How to Build a Business Others Want to Buy

Chapter 19Why partnerships don't work

I've worked with over 10 000 businesses over 18 years and presented to over 50 000 people about how and why businesses fail. If it's a multi-partner venture, the number one reason why the business breaks down is because the partnership blows up.

In the short term, partnerships can work well, but long term? Not so much. So, it will not come as a shock to hear me say, ‘I don't like business partnerships.’ On average, they don't work. Sure, we see the celebrity partnerships like the AfterPays of the world succeed, but what we don't see are the thousands of partnerships that end up in mediation, arbitration or litigation.

The key emotion that kills a partnership is resentment: One partner feels that they put in more effort, are more focused, and is more set on rapidly growing the business than the other. Or one partner puts in the bulk of the seed funding and thinks that absolves them from doing any of the work.

Here's a scenario I see play out time and time again.

HOW NOT TO SET UP A PARTNERSHIP

Paul, Riley and Dustin worked for a commercial real estate company. Paul is a qualified builder, Riley is a sales director and Dustin is a chartered accountant. Each harboured a desire to launch their own business, so when all three got retrenched, they thought, ‘Now's the time.’ They hired a co-working space, got their T-shirts printed and commenced operations.

They won some big tenders, built a small team and paid themselves a decent wage. After ...