Why do so many business partnerships fail?
Running a business is always challenging. Add a business partner into the mix, and things can get even more complex. It is little wonder that so many business partnerships struggle to survive. Some statistics show up to 70% of partnerships fail, however, this does not mean a joint venture is doomed. Understanding common pitfalls is the first step to beating the odds.
Common Reasons Partnerships Fail
Business partnerships bring unique challenges beyond those of a solo enterprise. Several common pitfalls often contribute to partnerships falling apart:
Imbalances in ownership or rewards: If one partner holds a larger equity stake or more decision-making power, or if partners disagree on how profits should be shared, it can breed resentment and mistrust.
Different levels of commitment: One partner might be putting in far more time and effort than the other. These uneven contributions often lead to frustration and conflict.
Skill set gaps or overlaps: If both partners have similar strengths but lack other crucial skills (like marketing or financial management), the business may struggle. Partners can also clash when their abilities do not complement each other.
Clashing visions for growth: Disagreement on the company’s direction or strategy, for example, whether to reinvest profits for expansion or take a more cautious approach can cause major tension if the founders are not aligned on goals.
No clear partnership agreement: Starting a business together without a written Shareholders’ Agreement or partnership agreement means there is no roadmap for decision-making and conflict resolution. Without this guidance, even minor issues can escalate, and partners might have no effective way to resolve serious disagreements.
How to Make Partnerships Succeed
Thankfully, partnerships are not all doom and gloom. When done right, a business partnership can harness the diverse skills and ideas of multiple people to build something greater than anyone could achieve alone. Many successful companies owe their growth to a strong partnership where both parties share a unified vision.
The keys to a thriving partnership include open communication, aligned goals, and mutual respect. Regular check-ins and honest conversations help ensure everyone stays on the same page as the business evolves.
Another smart strategy is bringing in an outside perspective. Involving an independent director or advisor can provide neutral guidance and help resolve conflicts before they escalate. An impartial third party can assist with strategic decisions and keep partners accountable to the business’s best interests. With the right groundwork and support, partners can turn the risks into rewards, and a well-managed partnership can be one of the most rewarding ways to build a business.
For personalised guidance on strengthening your business partnership, feel free to contact SAS Business for a no-obligation chat about how to set your partnership up for success.