Why Business Partnerships Fail?

Written By Alla Levin
August 12, 2021

Why Business Partnerships Fail?

Business partnerships have a lot of advantages. They allow two or more start-up entrepreneurs to pool the costs, risks, and skillsets of people involved to have a better chance of succeeding. However, many of the pros in these partnerships can become cons. Statistically, up to 70% of these arrangements fail. Understanding why business partnerships fail helps you avoid these pitfalls. Some of the most common reasons why are the following:

Mixing Business with Personal Relationship

Family businesses and marriages are generally successful. It’s always the comfortable notion of starting a venture with someone you know that attracts many to start a business. However, when money is involved, it will change the dynamics in everything, whether this is for marriage or personal relationships. Money will always be a recurrent problem despite your attempts to fix it, and sometimes, you can’t seem to resolve a seemingly small issue.

Any successful partnership should be based on complementary experiences, personalities, talents, and strengths. Anyone who wants to be your partner should bring more to the table other than just their relationship with you.

It’s best to keep business and personal life separate. With this arrangement, you can always have open and frank discussions with a partner about challenges, difficult decisions, goals, and more without hurting a close personal relationship that you have with your spouse or family.

As with any other venture, it’s important to set up a comprehensive agreement to ensure transparency in the division of work and finances. Simple handshakes between family members or conversations between friends are not enough, especially if your reputation and money are on the line with this venture.

If you do everything correctly, the partnership will become more rewarding, and before long, you’re finding yourself reaping profits. However, the opposite can happen where unsuccessful ventures can permanently destroy friendships or break up family ties—more about successfully growing a business on this page.

Unequal Division and Commitment Among the PartnersUnequal Division and Commitment Among the Partners

Many entrepreneurs know that starting any company will take a huge personal and financial commitment. When you’re the sole proprietor, you’re going to be the one responsible for the failure or success of your business. In a partnership, you will be dependent on others and their contributions. If they don’t have the same level of commitment as yours, this can cause resentment and plenty of sacrifices for one party.

In some instances, one is willing to commit to the funding and make a larger contribution carefully. The other person will make up the difference in sweat equity, which may be reasonable when you put it in a theoretical perspective. However, the “sweat” will be difficult to quantify, and if this is not properly delivered, everything will be a disaster.

Someone who is a working spouse, young children, or art interest can’t fully commit to the work. Other times, it can be difficult for most people to be immersed in a partnership when there are plenty of distractions. It’s important to know that all partners are legally liable, and the actions and decisions can impact the other.

No Successes in Business

It takes perseverance and patience for a company to succeed, and the owners should be prepared to commit to this for the long term. Periods of decline or lack of revenue can take their physical, emotional, and psychological toll on everyone, and there can be conflict as a result.

If the business has reached a point that it’s already draining on the strength of the people involved and being heavy on finances, expect that this won’t sit well. This can be especially if the other individual is used to receiving a hefty paycheck and suddenly barely survive because there are no profits to expect.

When the people involved begin to second-guess whether the venture is worth investing in, it might be time to assess some issues and renew motivation. Success is not a guarantee in businesses, and some of the advantages in partnerships won’t compensate for the lack of preparation of all parties involved or an idea that’s not viable in the first place. Read more about preparations to take in this link here: https://business.gov.au/planning/new-businesses/prepare-yourself-for-business.

Thorough planning is one of the keys to success, and this should be done before and after starting up. Natural cash flows, defining a specific target market, and revenue projects that have more than sufficient financing are all going to contribute to business prosperity.

Why business partnerships fail: different valuesWhy business partnerships fail

Most of the partnerships don’t attain success because they are not often aligned with their goals and values. The business may evolve, and the differences of people involved may become a source of friction.

Before entering into a partnership, all the people involved must be ready to become entrepreneurs, have long-term objectives, and have visions for the company. Wanting to start a venture because you hate a 9 to 5 job will not give you the wealth. This can be a motivation, but you won’t be aware of the realities of running a company.

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