M any of us in business have learned that a business partnership is a lot like a marriage but harder to get a divorce. Apart from the obvious differences between the two types of partnerships there are a lot of similarities. Both require a great deal of trust and mutual respect, and both typically involve the mingling of financial resources. For this reason, it’s imperative to know who you are doing business with and protect yourself and your long- term interests. Whether it’s family, a friend, or just someone who conveniently comes along at the right time when you need them, a business partnership should be planned, and the terms and roles of each partner clearly laid out in advance. There needs to be mutual understanding of the duties and responsibilities and what each party is bringing to the table. Money, expertise, customer connections, assets; these are all valid and valuable resources that can enhance and strengthen a new partnership and lead to success.
alone.” It may seem obvious but I’ve talked to many people who got into business this way and were surprised it didn’t turn out so well. There were two brothers who started a business only to learn that one of the brothers didn’t want to contribute and became a burden rather than an asset to the business. I had experience with a new partner who, as it turned out, allegedly owed a couple million dollars in back taxes, and had such a poor credit rating it would have destroyed our ability to ever borrow money, severely jeopardizing our business. A huge red flag that forced me to run the other way and one I should have caught ahead of the deal, not after it was signed. If someone says things such as “I hate contracts and prefer a handshake deal” or “I always pay cash” it may be because he gets sued a lot and has no credit. In my case I was lucky that I was able to document evidence of bad faith and force a sale to get out but often such failures in partnerships destroy the business and the jobs of all those involved. There are also the highly successful business partnerships that seem to be going great and just disintegrate. Business success often comes with financial reward. Some words of wisdom that have
stuck with me are a paraphrase from Henry Ford; “Money doesn’t define a person, it reveals them”. A seemingly great business partner can get greedy and as in the Russian proverb famously quoted by Ronald Reagan, “trust but verify” requires you to stay vigilant and establish guardrails when the money starts coming in. Solid bookkeeping and accounting by third parties, robust operating agreements, and systems of internal checks are crucial to keeping things on track as you grow. Some of the red flags I’ve had the experience of learning about are very similar to the common signs of a failing marriage. A partner who is gradually becoming distant, less engaged socially with you and appears to be building alliances and walls within the organization. When your business partner is adamant about replacing good and loyal employees with people obviously less qualified or set on keeping employees who are troublemakers, overpaid, underqualified, or just plain disruptive it is very likely that they are trying to build an alliance against you. Look out for gaslighting and the spread of rumors that are leading to dissatisfaction among employees.
Some of the wrong reasons to take on a partner include
feeling responsible for a person, sympathy, offering to help, or just a sense of not wanting “to go it
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