Why Do Many Business Partnership Fail?

BizGuru.me – There may be many of you who want to start your own online business. Starting a business alone often seems scary, so many people prefer to have one or more partners to start their activities.

Starting a business with people you already know and you trust can help you feel quieter and more confident in getting started from your business.

Choosing the right business partner or the work partner is one of the essential things to create a business partnership. If you choose the wrong, it could affect your relationship with your business partners. If your business partnership fails, this will lead to more damage, namely the failure of your business.

Before discussing what can lead to a trade partnership failure, discuss that a business partnership is.

What is a business partnership?

A commercial partnership or commercial partnership is a legal relationship for two or more people to conduct business as a common owner. A partnership is a company with several owners, each invested in the company.

Some partnerships include people working in the company, while others may include partners with limited participation and limited liability.

A partnership, as distinguished from a society, is not an entity separate from its individual owners. The partnership income tax is paid by the partnership, but the benefits and losses are shared between the partners and paid by the partners, on the basis of their agreement.

Type of partnership

Before starting a partnership, you must determine the type of partnership desired. You may have heard the requirements:

Global partnership

Composed of partners who participate in the daily operations of the partnership are responsible for holding debt and prosecution.

Limited partnership

Having a general partner who manages the company and one or more limited partners who do not participate in partnership operations and do not have responsibilities.

Limited coverage partnership

Similar to a limited partnership, but there may be general partners.

Types of partners in partnership

Depending on the type of partnership and the level of the partnership hierarchy, a partnership may have several different types of partners. This article on different types of partners explains the differences between:

General Partners and Limited Partners

The General Partner participates in the management of the partnership and is responsible for the partnership to be paid. Limited partners invest but do not participate in management.

• Partners actions and employees
• Some partners can be paid for employees, while others have only property interest
• Various levels of partners in partnership

For example, there may be junior and seniors partners. These types of partnerships can have different duties, responsibilities and seizure levels and investment needs.

Reasons why most business partnership fail

Business partnerships have many advantages – they allow entrepreneurs to combine several sets of skills, as well as share startup costs and risks. This makes business partnerships one of the most common ways to succeed in business.

Unfortunately, although commercial partnerships have many advantages, they can also be disadvantages and statistics show that up to 70% of commercial partnerships fail. Look closer to some of the most common reasons for commercial partnerships break down, so you can partner in a more successful relationship.

Collaborate with friends or family can be risky

Many partnerships between partners, family businesses or friends have been successful. Take Amazon, for example, founded by Jeff Bezos, his wife Mackenzie and some of his friends.

In addition, the idea of ​​starting a business with a person you know (or do you think you know) closely and trust can be very attractive and seems promising.

However, as it is often said, choosing a business partner is more difficult than choosing a life partner and many such partnerships fail.Each successful business partnership must be based on the complementary forces, talents, personality and complementary experiences of the potential partner.

A parent or friend must have more skills or experience that make it a potential commercial partnership than just have their personal relationship with you. For a partnership with friends or family to succeed, it is important to maintain a separation between business and personal relationships.

In this way, you can have honest and frank discussions with your business partners on business decisions, objectives, finances and other discussions that can make personal relationships difficult.

Most of the commercial partnerships between spouses tend to dissolve in cases of divorce. Similarly, personal relationships between family members or other friends are often compromised severely when a business partnership between family or friends goes wrong.

As in any commercial partnership, it is very important to have a comprehensive partnership agreement, so that issues such as funding, the division of labor, etc., are clearly defined before starting a business.

A simple hand handle between a family member or a friend is not enough if your finances and reputation depend on the company.

On the right, business partnerships with family or friends can be very rewarding and profitable but unsuccessful partnerships can destroy family relationships or destroy friendships permanently.

Also Read: Stock Investment Guide for Beginners

Uneven commitment between partners

As it looks like a businessman, starting a business requires a significant financial and personal commitment. As a single owner, you are solely responsible for the success (or failure) of the company.

In a commercial partnership, you depend on other partners and, if they are not incapable or not to do the same level of personal or financial sacrifice, this will result in hatred and conflict at the end.

A partnership based on a partner making a greater financial contribution and another promising partner to assume more responsibilities and to do more work can make sense in theory, but this is difficult to measure and describe in a partnership agreement.

If these partners can not keep their promises to take larger responsibilities and work stronger, this will affect the success of your business.

Similarly, it is difficult for a partnership member to truly write businesses when he has other responsibilities. A person with other commercial interests or child and a work spouse, for example, may not be able to fully engage in a commercial partnership.

The unequal contributions between partners may not be problematic if they are included in advance (and entirely articulated in the partnership agreement), but there is a high probability that it can be the beginning of a dispute between partners.

Unfair division of tasks between you and your business partner

You and your business partner, you are encouraged not to do the same thing in the business, especially when you start. You will not have enough money to hire someone else, so you need to focus on solving different problems.

