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Potential Pitfalls in Partnering

Posted by: Today's Tip Contributor on June 28, 2010

In my consulting practice, I have worked with several entrepreneurs who have taken the concept of partnership too lightly—making commitments too quickly and jumping into relationships before being sure they were the right fit.

For example, I work with the founder of an emerging company that is just starting to get some traction. She identified one of her team members as her "partner" since he "challenges her thinking." However, what I witness is that they have very different visions of how the company should grow and when. Through arguments this individual may well serve to challenge the founder’s thinking, but he is also holding her back from evaluating which options for growth are best for the company.

There are more serious consequences to prematurely calling this a partnership. Because this relationship was labeled a partnership very early on in the business, this "partner" has high expectations about the percentage of the company he thinks he will own, and his role in decision-making. But now that it has become clear he doesn’t have the requisite skills for the larger role, my client faces some difficult discussions. She must decide whether reducing the partner’s position to more of a consulting role is best for the company and she must also figure out what to do to address his expectations. Of equal importance, the other members of her management team find themselves torn, as they try to figure out which point of view will ultimately prevail—and what impact that will have on their priorities.

As you work with others who may be able to help you build your business, consider these questions before inking any partnership deals:

• Are your skill sets and work styles truly complementary? Do your "discussions" truly help, or are they more like arguments that hold you back?

• Are your business and personal philosophies similar? Do you both want the same things out of the venture?

• How does the way you work together impact the rest of the team?

Barry Horwitz
Horwitz & Co.

Reader Comments

Elisha Tan

June 29, 2010 12:20 PM

I think the best way to safeguard a business owner's interest while venturing into partnerships is to always have the majority shares of the company. Should the partnership fail, at least I will only have my pocket burnt when I buy back the shares and not have the business going in a direction that I have no control over.

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