6 Steps for a Successful Business Partnership

by Kobi Simmat 8th of August, 2023

6 Steps for a Successful Business Partnership

If you want to start a business partnership, my first piece of advice is, don’t. But if you’re headstrong and think things will be different for you, and you just can’t imagine going it alone, here are my top six tips for how to make that partnership work.

1. Have an exit plan

A business partnership is like a marriage. Easy to enter into, hard to get out of. It takes so little to start a business that people are lulled into thinking it’s easy to actually build the business. You have a few beers with a mate at the pub, come up with an idea, pay your ASIC fees and you’re off and running!

You’ve barely ‘dated’ or had an in-depth discussion around values, goals or money: how to resolve conflict, what you’ll spend money on, who will do what or how success will be measured. At least with a marriage, you hang out together for a few years, write some vows and spend time mulling over the magnitude of your decision. You think about what you’re doing before you do it. Before you commit to a business partnership, you need to think about the exit plan and create a pre-nuptial of sorts as to how you’re going to get out of it, before you get into it.

2. Write a dis-agreement

Like marriages, most business partnerships start with high hopes and good intentions, so while the goodwill is still good, use that time to write a dis-agreement Yes, a dis-agreement. This document sits to the side of your standard shareholder’s agreement and its purpose is to identify in advance every scenario that could trip you up, catch you out or form the foundation of an argument. It’s similar to a pre-mortem in that you act as if a specific disagreement has already happened, and you create an action plan for how to fix it. If or when the conflict does arise, you have a strategy and can deal with it quickly without a lot of emotional turmoil.

3. Shit test your assumption

When you get married, you commit to a life partner. When you start a business partnership, you commit to a business partner and their life partner, and that person often has a thing or two to say about how things run and get done. The partnership can get, as Princess Diana said of her own marriage, ‘very crowded’ because each person comes to the partnership with a bunch of assumptions, most of them unwarranted, unrealistic and almost certainly unspoken. If those assumptions are not shit tested, teased out or interrogated the partnership is doomed to fail.

4. Choose your partner carefully

I get very worried when I see two technicians get together as business partners. It’s a guaranteed recipe for failure, unless both have a high degree of emotional awareness and take active steps to minimise conflict.

The best way forward is for one to take on the role of CEO and for the other to stay on as the technician. This is still not ideal as that technician still thinks they have the deciding vote as to how things get done—which they don’t—which will cause a raft of other issues. Ideally, a third party takes on the role of CEO so the technicians can get on with the work they like and do best.

5. Have an uncomfortable conversation

What if you’re already in a toxic partnership? What if the goodwill has gone and you can’t instigate any of these precautionary measures? If that’s the unfortunate case, you need to be prepared to have some uncomfortable conversations. It takes two to tango so for every grievance you have with your partner, they will probably have one with you too. Before you launch into this strategy for dealing with an underperforming partner, display some curiosity into your own actions to ensure you see the whole situation from their perspective.

6. Set the cadence for communication

Resentment festers if it’s not dealt with quickly. The longer you leave it, the harder it is to fix, so it pays to nip it in the bud by scheduling regular catchups with your partner. You can’t leave these meetings to chance. They need to be scheduled, diarised and attended. Don’t let apathy set in. As time goes on, one or other of the party will want to reduce the cadence of the quarterly.

I know it’s controversial to say that you should not partner with someone to build a business. Every accelerator, incubator and angel investor will tell you the opposite, but I don’t see overwhelming success come from forming a business partnership. I see bitterness, regret and resentment. However, if you are hell bent on building a partnership and you simply can’t do it alone, follow these principles and you’ll minimise the likelihood of conflict and increase the chances of success. The future of your business depends on it.

Tags: small business entrepreneurs coaching business owners