Finding a business partner is easy, but finding the right partner is hard. Neither party enters into a business relationship with the intention of failing. Unfortunately, this happens all too often.
A business partnership can arise when two friends come up with an idea, or even when two people in a marriage work together. No matter the case, people by nature have differences. These differences can be easily overlooked if they don’t take the time and due attention to identify and address them beforehand. For a company to be successful in the long run, the two parties are required to be aligned, as well as stable management.
These are the most common factors that I have seen throughout my professional experience that cause the failure of business society:
1. Different stages in life
It’s important to know what stage of life you and your partner are in. For example, if you are in the ’empty nest’ phase and your partner has two young children, the two stages are dramatically different. This does not mean that either of them is not able to add value to the company. It simply means that they will have different priorities. You can’t expect a father of two toddlers to leave everything and fix something. On the other hand, you can’t expect a mature person with adult, independent children to have the energy to spend the night in the business. Simply knowing and recognizing the impact of different stages of life can help you become aware of potential challenges.
2. Lack of desire
Motivation and drive are important elements for any company to work. Do you and your partner feel like making the business work? More importantly, do their desire levels match? If you have a lot of desire to grow and your partner doesn’t, you could end up developing resentment towards him and vice versa. Desire levels will vary over time. They rarely coincide exactly at any given moment, but it is important that they coincide relatively long-term. A long-term mismatch in the levels of desire between two people will surely lead to frustration and ultimately failure.
3. Misaligned end goals
Having an aligned end goal is critical. Before joining the society, everyone involved should describe the ultimate goal of the company. Is it creating long-term sustainable profits? Is it to sell? Is it to pass it on to your family? Knowing the goal they have in mind will make it much easier to move the fool forward. The end goals may also change. After a few years in business, one of the parties may want to retire, so be sure to foresee how you will deal with these potential scenarios.
4. Different values
People are driven by their values, which means they make decisions based on them. Each individual, consciously and unconsciously, prioritizes his or her own set of values. For example, you may value saving on costs to improve profits, while your partner values marketing spending. The ultimate goal is the same, however, both see different ways to achieve it. Making sure their values are aligned in some way, will save them a lot of headaches and arguments. On the other hand, if you and your business partner are on the same channel, you’ll be able to make decisions faster and move your business forward with fewer setbacks.
5. Different risk tolerance
In some ways, a company is similar to an investment portfolio. Running a business is risky and requires a certain level of tolerance. However, companies require much more attention and practical work. Your risk tolerance must be somehow aligned with that of your partner. If you usually take risks and your partner runs away from them, this could lead to failure. This factor is especially important when they make a decision that generates losses for the company. Make sure you are both aware of the dangers and agree with the degree of risk the company takes.
6. Poor individual performance
Average performance is no longer valid in business. Both partners must have a high level of performance to give the company a better chance of thriving. The environment is too competitive to keep underperforming companies afloat. For the company to perform at its best, all partners must perform at their best.
7. Lack of mutual dependence
You must constantly ask yourself, ‘Do you need your partner?’ and ‘Does your partner need you?’ If you answer ‘yes’ to both questions, they will have a better chance of thriving. When one party is not dependent on the other, business partners can lose focus, and business relationships crum down.
Don’t confuse dependence with being in need. Being dependent only means you’re better off being in a society than on your own.
8. Lack of security
Find security in a business partner who has enough stability to continue for the long term. This includes areas such as financial, mental or even relationship security. For example, companies can fail because a partner is irresponsible with their personal finances and can’t afford to stay in business. You may need to have awkward conversations, but they will ultimately avoid pain in the future.
9. Lack of confidence
Could you walk away from your business for a month and allow your partner to run everything? If not, you may want to reconsider. For any relationship to work, trust is needed. When it comes to business, even greater trust is required. Not only are they dealing with their own lives, they are also dealing with the lives of their employees and customers.
Before you enter your next business partnership, review each of these factors and rate them. Now you know who you’re dealing with.