The Top Reasons Why Business Partnerships Fail - A Comprehensive Guide

The Top Reasons Why Business Partnerships Fail - A Comprehensive Guide
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  • 03 Jan
The Top Reasons Why Business Partnerships Fail - A Comprehensive Guide


Unlike marriage, commercial partnerships should end. Many entrepreneurs have unspoken expectations that their relationships with business partners will last forever, but in reality, these relationships are not intended to last forever. Many commercial partnerships fail, some quickly, others have long and successful partnerships.  In this article, we will discuss the main reasons that make business partnerships fail quickly. 


- Lack of Security

The search for security in business partners means that they are stable enough to continue in the long term. These include financial, mental or even relational security. For example, companies may fail because one partner is irresponsible with personal finances and cannot continue to do business pr project. You may have to have uncomfortable conversations, but they will save your pain in the future.


 - Lack of Communication

 Communication failures between business partners are unfortunately common. One of the factors contributing to this situation is that many co-owners do not consistently allocate time to meet and address ownership issues –meetings are held only occasionally or never. This bad habit will inevitably lead to communication breakdowns. In the case of a breakdown of communication, at least there are some methods to find what has gone wrong, but lack of communication is a sign of lack of planning – who does what, reports and responsibility? In evening planning, partners can play a leading role and do not keep in regular communication with partners, staff and other stakeholders. In many cases, dissatisfaction and mistrust originate from the lack of a good communication plan defined and followed.


- Lack of Mutual Dependency 

You must constantly ask yourself, "Do you need your partner?" and" Do your partner need you?" If you answer both questions "yes", you will have a better chance of thriving. When one party is not dependent on the other, the partner loses focus, and the business relationship disintegrates. Do not confuse dependence with necessity. Dependency only means being better in partnership than not being. 


- Hidden Agendas. 

Partnerships with transparent agendas are good. This is a benefit. However, things get worse when it becomes later apparent that there are other reasons, less than altruistic, to start a partnership. Be clear in advance. Agendas later discovered will inevitably lead to distrust and partnership collapse.


- Different Stages of Life 

Knowing the stages of life of you and your partner is important. For example, if you're an empty nester with two babies in your business partner, both phases of life are significantly different. This does not mean that either of you cannot provide value to the business. It only means that you will have different priorities in your life. It is impossible for two young children's parents to do everything and fix things. On the other hand, you should not expect an empty nester to have the energy to come to work all night long. Simply knowing and recognizing the impact of different stages of life can make you aware of possible challenges. 


- Lack of Transparency

In healthy business partnerships, there must be a division of labour, which usually means that some partners are more regularly needing to interact with data such as financial data and reports than others. This may be necessary in daily operations, but all owners must have continuous and unrestricted access to important company operations and financial performance data. In this case, this is where partnerships are in trouble as responsibility, communication and trust are weakened.


- No Shared Vision 

Falls business partners don't steer the boat in the same direction. After years of close integration, different business partners can develop different plans and aspirations for how they can lead the company. To further exacerbate this situation, many companies only have a vaguely defined and unwritten strategic business plan. Without a formal shared business plan with clear objectives and tactics, every owner can freely sail the boat in any direction he or she feels best.


 - Lack of Trust

Could you leave the business for a month and allow your partner to lead the show? If not, you may want to reconsider it. To make any relationship work, it requires trust. With regard to business, even greater trust is needed. It is not only about your own life, it is also about the lives of employees and clients. Before committing to the next partnership, list each of these factors and mark them. Now you know who you are dealing with.


- Lack of Motivation

Motivation drives an important element in any business. Do you and your partner have a desire to make business work? More importantly, do hunger levels coincide? If you are very hungry and your partner does not, it may lead to resentment towards them, and vice versa. The level of hunger will vary over time. They rarely match exactly at each moment, but it is important that they are relatively consistent over a long period of time. The long-term inconsistency between the two levels of hunger will probably lead to frustration and ultimately failure. There was no need for partnership at first. What happens when you enter into a partnership and realize that it is not what you want? Overtime, you find it uncomfortable to give up some of your power. You start to notice the irritating habits of your partner. You like to be your own boss and manage your own staff. You discover that you could achieve what you intend to achieve in another way. For these companies, a few research planning at the beginning of their partnership journey could save them experience.


- Failure to stay in your path.

