It's not what you think.
In my experience as a business lawyer, there is one common reason why business partnerships don’t work out - and it’s not the reason you think. It’s not because the other person was greedy or nefarious (although that happens too). In my experience, it usually happens more like this:
Alicia has a great idea for a business, but she doesn’t believe she can do it on her own. One day, Alicia meets Dani. Dani is excited about Alicia’s ideas and seems to be a great person to bounce ideas off of. Dani also hints that she has some good connections that could be beneficial to the business. Before you know it, the two have decided to become business partners.
The problems start soon after. Alicia has high expectations for the amount of work that needs to go into the business, which turns out to be more work than Dani was expecting. Rather than wait for Dani to catch on, Alicia plows ahead and creates a pretty great business. However, she resents Dani for leaving her to do all the work. When problems come up in the business, Alicia and Dani are fundamentally different communicators. They either end up talking past each other, or one of them shuts down and becomes avoidant.
Flash forward and the business is doing well. Alicia is still doing most of the work when one day, seemingly out of nowhere, Dani demands her share of the profits. Alicia is floored that Dani expects to be paid for basically doing nothing. Ugly text messages are exchanged, and Alicia decides it’s time to lawyer up.
Maybe this sounds familiar, or maybe you are considering a business partner. In my experience the under-advertised reason why business partnerships fail is that one person ends up doing all the work, but the other person still wants to get paid. Usually, the person doing all the work is the one who had the original idea, but they didn’t have the self-confidence to try it on their own. They craved the external validation of having a “business partner”, but now they deeply regret it.
So what’s the solution? Here are three things to consider before taking on a business partner:
Do you really need a business partner?
Do you really need a business partner? Or are you just hoping that another person will make you seem more legit or make you feel more confident? A confidence boost is not a good reason to take on a business partner. Just because someone is a good hype man, has connections, or is willing to contribute a good chunk of cash, does not mean they will be a good business partner.
Does this person have a proven work ethic?
How well do you know this person? Do they have a proven work ethic, or are you just relying on their word and good vibes? Keep in mind that true entrepreneurs are the minority of people - very few people are actually willing to work as hard as we work. Instead of accepting an unproven person as a business partner, a strategic alternative can be hiring them as an independent contractor for a limited scope of work. Starting them out with isolated projects can be a good way to test them and see if they truly have the skill and the dedication required.
Do you communicate well?
A business relationship is like any other relationship - the ability to have hard conversations is crucial. Business partners need to be able to give and receive constructive criticism. They need to be able to have hard conversations that result in decisions, rather than devolving into arguments. If one person has an open communication style and the other has an avoidant communication style, this can be a recipe for disaster.
A good business partner can bring wealth and success. A bad one can sink the whole ship. Sorting out the difference is everything.
Thanks for reading the Bevel Law Blog! While this information is hopefully helpful to you, nothing in this blog is intended to be legal advice. Always consult a lawyer before making any legal decisions based on topics in this blog.
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