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3 common reasons business partnerships fail

On Behalf of | Mar 30, 2020 | investment Partnerships

If you have a brilliant idea for a product or service, you are probably itching to get it to consumers. After all, running a business is a good way to achieve the American dream. If starting a business venture on your own seems out of reach, forming a successful partnership may be the solution. 

One of the more effective ways to increase the likelihood of partnership success is to have a well-written partnership agreement. This binding contract sets the terms of the partnership, including each partner’s duties and obligations. Of course, you can also learn from failed partnerships. Here are three common reasons business partnerships fail. 

  1. Mismatched contributions

Partnerships make ideal business models because they allow each partner to contribute according to his or her own strengths. For example, one partner may oversee everyday operations, while another provides an influx of capital. If partners see contributions as being unequal, though, friction may arise. Accordingly, the partnership agreement should not only clearly define contributions, but it should also include a procedure for dealing with conflict. 

  1. Divergent values

Even if partners generally agree about the function and direction of the partnership, they may have different business or personal values. Regrettably, if partners cannot decide which values are relevant to the partnership, the venture may be on the road to failure. This is particularly true if the partnership is not doing well financially. 

  1. Inflated egos

While ordinary activities of a business partnership can certainly lead to disagreements among the partners, a human element may also be disastrous. That is, a partner’s ego may interfere with business growth. As such, it is vital that all partners understand the partnership agreement and respect its parameters. 

If you are thinking about opening a business, you want to build a solid foundation for it. Working with business partners may be the right approach. By understanding why partnerships often fail, you can boost your future partnership’s odds of success.