When it comes to business partnerships, finding and maintaining a productive partnership can be as challenging as a marriage. Perhaps even more so given that many business partnerships are nothing more than shotgun marriages; the result of a courtship based solely on the financial merits and not much more. I liken this to marrying someone based solely on how attractive you predict the children will be, without regard to whether the two of you will be able to stay together. The refrain, “Failure is life’s greatest teacher,” speaks directly to my experience and in this regard, I have earned a PhD, having suffered through two failed business partnerships before figuring out how to enter my most recent one with the best opportunity for success. Additionally, through my advisory work I have observed many partnerships in action, brought in to assist when the partnership is going off the rails. It is usually then when most partners begin to realize the complexities of the partnership, far beyond the dollar signs they had floating in their eyes when they first came together.
When I ask partners that are experiencing conflict and potentially on the brink of collapse, “what would you have done differently?” I almost always hear the same two responses; “I would have asked a lot more questions,” and, “I would have taken more time.” And this is the crux of the issue—most people do not take enough time to truly vet the potential partnership for issues that will derail it. This happens most often because there is the rush of a deal or market timing driving the urgency, and as partners in the midst of conflict will testify, no partnership, no matter how lucrative the opportunity may appear, is worth the pain and suffering caused from premature and ill-prepared agreements.
The reality is, attempting to repair a partnership that is deep in conflict and has not done the preparatory work to set it up for success is much like trying to unscramble the omelet. Not that it can’t be done, but on a scale of difficulty, it is much larger than I can do justice here and suffice to say, often the cure kills the patient. Rather, the best opportunity for success is if you are in the early stages of formation. Following are some key steps I recommend to ensure you enter the partnership with eyes wide open and prepared for the work it will take to achieve success:
- Slow down – As I’ve already stated, there is no deal so important as to overcome the poor planning of a rushed deal.
- Look for a reason to say no – This sounds contrary to what you’d want, but the mindset of no is necessary to force the hard questions and rationale of, “why the partnership?” Be clear about this and force yourself to write it down. Actually, there is a whole lot more here than I have the space to write, but suffice to say it is adequately covered in David Gage’s The Partnership Charter.
- Clarify roles – One of the key issues I see is that partners don’t clarify their roles “in the business” as employees, versus “on the business” as partners. There is a key distinction and clarifying when and how these roles are defined can often be the difference maker between success and failure.
- Go deep on values – If they even go through the effort of defining values at all, most people short the process. It is not enough to know that all agree that integrity is a value, for example. You need to go deep, defining what behaviors define integrity, so everyone is clear what it is, and what it is not.
- Define how to exit – Most partner agreements avoid this step, however force the conversation around how to value the business, or in the least, who would do the valuation, and agree on what those steps would are ahead of time.
The reality is there is no guarantee, however as the saying also goes, success favors the prepared. With patience and effort you will avoid the proverbial Rodney King moment when you are exclaiming to everyone, “Can’t we all get along?”