Even if the roles of each partner have been defined, sometimes a partner moves and participates in behaviour that deviates from others or processes in the company. When this happens, the offending owner usually acts with good intentions, but disturbance behaviour is often not controlled because it is difficult for any organization to tell the owner "to stay on your way". However, if this continues, the partnership and business may suffer. Misaligned end goals Having an unified end goal is crucial. Before joining the partnership, all parties should outline the final goal of the company. Creating long-term sustainable profits? Sell? Will it be passed on to your relatives? Knowing the end will make it easier to move the business forward. The end galangals change. A few years after the operation, one party may want to withdraw, so you should ensure you cover the way you will deal with these possible scenarios.


- There is no policy, procedure or documented system.

This is also related to the problem of too much, too fast. The partners will bring to the company their existing ideas on systems and processes that need to be rationalized for the new company. The company may lead to more staff and resources. As in all companies, the venture is at high risk if there is no policy, procedure or documented system.


- Too many chefs in the kitchen.

When meeting, the partner tends to be close to others with similar skills. A good example is the work of a family with a similar background. They may have different technical skills, which form the basis for a partnership, but they may need a partner with business skills. The integration of technical skills to increase market presence may seem attractive, but there is not enough diversity to increase existing skills and experience.


When a partner contributes less to the organization (or is perceived to contribute less), the seeds of discord within the relationship are planted, such as less time, effort, money, and results. This awareness can be a natural progress in many partnerships. If one of the partners is much older than the other, his or her energy and engagement may decrease earlier than the other.


- Partnerships are irrelevant.

This is particularly true for strategic alliances. For many, initial negotiations would have taken place at the level of middle management. Although this concept may have been consistent with the strategic priorities of the time, things have changed. The policy direction is being changed.

- Management and priorities change

Partnerships are irrelevant. This is particularly true for strategic alliances. For many, initial negotiations would have taken place at the level of middle management. Although this concept may have been consistent with the strategic priorities of the time, things have changed. The policy direction is being changed. The financial position changes. Without ongoing leadership commitments, partnership projects may become irrelevant to partners who are interested and prioritized elsewhere.


- Different Values

People are driven by values, which means they make decisions based on their values. Every person puts the importance of his or her own values consciously and consciously. For example, you may value costs savings to increase profits, while your partner values marketing expenses. The final goal is the same, but both see different ways to achieve it. Ensure that your values are slightly aligned, saving you many headaches and arguments. On the other hand, if you and your business partner are in line, you can make decisions faster and move your business forward with fewer problems.


- Incapacity to hire 

professional help Without external help, entrepreneurs face problems far beyond their capabilities. The ball is dropped. Fingers are pointed. Relations become tense. Some owners never fully recognize the need to hire a professional management company and consult with an expert. Other owners see this need, but then they struggle to find, hire and lead these people. Failure to  develop a competent team not only hampers the continuous growth of the business, but also puts the partnership at risk.


In some ways, companies are similar to investment portfolios. Running a business is dangerous and requires a certain level of tolerance. However, companies need more hands-on work and attention. Your risk tolerance should be a bit like that of your partner. If you are a risk-taker and your partner is a risk-averse person, this may lead to consequences. This factor is particularly important when making decisions that lead to business losses. Both sides must recognize the risk and agree on the risk taken by the company.


- Kids don't want to work in business

Within family-owned and led enterprises, a lack of interest, engagement or alignment can undermine business partnerships, no matter how strong family bonds are. In addition to Piercy's valid point, in the exit plan we see other reasons why family problems may undermine the relationship between partners. For example, if one partner has family in the company but another partner does not, it may be that the partners advocate different exit strategies. Partners with children want companies to go to their children, and partners without children want to sell them to outside buyers. These seemingly incompatible exit goals may undermine partner relationships without a plan to adapt to the desired goals of everyone.


One of your partners has a bag: "If your partner has more problems than National Geographic, it may be time to cancel your subscription," Piers wrote. Experienced lawyers also noted that while supporting partners facing serious personal matters was a noble cause, everyone had to protect the company and not allow personal baggage to destroy the whole business. We once worked for a $100 million company where one of the owners had a serious alcohol problem. For years, his partner turned back to support the person, including covering his partner during extended illness and recurrence. However, when a partner was drunk confronting a client, their tolerance ended. The other partners regretted knowing that they had to file a corporate divorce.


- Too much and too fast.

 A partnership company that moves too quickly without involving internal stakeholders is in trouble. Without a good plan, change is slowed down by resistance and fear. Integration of systems and resources takes time. Too much speed without any legitimate reason slows down the process. The strategy of incorporating change enablers and change management plans is more likely to be successful.


- Poor individual performance

 Average performance no longer reduces it in business. Both parties should have high levels of performance in order to give businesses the best chances of growth. The environment is too competitive to keep under-performing enterprises at bay. In order for the company to be successful, both partners must perform well.


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