise
- Checking professional references
- Looking into past ventures and successes
- Assessing working styles and personality traits
Potential partners should also have in-depth discussions about the vision, values, goals, and plans for the partnership.
Getting fully aligned upfront on expectations, working styles, and core principles prevents unpleasant surprises later on.
Taking adequate time to vet potential partners and assess alignment will pay dividends down the road.
Skipping this due diligence opens the doors for clashing work ethics, values, or priorities.
Lacking Clear Communication and Accountability
Frequent, clear communication and accountability are essential ingredients for an effective partnership.
Partners who avoid difficult conversations or fail to promptly address issues wind up with mounting resentments, misunderstandings, and frustrations.
Set recurring status update meetings to discuss priorities, progress, and roadblocks. Provide direct but compassionate feedback when work quality or effort falls short. Document all goals, responsibilities, and decisions in writing.
Also, institute regular check-ins to hold each other accountable as the business scales. Maintaining open and proactive communication takes continuous effort but prevents major problems.
Check these out!
- The 7 Selling Skills That Separate the Pros from the Wannabes
- Maximize Profits: 8 Essential Accounting Tips for Etsy Sellers
Neglecting the Partnership Relationship
With busy schedules and hectic workloads, it’s easy to neglect the interpersonal relationship with your partner. But failing to nurture this relationship is a huge mistake that allows issues to fester.
Make time for candid conversations about concerns, frustrations, or roadblocks. Don’t avoid difficult topics – address them quickly and professionally before they escalate.
Partners should also connect on a personal level through shared meals, activities, or vacations. Investing in building trust and familiarity strengthens the bond and improves collaboration.
Actively managing the health of the partnership is just as important as handling day-to-day business operations.
Failing to Adapt to Changing Needs
The final partnership mistake is failing to adapt as the business grows and needs to evolve. Revisit your original partnership agreement at least annually, updating terms or duties as required.
For example, a partner who handled operations early on may need to focus more on high-level strategy as you scale. Expect roles and responsibilities to change over time.
Check-in regularly as a partnership to ensure everyone feels fulfilled while playing to their strengths. Adjust roles or hire help if responsibilities become lopsided. Renegotiate profit splits if workloads change substantially.
Staying flexible and communicating regularly as the business grows is key. A partnership that worked well initially may need restructuring at 10 or 50 employees. Adaptability is critical.
Check this out!
Micromanaging Your Partner
Micromanaging your partner by constantly questioning their decisions or needing to control every detail will breed resentment and stymy productivity.
Give your partner space to use their expertise and talents. Offer input when sought but avoid nitpicking. Focus on aligning around strategy and vision rather than specific tasks.
Foster open communication and give regular performance feedback. But refrain from dictating day-to-day work. Micromanagement erodes trust and limits growth.
Unequal Contributions and Commitment
A partnership quickly becomes lopsided if one partner contributes more capital, works longer hours, or puts in more effort. Resentment builds when contributions and commitment levels are unequal.
Have ongoing discussions about responsibilities and effort. Rebalance workloads if needed and hire support staff for more capacity.
Renegotiate equity splits to reflect substantial changes in contributions. Both partners should feel valued and fairly compensated for their investment.
Not Separating Business and Personal
Mixing business and personal relationships can create issues with boundaries, expectations, and communication styles.
Set times for business meetings versus casual hangs as friends. Discuss work matters objectively, not emotionally.
Avoid making assumptions and read into behaviors based on the friendship. Maintain professionalism in business dealings.
Having Unclear Decision-Making Policies
Ambiguity around how decisions get made, from daily operations to high-level strategy, leads to conflict and inefficiencies.
Outline decision-making authority and processes in your partnership agreement. Revisit periodically as the business evolves.
Align on which partner has the final call for different types of decisions. Foster collaborative discussion but avoid stalemates.
How can partners resolve conflicts?
Have candid discussions focused on mutual understanding. Compromise where possible and agree on a shared solution. Seek mediation if needed. Ultimately, some partnerships cannot be salvaged.
Avoiding these common partnership pitfalls from the outset allows co-founders to build a thriving, sustainable business together over the long haul.
With strong communication, accountability, adaptability, and active relationship management, most partnership mistakes can be averted.
Frequently Asked Questions
What are some key elements to include in a partnership agreement?
Some key elements are ownership percentages, partner roles and responsibilities, decision-making policies, contribution amounts, standards for quality and ethics, intellectual property rights, funding terms, and dissolution procedures.
How often should partners have status update meetings?
Partners should have regular status meetings at least every 2-4 weeks. Frequency can increase as the business grows. Meetings ensure alignment, accountability, and open communication.
What are signs a partnership isn’t working out?
Signs include lack of communication, avoidance of difficult conversations, personality conflicts, differing priorities or values, imbalanced workloads, and inability to compromise or problem-solve together.
What other partnership mistakes have you encountered? Share your thoughts below.