The 5 Pitfalls of Partnerships - Business Negotiation Services

We all like the synergism of a partnership. Two heads are better than one. Here are five pitfalls of a partnership that can negate that leveraging of the minds and spiral a business into oblivion.

The first is lack of a partnership agreement. When the partners or joint venturers get together, they are at the height of optimism. Everything seems right and the stars are aligned. Nothing can go wrong, we are all friends here, and who needs a ?stinking document?? Consider it insurance, it is your guide to follow when things do go wrong. Better to have an agreement in place when everyone is getting along, than to try to sort it out, when there is money involved, feelings are hurt and no one is talking to each other.

The second pitfall is not to have an exit plan or agreement in place. Things change over time. People?s perspectives change as well as their priorities. If people want to end the partnership, it is better to have planned it up-front, rather than wrangle with each other trying to put things in place when the stakes are higher. One of the worst break-ups in time was the Beatles. All they wanted to do was play great music together and get rich. They met both objectives, and then things changed. John fell in love, Paul wanted more writing credit, and George wanted to sing more. The band disbanded, and they never came together again. Two of the members have died and they will never be reunited, much to their fans sorrow. A good exit plan would have let the partners know that they could buy out some members, how the business would be valued and who got what. Without it, there is total chaos.

Next is lack of defining the scope of work. Who is going to do what and when? Often each of the partners is a specialist in their own area and needs to contribute to make the venture work. If one of them fails to execute, they all fail. The agreement should state who is responsible for each part of the business.

Fourth on the list is money. Both how much is put into the business; and how the profits (or losses) are divided. Two people who go into a partnership may think that everything is 50/50. This is fine when it works. What happens when one partner is late on the rent, or runs up bills in the name of the partnership without the other partner?s knowledge or approval?

How much time does each partner put in? What happens if one partner gets sick, has a family crisis (often a divorce or sick relative) and they drop out or quit coming to work? The other partner may be willing to cover them for a time, but what happens if no end is in sight. How will absence of one partner?s input be handled? Also, how will the distributions be impacted? If one partner goes from a 50/50 share of time and money, what happens if that partner goes to a 90/10 split on time? Does the other partner still get 50% of the income? I have seen a going business disbanded, because of an inequity in time that was never resolved.

First and foremost, any partnership should have a written agreement. In that agreement they should at least address the other four pitfalls in their partnership in order to keep things smooth. I have a questionnaire that I give my clients to guide them past these and other pitfalls so they avoid having to put together an agreement in order to end a partnership. It is far better to invest in getting a good agreement, than the enduring the stress and cost of disbanding a partnership under duress.

Source: http://businessnegotiationservices.com/the-5-pitfalls-of-partnerships/?utm_source=rss&utm_medium=rss&utm_campaign=the-5-pitfalls-of-partnerships

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