In other words, you must divide and conquer. For example, your partner may treat products and engineering, and you manage everything about related revenues. Maybe you can work together on marketing and strategy.

Make sure to clearly define that will do what you do not walk on the feet on the other.

A lack of success

Building a company takes patience and persistence and for a business to succeed the owner must be ready to make long-term commitments. In addition, many companies are in cyclical industries and corporate owners may need to become familiar with slow growth and fluctuation periods in business income.

Lack of business and / or reduced income periods may have a psychological impact on trading partners and lead in the end to conflicts, especially if the business becomes a heavy burden on the personal finances of people involved.

If one or more of the previous partners have become employees with regular salaries (and benefits), they may be tempted to doubt their decision to become entrepreneurs if the company does not succeed immediately or when the business decreases.

If each partner of the company does not cooperate and thinks that his own advantages, it will definitely be difficult for the company to succeed and cross difficult times.

There is no certainty of success in the affairs and the benefits of a partnership can not overcome a lack of preparation or an insufficient business idea.

In-depth planning of activities before and after startup, including research on target markets, realistic cash flows and revenue projections, and with sufficient debt or equity financing available if necessary for any company which will thrive in the long run.

Difference in value between business partners

Many partnerships do not work because partners have not aligned values ​​and / or business objectives. As a business, differences can become a growing source of friction.

Although the objectives of personal life should not affect the partnership, reality is not. If your goal is to live a relaxed lifestyle and that your partner wants to work seven days a week in the office, it will be difficult for you to work with your partner.

One of you will believe that the other does not do its job and will eventually create a lot of problems.

If your life goals line up on those of your business partner, it will help maintain peace. Before collaborating with anyone, make sure you have a common goal in life, especially when it comes to working.

One way to ensure that this comes up against potential business partners and articulating the following:

• Why do they want to become entrepreneurs?
• What is their vision of the company?
• What are their long-term goals?

Wanting to start a business because you hate your job or think you can get rich, you can be an excellent motivator, but it can also confess you to possess and lead a business. Potential partners, especially those entering their first business, must be realistic on business prospects and make their expectations accordingly to avoid any disappointment.

Potential partners may disagree with their vision of society and have very different understandings and plans about the organization’s long-term objectives. For example, a partner can see the company as an alternative solution to live a simple life and has no desire for future expansion, while another partner may have ambitious expansion plans for this company, including having An important staff, opening a satellite office, take a public company. , etc.

To avoid long-term conflicts between partners, the Company’s vision must be agreed and explained in advance in a statement of vision. In addition, part of the corporate plan should be used to formalize the long-term objectives of the organization.

Inappropriate personality

Risk sharing and with skills that help us are some of the great advantages of a business partnership, but if colleague personalities do not match, you may encounter problems.

It is possible not to agree between partners, but contrasting personalities can amplify differences in opinion and lead to conflicts.

Interviewer and evaluate potential partners is essential if you do not know well. Treat it as a job interview – as well as discussing skills, talents and experience, assessing their personality with issues such as:

• Are you a risk taker?
• Are you very motivated?
• How do you manage difficult situations such as processing employee, customers and suppliers?
• What are your expectations of me and my business?
• Do you have patience and perseverance to manage the startup and growth of a company?

Remember that personality differences can also be an advantage and not an obstacle. But with the consideration that you appreciate your partners, evaluate their opinions and share the same vision of this company.

Trade partners do not trust

An honest and open relationship between business partners is the basis of any successful trading partnership, so there is no partnership faster than a lack of confidence.

Given the shared responsibility inherent in a commercial partnership, illegal business practices or to ethics by a partner put at risk all other partnership members.

Although you can never predict with certainty that your partner will always make things ethically, you can reduce this possibility by seeking their previous story and their reputation, especially the people you do not know:

Did they have other companies in the past and, if so, how are they collected by trading partners, suppliers, customers, employees, etc.

• What is their reputation in society?
• Have they had preliminary legal difficulties?
• Do they have work on the ground or a conjugal history?
• Have they ever been broken, had a bad credit rating or had problems with the tax authorities?
• Are they willing to agree on a written partnership agreement that describes all the essential aspects of the company?

Chances are only if the person has a history of stability and ethical behavior, they will make a trustworthy trading partner.

Emotions less awake

Emotions tend to affect all. When someone blames you, it’s natural to chat and fight.

However, you can not be emotional with your trading partners; You must logical. When something is wrong, take a step back and look at it from an outsider point of view. Find out what is the logical answer and take this approach.

At the end of the day, you will do the best thing you can do what you think is the best for society, so there is no need to become emotional. Emotions will not help you achieve your goals; They will influence only your judgment.

Conclusion

Before you start choosing your potential business partner, it is wise to carefully seek your potential partners.

Finding the right business partner takes time. Use as much time as possible to find the right corporate partner so you do not have any difficulty in running your business.

When you found a partner that you judge appropriate and appropriate, enter a full written partnership agreement. With this agreement, your chances of having a successful long-term commercial partnership will be even more important.