Thursday, September 23, 2010

Reasons To Avoid A Partnership

If you have talked to many business people who have had partnerships you have undoubtedly heard a LOT of horror stories. I personally have spoken to over 20 people who opened up to me about partnership nightmares. Believe me - the whole truth is far worse than the individual tales that you hear. After hearing so many people speak of the problems that had arisen from partnerships I felt compelled to write a piece that may save others from this misery.

At face value a partnership, much like communism or socialism, sounds so blissful. Everyone works hard and everyone shares in the fruits of the labor. The reality is there is always a portion that does the majority of the work and a portion that exists by sucking the life out of the working majority. Interestingly enough, the parasitic group always thinks that they should be in charge - usually to get the power to protect their sorry existence. In partnerships, this is often what comes to be.

Typically if you are approached by someone who "wants to be your partner" they have had a bit of self reality that they lack certain (often a LOT) of skills for the particular endeavor they choose to pursue. Somehow, they have targeted you as the competent and able individual who can take them to heights they would never reach on their own. Thus they plead their case at how great it would be to form a partnership and find incredible success together. Often they will try to be your best friend - basically it's a con job to convince you into believing that they are a great friend. They act as an illusionist - they distract you with one hand while they do their trickery with the other.

In the beginning all partners, good or bad, will communicate well and work with you to plan and execute successful business strategies. This is because each partner is allowing the other to apply their own skills and build the business. Shortly after there is a steady period of success the bad partner types will begin to morph into scheming and controlling people (their real form). At this point they begin to become very secretive about their behaviors, show signs of distrust for you (projection), and weasel their way into controlling finances and the customer base. Inversely, the rare good partners continue to work closely with you and you feel a genuine sense of camaraderie.

When the bad partner begins to emerge from their fake front the average honest partner will discount or make excuses for the perceived ill behaviors, then they will move through a denial period because such behaviors are not a considered behavior for themselves. By the time the honest, hard working partner realizes what is going on the bad partner will typically have gained a strategic position to effectively steal the company for themselves. In one case, we heard of a partner who had been brazen enough to approach customers and tell them that he was starting his own business and tried to divert customers in his direction. Fortunately the customers found this to be a disgusting act that clearly displayed reasons for NOT following the bad partner.

The bad partner is essentially looking for someone they can use to gain an opportunity to make money. Unfortunately for them, their behaviors and lack of ethics will be the cause of their ultimate failure. For the good partner, a bad partner can cause financial losses from lost customers, attorney fees to battle through dissolution, and significant personal misery from dealing with what is essentially a scam artist. Of the people with whom we have spoken, the good partner can find success, usually even greater success, within 1-3 years after dissolving the bad partnership. Our recommendation is that the only partnerships that seem to work are professional partnerships such as attorneys, doctors or financial professionals.

In over 90% of the people with whom we spoke, following the dissolution of the partnership and when both partners remained in the same business, the bad partner became obsessed with the good partner. The bad partner attempted to rabidly emulate the style of the good partner only to find that they are incapable of doing so. The bad partner typically did not last over 2 years (post dissolution) before realizing total failure. This effectively brought things full circle - the good partner continues to be successful while the bad partner cannot achieve success without the good partner. Sometimes, there is justice in nature.

Personally, we think that partnerships are a very bad idea. Before you START a partnership, do a deep background check on your potential partner, ask yourself if what they can bring to the table can be hired in lieu of sharing ownership rights, and have an attorney create a very solid partnership agreement. If all of these don't check out, especially if you get pushback on the agreement, you should walk away immediately! Before entering into ANY partnership, think long and hard about your future and critically assess if you truly need a partner.

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