Conflicts in Business Partnerships

Taking on, or starting a business with a partner can be a great way to share responsibility, raise capital and combine skills, knowledge and experience. Often, partnerships come together quite organically between friends or family members who share an entrepreneurial drive and a common vision. In the early days, you will have no trouble rolling up your sleeves to do everything necessary for the business. But this could change when the business gains traction and becomes profitable. Businesses with accelerated growth require owners to take higher risks, make difficult decisions and navigate complex situations when you may not see eye-to-eye. Conflicts in business partnerships commonly appear at this stage. The success of your business and relationship with your partner will depend on how well you sail through these challenges.

Conflicts in Business Partnerships

Breakdown in trust, differing values, goals and priorities, lack of boundaries and role imbalances are some examples of what create conflicts in business partnerships.

In 2021, I had a series of conversations with a potential client. Like many, she and her partner started a business with little formality. It grew quickly and had become profitable. Predictably, the challenges at that stage of the business magnified their differences in values, expectations, and goals. Their relationship had become very tense.

Unfortunately, such situations rarely improve by themselves. The conflicts you have with your business partner in Week One will be the conflicts you have in Week One Hundred unless you take steps to resolve them. When you don’t take action, a cascading effect can make matters much worse.

These partners were avoiding one another and not having the important face-to-face conversations characteristic of solid partnerships. The same issues kept coming up over and over again, driving a deeper wedge between them, and decision-making had become increasingly difficult because it brought up resistance.

The Cost of Conflicts in Business Partnerships

To help them chart their way through the stormy waters, they engaged a business consultant. Despite the excellent advice they received, they could not agree on how to implement the changes. Consequently, they lost out on the growth potential of a business that was still very viable.

The opportunity cost from their inability to move the business forward was only one of many costs they incurred. These partners had also spent more time, money and emotion figuring out how to fix their partnership or terminate it. Prolonging a sub-optimal business partnership can be a very costly exercise, indeed.

Early Intervention in Business Partnership Conflicts

Business partners caught in a downward spiral in their relationship can benefit from mediation services. While I almost always advise early intervention, this investment is worthwhile only after the business is profitable and growing. In this case, early intervention would have allowed me to delve into their core differences and counsel them on how to work together or plan an amicable breakup.

But, they had left their problems festering for too long. By the time they reached out to me, their issues were deep and personal. A major effort was needed on both sides to put things right. My sense was that neither wanted to put in the work even though it would have brought them a stable business with better revenue.

Partnership Agreements

Partnership agreements are not required by law. Consequently, too many partners overlook this formality which can seem unnecessary in the early days. After all, just like a marriage, nobody goes into a partnership with someone they trust and like, believing it will end. But that is precisely why conflicts in business partnerships can ruin long-standing friendships and relationships.

Business coaches, mediators and lawyers will always counsel partners to draw up a partnership agreement at the onset. Standard agreements address how business partners divide responsibilities, outline processes for making decisions and resolving disagreements, as well as set clear protocols for buying and selling shares. Most importantly, partnership agreements address exit strategies.

Consider circumstances that have nothing to do with prickly relationships between partners. What happens if one partner becomes incapacitated or passes away? Perhaps one partner wants to retire while the other wants to keep going. Sometimes, a change in family dynamics could force one partner to spend much less time on the business. Whether business partnerships end amicably or contentiously, a partnership agreement can help you navigate the steps to dissolve the business relationship much more smoothly and cost-effectively.

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