Pick­ing wrong part­ner can ruin a busi­ness

The Bradenton Herald (Sunday) - - News - BY JOYCE M. ROSEN­BERG


Nearly a year after Courtney Jack­son launched her cloth­ing busi­ness, she took on a part­ner to help man­age the com­pany’s growth. A month into the part­ner­ship, some­thing was wrong.

Jack­son’s part­ner was sup­posed to han­dle half the work­load, but that didn’t hap­pen. So, Jack­son be­gan tak­ing on more of the re­spon­si­bil­i­ties. When Jack­son tried to dis­cuss the divi­sion of work, “she was a lit­tle de­fen­sive at first, and asked me to be pa­tient.” The sit­u­a­tion didn’t im­prove, and they agreed to part last year, just three months after the part­ner­ship be­gan. But un­der their part­ner­ship agree­ment, drawn up with­out an at­tor­ney, di­vid­ing the com­pany’s as­sets would have weak­ened it fi­nan­cially. The part­ners de­cided to close, and Jack­son lost her com­pany.

The fail­ure of a part­ner­ship of­ten brings hard lessons for com­pany own­ers. Prob­lems of­ten start when prospec­tive part­ners don’t think through all the ram­i­fi­ca­tions of what they’re do­ing – in­clud­ing whether they’ll be a good fit. They may not be clear on their ex­pec­ta­tions for each other, and how they’ll re­solve con­flicts. And they may not con­sider the le­gal con­se­quences of how they set up their part­ner­ship, and how dif­fi­cult it might be to un­wind it; rather than hire an at­tor­ney, they write their own agree­ment that can be prob­lem­atic when the re­la­tion­ship turns sour.

Jack­son’s ex­pe­ri­ence taught her that she needed to be more strate­gic in her busi­ness de­ci­sions. And in choos­ing a part­ner – Jack­son had met hers through a mu­tual ac­quain­tance.

“You need to make sure you know the per­son well enough to know what their strengths are and their weak­nesses,” says Jack­son, who lost her en­thu­si­asm for re­tail­ing after the com­pany closed. She now is the sole owner of an in­for­ma­tion tech­nol­ogy com­pany in Tampa, Florida.

Own­ers are so caught up in the idea of find­ing a part­ner to get in­vest­ment money, help and ex­per­tise that they don’t do the kind of due dili­gence they would do be­fore hir­ing an em­ployee, says Michael Howard, a man­age­ment pro­fes­sor at Texas A&M Univer­sity’s Mays Busi­ness School.

“What will hap­pen when you grow? What’s your process for re­solv­ing prob­lems? How should we man­age this project? If you ask these kinds of ques­tions, it could re­veal a lot of prob­lems in ad­vance,” Howard says.

While part­ner­ing with strangers has po­ten­tial pit­falls, so does go­ing into busi­ness with friends.

“It’s im­por­tant to have trust and strong so­cial ties, but if main­tain­ing them comes at the loss of busi­ness suc­cess, that’s not re­ally ap­pro­pri­ate,” Howard says.

Part­ners also need to be sure they share the same goals for the busi­ness, or at least un­der­stand what their dif­fer­ences are.

“You need to talk up front about what your ex­pec­ta­tions are, for long term, short term, two-year and five-year pic­ture,” says Sandy Jap, a mar­ket­ing pro­fes­sor at Emory Univer­sity’s Goizueta Busi­ness School.

Newspapers in English

Newspapers from USA

© PressReader. All rights reserved.