A colleague recently mentioned that one of his clients was going through a rough patch. It seems the four partners were arguing about various elements of the business and, consequently, overall business performance was suffering. My colleague didn’t mention it but I bet the entire “team” working below the four partners was suffering, as well!
There are thousands of partnerships in the U.S. Most are relatively small and formed by individuals who have known each other long before the partnership was formed. The list includes high school and college buddies, childhood friends and family members. Unfortunately, most partnerships ultimately fail and the tragedy is that the underlying relationships rarely survive the breakup of the partnership.
I have been in two partnerships with family members. Both were commercial failures. The first, right out of college, involved my brother and our wives. After the initial exciting launch, the hard work began. We made progress early but, ultimately, external pressures came to bear and we had a long lead up to a failure with great personal stress. The breakup was not pretty and the hard feelings echoed through the years.
The second commercial enterprise was a retail store in the picturesque plaza of Sonoma, California. This one involved my wife and her sister as the primary partners with the husbands joining in. Again, an exciting and optimistic launch late in 2006. It all looked good until the Great Recession came along in 2007. After three losing years, we threw in the towel. In this case, however, our underlying relationships never suffered a scratch.
What was the difference? Although there are many things you need to cover carefully, from a legal and business standpoint, in forming a partnership, the most important item is making sure you have a common vision and shared values. What are your partnership and individual goals?
The second most important element is to carefully define how you will handle the inevitable setbacks you will face. In our first partnership, we didn’t do the hard work required to get us all on the same page and we didn’t work out the mechanisms for addressing conflict. We just assumed, “Hey, we’re family! We know and love each other. Everything will work out.” It rarely does “work out”. The exact same thing happens with partnerships formed by childhood and/or school friends. In our second partnership, we DID get clear about goals, values and how we would deal with negative circumstances. Although the fallout was financially painful, our underlying relationships are as strong as ever.
If you’re going into a partnership, there are many details to work out but you can boil my story down to two simple directives:
- Get crystal clear about the goals for the partnership and make sure the individual goals and values of each partner can be satisfied.
- Work out exactly how you will deal with setbacks. Make sure everyone agrees to be open and honest in their communications with each other.
Personal note: Ultimately, my brother and I fully recovered from the failure of the first partnership. My wife maintains it’s because men can’t remember anything.