Why It Is So Hard to Make Partnerships Work
Whether it be marriage or a business partnership, don’t fall victim of jumping into something.
Partnerships are not easy, whether they are marital or business relationships. Having been a business consultant for many years, I have witnessed many a partnership break up. The reasons for this are numerous, but here are some classic examples:
- Uneven partner duties and careers: When first starting out, having one partner handle the office and another partner handle the field was convenient and a good way to save money. However, as businesses grow, it is almost impossible to maintain equal value when job duties are categorized in this fashion. No one wants to be partners with a foremen or superintendent. Neither does someone want to be a partner with a glorified office manager or bookkeeper.
- Unequal partner growth: Some people want to be the best they can, and others just put in time. Some people yearn to learn new things and make the business grow, while others want to keep the status quo. Some folks are alpha dogs and want to lead the pack, and others are followers. Rarely do people grow in their jobs and personal skills at the same pace.
- Different life goals: As people mature, their life goals and lifestyles change. One person loves to work, and maybe the other values free time. One is married and carefree; the other is trying to support a family. When you own a business, your life and business are closely intertwined. What if one partner wants to retire at 55, and the other at 75?
- Monetary rewards and satisfaction: When a small business matures and becomes profitable, two owners can make $200,000 to $400,000 a year. No matter what each owner does, in reality, you can probably hire someone to do the job cheaper. Throw in job inequity, and you have a real problem.
- Brothers and family: There is an old joke about business partnerships and family. A successful contactor gave 50 percent of his business to his new son-in-law. The son-in-law tried working in the field but after a week told his father-in-law that he was not a field kind of guy. The next week he worked in the office but by week’s end declared he hated the paperwork and office environment. The father-in-law asked what he might do with him if he did not want to work in the field or office. The son-in-law replied, “You could always buy me out.”
I could write the entire article on this subject but will keep it simple. Just because you are kin does not make you equal. Families also bring existing relationships into the company. Show me a family where parents set poor boundaries with children, and I will show you a family where siblings are not great employees. Show me two brothers that enable one another, and I will show you a business in which each partner does not pull his or her fair share.
So what are the solutions and suggestions for fixing the problem? Here are eight tips that could help.
- Have clear job descriptions and objectives for both partners. Regularly evaluate the value each person brings to the business.
- Have monthly and quarterly meetings to communicate and plan business activities.
- Once a year, have an off-site meeting to discuss long-term plans such as retirement, business goals, and what both parties want out of life and the business.
- Consider having a third-party consultant or advisor act as an intermediary.
- If the business is not profitable and has not been profitable for a while, dissolve the partnership. There is no use for the two of you to go broke together. Maybe the business will succeed as separate entities.
- Understand that equal ownership does not have to mean equal pay. Establish a fair market value for each job, and then split profits after each partner is paid fairly for his or her job contribution. However, understand that this still can be an issue if the gap widens.
- Have a written partnership agreement that addresses issues such as disability, death, divorce and buyouts. Understand estate, insurance and other protections that should be in place.
- Have a clear understanding regarding hiring partner children and family members either as successors or merely employees.
As stated in the beginning, whether it be marriage or a business partnership, don’t fall victim of jumping into something. What might seem like a good idea at the time might become a disaster 10 years down the road. If your partnership is not working, make a strong and sincere effort to fix it, and if you can’t fix it, break it up and move on.