How to Create a Successful Business Partnership That Won't End in Fisticuffs!

I've seen some nasty endings to working partnerships over the years, really nasty. In fact I've seen friendlier divorces in a lot of instances.

Even if partnerships end reasonably there is always financial fallout. I had a friend who had an extremely successful retail business; he and his business partner had a huge shop selling music, musical instruments and hiring out disco gear and lighting. The partner had a sideline in a comedy dance band, used to wander off to Germany to entertain troops and on reflection, really wanted to be famous and the successful business wasn't firing his rockets, in fact he thought it was holding him back from a great career. Wannabe's, they are a total pain in the neck!

One morning my friend came into work and found his partner sobbing gently over his desk. "I cut the lawns yesterday," he sobbed, "and then I woke up this morning and realised the grass had grown again." Ever quick on the uptake my friend realised his partner was in a bad way - cut a long story short, partner had nervous breakdown, friend kindly bought out his share of the business for a very substantial sum. On the day my friend signed the bank loan agreements to buy his partner out the last recession started and the interest rates went up and up and up. With the bank loan round his neck he went bust in a year - people aren't really interested in buying musical instruments when they're worried about the next loaf of bread. Without that bank loan he would probably have survived - battered but solvent.

Sad story, but remarkably common in partnerships and limited companies. I have seen directors set private detectives on other directors to see if they are working for the competition. I have seen best friends come to blows and actually throw punches. I have seen marriages wrecked, homes lost and good companies go bad because people who should never have been in the same room together have entered into something as legally binding and potentially volatile as a marriage.

I think psychological compatibility and a deep understanding of the other person's psyche is necessary before you formally go into business with someone.

Here are some of the things you need to think about before you set up a partnership or a limited company with someone.

1. It's not how you start its how you finish - before you ever open the door or hand out your first shiny new business card you need to work out what would happen if one of you ever wants to leave. Draw up a legal partnership agreement and cover every single base you can think of from one of you voluntarily leaving to acrimonious partings to long term sickness to sabbaticals. Thrash it out yourselves first in private, consider the worst case scenarios, then go to a lawyer and get a partnership agreement legally drawn up. This is your pre-nup agreement! Think about it and get a process to deal with every nasty eventuality.
2. Marry in haste, repent at leisure - more with the marriage analogy! Honestly, it is that serious. Even if you have made the decision to go into business with someone and you have thrashed out an agreement put it away for a week and give it breathing space before you commit. If you can work together informally for a while and you are both clear that this is a probationary situation then so much the better. I once worked with someone for six months with the intention of going into partnership with her, I started with everything rosy and lovely, and we seemed to totally be singing from the same hymn sheet. At the end of six months I knew we were totally incompatible in our way of working and called a halt.
3. Lifestyles matter - in the world of big business the lifestyle of an individual can have a minimum impact on the working of a company. In a small business the family life of the people involved tends to infringe on business decisions. One common scenario has wives and husbands of the partners being very involved in the early stages of a company - mainly because they're cheap and will work for love! When the time comes for the company to grow and take on professionals these people can often struggle with their reducing involvement and to keep a happy home life partners have been known to dream up phantom roles to soothe family egos. This pisses off the real workers and I recall a company that went through a very rough patch when it came out that a wife was getting a £1000 a month pay slip for answering the home phone!
4. Skill base is all important - in an ideal world you want a partnership where one partner is strong in the areas you are weak in. In the real world this tends not to be the case, as we are drawn to people who are like us and are passionate about the things we are wild about. Whilst this is great in terms of motivation and ideas it can prove a frustrating mix and the team is unbalanced. I once spent a couple of years babysitting a pair of directors who whilst wildly enthusiastic and real ideas men lacked any sort of skill base on structuring a company, financials and day to day management of a team. As a partnership they agreed on the company mission but struggled so much with the boring stuff that they were actually incapable of running their own business without serious (and expensive) support.
5. Work Ethic - not everyone comes with one! Apart from falling out over money and direction and wanting to leave and become a popstar/actor/raiser of organic pigs partnerships mainly fail because one partner perceives that he works way harder than the other. It could well be this is true, as some people find it easier to rest on their laurels than get on with the day to day grind. So a compatible work ethic is as important as compatible personalities and skill bases. Look carefully to your potential partner, if they are the kind of person that is flying round doing busy busy work all day then your tendency to chill out when necessary and push when a deadline approaches will drive them bonkers and equally their constant make work will get on your nerves. Small things like this can cause cracks and can cause a good business to flounder.

Partnerships in business are like marriages. They are built on good communication, understand of the other person and personally, I believe, politeness! Never underestimate the value of politeness, if you aren't totally compatible it can make the difference between success and failure.

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