A partnership venture begins as a brainstorm between at least two entities. The company can build on friendships that it proposes to extend into a new business deal. You agree it’s a good idea, you sign the deal, you get started, and the partnership can work fine for a while, until the cracks start to show. The financial costs of not properly planning your partnership venture before reaching an agreement can easily be amplified by the costs of damage to friendships and loss of reputation. For some time now, I have been talking to people who have experienced failed partnership ventures. There were too many similarities and a few surprises. Based on these conversations with people who have experienced partnership failure, I’ve put together a list of 18 possible reasons why 50% of partnerships fail in the first 2-3 years:

1 Too many chefs in the kitchen. When they get together, partners gravitate toward others with similar skills. Trades with similar backgrounds working together are a good example. They may have different technical skills that formed the basis of their partnership, but what they possibly needed was a partner with business acumen. Bringing together technical skills to increase market presence may sound appealing, but there isn’t enough diversity to add value to existing skills and experience.

2 different (and contradictory) values. In retrospect, conflicting values ​​appear as a contributing factor to partnership failure. A partner with a strong set of family values ​​will eventually come into conflict with a partner who puts business first. Which will it be: an 80-hour-a-week workload for the company to make a lot of money, or a business structured around family time? These differences may not be touched upon at first, but they will quickly become a sticking point and a potential deciding factor.

4 At least one of the partners is a control freak and treats the others like employees. The need to control is a common trait of business owners. Most business owners have it. So why do they forget about this when they get together? At first, the partners may try to reach a compromise and make collegial decisions. But for various reasons, at least one partner will break the silence and move front and center. There are several ways they take control. They may feel like they need to take control to get things done. Their ego can lead them to show their control in front of customers. If there is no clear delineation of roles and responsibilities, partners can extend their control over other partners and, in turn, confuse staff.

4 Stress imbalance. This is where one partner is relieved to put in more time and energy than the others, which may be the case whether they agree or not. Much of this is due to the perceived value of the partnership company and the time and resources available. A good exploration of the value of the partnership, return on investment, commitment, and resource requirements early on will inform an agreement that clearly identifies the effort required from each partner to make the business work. Any conflict of these arrangements must also be dealt with through the terms of the agreement.

5 Partners are not being transparent, especially when it comes to money. This is an all too common association switch. A businessman affirmed, after three bitter failures of society, that the greatest learning from him was that “whoever controls the money, has the power.” Although this statement is open to debate, his point of view represents the partners who have been victims of the lack of transparency of their colleagues. Too often, we hear about partners siphoning off funds and leaving the remaining partners with significant debt.

6 Partners who bring hidden debts to the partnership company. You probably wouldn’t think it was possible, but we came across two partnerships where the partners had tried to bring hidden debt into the deal. One was seen before the fix could continue. The other was not and the innocent partners found themselves in debt. We cannot be too careful when it comes to risks.

7 hidden agendas. It’s okay to enter a society with an agenda. That is a benefit. However, things turn ugly when it becomes clear later that there are other, less altruistic reasons for entering the partnership venture. Be clear from the start. Agendas discovered later will inevitably lead to distrust and the breakdown of the association.

8 Lack of communication. When communication breaks down, there is at least some recourse to find out what went wrong, but lack of communication is a symptom of a lack of planning: who does what, reporting and accountability. Even with planning, a partner may take a leadership role and not maintain regular communication with partners, staff, and other stakeholders. Many cases of dissatisfaction and mistrust have their origin in the lack of definition and follow-up of a good communication plan.

9 Too much, too fast. A partnership venture that moves too fast without the inclusion of internal stakeholders is headed for trouble. Without a good plan, change stalls in resistance compounded by fear. It takes time to integrate systems and resources. Moving too fast for no good reason slows down the process. A strategy that incorporates change enablers and a change management plan is more likely to be successful.

10 A job versus a business? The partners, especially when it comes to a partnership of two people, can approach the company from different points of view. One partner may be banking on the next commission or contract, while the other is thinking about the big picture and building the customer base. While this could be a good match, each partner needs to recognize the value the other brings to the business and take that into account when splitting profits.

11 There is no agreement in force or elements are missing from the agreement. There are many levels of association, not just a formal trade association. There may be strategic alliances, project-based partnerships, and joint ventures. Some will start in trust without an agreement, others will require an agreement in law. When trouble starts, the first logical place to look is the deal. Without the signed agreement, things may remain unresolved and may require legal intervention.

12 Management and priorities change: the partnership company becomes irrelevant. This is particularly true with strategic alliances. For many, the original negotiation would have taken place at a mid-command level. The concept may have aligned with strategic priorities at the time, but things change. Changes in policy direction. Financial positions change. Without ongoing commitment from the top, the partnership enterprise can become irrelevant to the partners, who will take their interests and priorities elsewhere.

13 Differences of opinion: who wins the argument? This may also be associated with some of the other reasons associations may fail. If there is a dispute between the partners, how do they deal with the problem? A good dispute resolution clause in the formal agreement should mitigate the issues and address the argument, but it’s not always that easy. The argument may be more fundamental than within the bounds of the association. It can be personal. How does an association continue when wounds don’t heal fast enough?

14 The balance of power shifts when family members are recruited to ‘help’ with day-to-day operations. This is a common factor in the breakdown of a partnership. A partner will suggest a family member to help with some aspect of the business. This seems like a good idea at first. It may be the right move, but in other cases, a change in the balance of the association is perceived. Problems may arise about payment to the family member. One of the partners may find themselves in competition with and alienated by the other partner and her family member over decision making.

15 There is no exit clause. A strong but obvious recommendation from people who had previously been burned by the partnerships was to make sure there is an exit clause in the deal. This clause is one of the most important, but it can be easily overlooked or bypassed. It defines what happens to intellectual property, profits, debts, customers, and other considerations, in the event or when the partnership ceases. This is particularly important if the partners contribute assets to the partnership and wish to retain those assets afterwards.

16 There are no policies and procedures and/or documented system. This is also associated with the problem of too much too fast. The partners will bring to the company their existing ideas about systems and processes that need to be streamlined for the new company. The company can generate additional staff and resources. If there are no documented policies, procedures or systems, as with all businesses, the venture is high risk.

17 Not solving problems when they first occur. Examples of failed partnerships are alphabetized with problems that were not addressed as soon as they occurred. This could have occurred between partners who did not feel safe raising issues, especially in the early days. If left unresolved, this practice can become toxic to society.

18 I didn’t need a partnership in the first place. What if you walk into a partnership and realize it’s not what you want? Over time you discover that you don’t feel comfortable giving up some of your power. You begin to notice the irritating habits of your partner(s). You prefer to be your own boss and manage your own staff. You realize that you could have achieved what you set out to achieve in another way. For these companies, some research planning early in the partnership journey might have saved them from the experience. A partnership probably wasn’t the right choice.