A friendship founded on business is better than a business founded on friendship.
John D. Rockefeller
Great partnerships can achieve great things, both in life and in business.
In the tech industry, Apple and Google are two very successful companies that were started by co-founders in the 1970s and 90s. Both companies started out in a garage and went on to become a global name. The partnerships that founded them remained largely intact for most of their growth period. And Google and Apple aren’t alone: there are a lot more examples out there of great partnerships that created great businesses.
Sometimes, however, a partnership can be your main obstacle to business success. For every successful partnership, there are many more that ended badly and caused significant damage to businesses. We don’t usually hear about these failed partnerships, for the simple reason that their businesses never really made it out of the garage.
It’s easy to ignore the things we don’t often hear about. Still, since a higher proportion of business partnerships end in failure, it’s worth paying attention to why it happens and how we can avoid the worst.
Why partnerships fail
One of my first business ventures began as a partnership with one of my best friends, when we decided to develop an e-commerce platform back in 2012. Unfortunately, the venture wasn’t successful. Our business partnership was purely based on friendship, and after some time, our lives got in the way and we both had different priorities. For my friend, our business venture took a back seat in relation to his other concerns.
I had to hang on to the business a bit longer as I was the one who had come up with the proposal. But eventually, I lost interest too, and we had to write off our project. Our friendship survived, but our company didn’t. The platform could have been profitable by now had we hung on to it a little longer, but the reality is that relying on other people who don’t share the same priorities over the long term doesn’t work very well in business.
This incident got me thinking, and I started analysing why things had gone wrong for us. One obvious reason was our lack of business knowledge. Our partnership had been based purely on friendship, rather than on us bringing anything valuable to the table as business partners. The main lesson I learned is that while people may have the same enthusiasm, passion and priorities at the start of a venture, this doesn’t last forever. Sooner or later, life gets in the way and disrupts harmony. This can really slow you down.
How partnerships fall apart
It’s easy for a partnership to fall apart once the initial honeymoon is over and daydreaming about success wears off, and especially when the real work begins. Partnerships can even become nightmares! This can happen to best friends with good intentions, and to family members you’ve known all your life. People’s lives change, and so do their priorities. Some people just aren’t cut out for running a company… so sometimes you’re better off in business without them.
The symptoms of failing business partnerships start early. People start being late for appointments. They stop showing up for meetings for odd reasons. Their responses to emails are slow, or may not come at all. The work assigned to them isn’t delivered on time. Soon you find yourself becoming a nagging boss to them. Sometimes you want to run things on your own but you can’t do it, because the legal terms of your partnership mean you can’t be the sole decision-maker. If you need other people’s consent and signatures for making decisions, you’re stuck until your partner is available.
These are some problems with partnerships while you’re building a business, but things don’t stop there.
Things can go wrong in an already successful business, too. If your partnership terms aren’t clear, there will be a problem when deciding how to benefit from the profits. Do you expand, reinvest, or even sell the company? Money can be a major cause of mistrust and disagreements, even among best friends or family members. If there’s a breach of the agreement, are you ready to take your siblings to court?
In summary, you should think very carefully before you start a business as a partner, especially with your best friend or family member.
So what are the alternatives?
Partnership alternative #1: Start solo
My first choice of startup model is always to go solo. At least for your first business, you should consider starting your business by yourself. This has many benefits:
- You have complete control when deciding on the direction of the business.
- Your business benefits fully from your passion and enthusiasm.
- You can make decisions faster, as there’s just one person doing it.
- Finally, you can decide what to do with the profit, without having to get approval from anybody else.
If you have more than one business, at least one of them should be fully under your control, so that your journey towards financial freedom doesn’t get slowed down by others.
Of course, there are a few disadvantages of going solo. For one, the total investment consists of your own money, so if the business fails, you have to shoulder the damage by yourself.
Secondly, if you’re entering into a new industry, you may not have the experience you need. If you aren’t partnered with someone who has the experience and resources, you may run into difficulties which you wouldn’t have encountered otherwise.
This leads us to a second alternative.
Partnership alternative #2: Hire or contract out
If you don’t have all the skills, knowledge and experience you need for your new business venture, you can try to get help from other people as employees, consultants and contractors rather than making them partners. In this way, you can bridge the skills gap while still being free to let people go if they don’t do the work you need. What’s more, you keep full control of making major decisions. The downside of this solution is that it obviously costs you more, and it’s hard to keep everyone aligned with your vision.
In summary
There are pluses and minuses of starting businesses in partnership.
Although friends and family members are the easiest and most trustworthy partners you can find, their priorities can change over time, and this can damage your business. When this happens, a difficult situation becomes worse because of how close your partner is to you.
If you have the slightest chance of starting a business on your own, you should go for it. Going solo has numerous long-term benefits, including giving you full control of the direction of the business. The downsides are that you have a lot more responsibility and will be taking more risks.