Why Do Business Partnerships Fail?

Business partnerships are not unlike romantic relationships. In the beginning, there is nothing but excitement and optimism as they start their new venture together. Faults are overlooked, explained away, or otherwise ignored in an effort to focus on the larger goal of building something great together. When the partners move past the planning stage and decide to jump in with both feet and “tie the knot”, it often happens without a lot of thought given to how they will deal with conflicts that may arise along the way.

Some disputes between partners are small and fairly easy to deal with, while others can blow up into a major rift that threatens the future of the business. Here are five types of disputes that commonly cause business partnerships to fail:

1.  Disputes over Finances

During the first 18 months to two years a partnership is in business, there is a good chance that there will be some tough times. Sales may be slow in the beginning, startup capital may start to dwindle, and the time comes when you have to make difficult financial choices. When there is plenty of cash lying around, there is usually not much worry about where you are investing your capital. But when funds start to dry up, money can become a major source of conflict.

2.  Vaguely Defined Roles

When partnerships begin, the roles of the owners tend to overlap. This may be okay at the very start while you are getting the business off the ground and everyone is putting in 18-hour days. But if the partners do not clearly define their roles soon after, there may be confusion about who is in charge of what.

3.  Personality Conflicts

Some partners have a hard time getting along due to personality clashes. For example, one partner may be domineering and controlling, while another is more passive. This might be okay for a while, but when things start to get tough, the passive partner may start to resent the one who wants to control everything. This is not to say that partners need to have identical personalities; that might actually be worse. However, if the personality differences become too much to bear, it may be best to consider parting ways.

4.  Style Conflicts

What if one partner is a Type A personality who is focused intently on achieving goals and progressing step by step toward building the company, while the other goes from one big idea to another? The problem with the second partner is they are always coming up with these “amazing” ideas, but they never stay focused on one long enough to make it a reality. You can see how partners with these two styles can have some serious disputes.

5.  Values Conflicts

Your business should have a vision, mission statements, and a set of values that you operate by. But what if, in the midst of all the excitement starting your business, you later realize that you and your partner do not share the same values? You should be clear from the get-go about what principles you will operate by, how you will approach business development, how employees and customers should be treated, and how you will deliver your products or services. Make sure you are on the same page on this one.

Is there a Solution for Major Disputes Among Business Partners? 

Like marriages, there are some business partnerships that are simply doomed to fail. That may sound harsh, but it’s reality. There are others that can be saved if the partners take the right steps. In either case, one of the best ways to get a handle on conflicts between partners is through mediation.

Mediation is a form of dispute resolution that allows business partners to work out their differences in a cooperative setting. The process is facilitated by a neutral, third-party mediator whose job is to guide the discussion toward a workable and peaceful settlement. Through mediation, partners can identify and address the underlying issues that are causing the dispute.

At the end of the mediation process, partners typically have a much better idea where they stand. They either learn that the business can be saved and the steps they need to take to save it, or they learn that they are better off cutting their losses and dissolving the partnership. Either way, mediation helps partners move forward toward resolving the conflicts they are dealing with.