Common reasons why business partnerships fail

On Behalf of | Mar 24, 2021 | Business Litigation

You and one of your colleagues have decided to leave your employer and start your own company. Or, maybe you and your best friend from college have a great idea and are starting your own business. Whatever the situation, if you’re like a lot of business partners, you began your relationship as friends.

Sometimes, friends make great business partners. After all, Ben and Jerry, who were childhood friends, certainly made it work when they went in to business together after college more than 40 years ago.

However, running a successful business together requires a lot more than having a close personal relationships. Looking at a few of the most common reasons that business partnerships fail can help you avoid these pitfalls.

Unequal commitment to the business

If partners aren’t equally invested in the business both financially and personally, the one who is more invested can start feeling resentful. You may have different talents that you’re bringing to the business, but start-ups require hard work from everyone. You also need to be committed to the business over the long term, which means staying with it through the early bumps in the road.

Differing goals and visions for the business

It’s essential to detail these in a business plan to make sure you’re on the same page. Also, determine what role each of you will play. Often, one partner enjoys and is better at handling the financial side, while the other is the “idea” person. It’s helpful to work out who will be responsible for what areas of the business.

Lack of trust

You like your prospective partner and enjoy being around them, but do you trust them to handle the finances of your company? Business partners have to be able to trust one another.

These things apply whether there are two or multiple partners for the business. By drawing up a comprehensive, detailed partnership agreement at the start, you can codify your expectations for the business and each other. This agreement can also give you a reference point if you have business disputes later. An experienced attorney can help with draft your partnership agreement and assist with any legal issues you may have down the road.