Women's Enterprise Centre

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Partnerships, the Good, the Bad and the Really, Really Ugly

Thursday, August 26, 2010

Those who have survived bad partnership in business, when asked how they could have avoided the problems that brought their relationships to a crashing end, usually reply that the best solution would have been never to have gotten involved with that person (those people) in the first place.

However, to avoid all business partnerships would result in a huge loss of collaboratively generated power that can act to propel a business from a standstill to a real income-generating initiative. Good partnerships can be a boon, can result in valuable learning, and can provide the synergy whereby the whole is vastly greater than the sum of its parts.

Bad partnerships can leave a wake of destruction far beyond the business detritus after the end has come. Your husband, your best friend, your sister, your mother, your cousin, your college roommate, or book club pal could be a great help to you and to your business. On the other hand, you may ask yourself one day, “What was I thinking?” Please don’t assume that love, friendship, family ties or obligations are sufficient foundation on which to build a business relationship. In fact, it is often those very emotional areas that are the hidden landmines.

At the Women’s Enterprise Centre of Manitoba, we see all manner of partnering experiences along the continuum of great to awful. There are a few questions we suggest our clients ask themselves when considering bringing in a partner, whether at start up or to kick start a company.

Will your partner bring a special skill or attribute to the business without which it will not be successful or would require significantly more time to achieve success?

Are the roles that you each will play in the business clearly defined? Are the areas of decision making designated to the expertise that you each bring to the business?

Have you done a ‘values audit’ to ensure that you both bring the same work habits, ethical and moral view, financial responsibility, business mandate and sense of mission and desired outcomes to the organization? Do you have the same expectations of what the business will become and how profits are used (re-invested or withdrawn)? These can be important issues and it is essential that you are not naïve in this respect.

Do you have a legally drawn up partnership agreement or shareholders agreement as to what will happen if the partnership does not flourish? How do partners exit with the value of their input recognized without creating harm to the business? Fewer partnerships fail when there are exit plans in place.

If you are partnering for the purpose of bringing funds into your business, is there a clear and documented understanding of what portion of control the capital contribution will earn in the management of the business? Expected financial return and reward? Potential withdrawal of capital investment?

Some of the most successful growth businesses have been formed and developed through strategic partnerships. The key here is the ‘strategic’ part. Think, analyze, test, talk it through, think best and worst-case scenarios. Ask the tough questions, and then, if you think the benefits far outweigh the potential traps, and the risk is worth the reward, form a legal partnership that provides for win-win benefits, whatever the outcome.