Why Business Partnerships Die

Interesting…yet true! Enjoy…

Marriage is hard.  Half of marriages end in divorce, so say the oft-quoted statistics, and keeping committed to a relationship over a lifetime of bumps in the road is no simple task.

Just like a marriage, the road to a successful partnership is a long, hard, and winding one that requires attention, energy, and effort to maintain.  The voyage can be treacherous, so avoiding the potholes in the partnership road requires a good map, a keen awareness of the obstacles on the path, and a steadfast focus on reaching your destination.

Like meeting, courting, and marrying the mate of your dreams, closing a partnership deal is a respectable feat unto itself that is worthy of celebration.  Getting from a Value Hypothesis to a signed contract is an accomplishment that requires many hours of time, energy, and effort.  But as hard as it is to get a deal, keeping a deal is often the more difficult task at hand.

How to Keep a Deal

Contrary to popular hustler belief, companies do not enter into partnership deal for a deal’s sake.  The partnership is a means to an end:creating long-term value by bringing in revenue, getting new users, building a brand, or something else.  If a partnership is not delivering on the promise of what was expected coming into the deal, then partners may opt to cut loose and head in another direction.

While people may stay in a failing marriage for myriad reasons (kids, fear, money), there’s often less sentimental glue holding together a failing partnership.  While certain contractual provisions may commit parties to a deal that they no longer want to be in (such as minimum revenue guarantees), in most cases partnerships survive only as long as the value they are creating merits the costs of maintaining the deal.

The Costs of Partnerships

The costs of striking a deal can be obvious or hidden – from legal costs for drafting contracts to the opportunity cost of employees’ time – but unquestionably doing deals takes a commitment of resources on both sides.

In order to even get to the stage where a deal is on the table, both sides of a partnership needed to be firm believers that those resources would be well-utilized (be it for generating new revenue streams, building a better product, generating brand awareness, etc.).

But what about when the value that was promised to be delivered from a partnership fails to materialize?  What about when the customers don’t come?  Or the product doesn’t really work well?  Or when their sales team doesn’t want to sell your product?

Keeping a deal alive requires a continuous effort: marketing to support a new joint product launch; training to get a sales team on board; accounting to ensure that revenue share splits are accounted for properly.  The specifics differ partner to partner, but in almost every deal there remains some need for additional time and energy to be spent supporting a partnership once it’s in market.  And in a startup or a Fortune 500 company, continuing to spend time and energy on an initiative requires a return on that investment.

Keeping the Deal

Just as marriages require the occasional “date night” to keep the romantic flames lit, partnerships require a dedicated effort to maintain the deal.  Once your partnership enters the market, consider the following paths to avoid bumps on the road:

  • Talk regularly: use frequent “partnership update” meetings to update no only on progress with the partnership, but to gain insight into what’s happening at your partner’s company in total – and how that may impact their prioritization of your deal.
  • Discuss benchmarks: set performance expectations upfront.  Whether you include them in the contract as legally-binding requirements or not, the very discussion around what each side expects to get from a partnership can force the deeper questions that will help identify issues and discrepancies early.
  • Know your roles: the more you can clearly delineate who will do what – who’s tech team will lead development, who will develop training materials, who will manage public relations, who will drive sales efforts, etc. – the more you can rest comfortably knowing that you’re both traveling down the partnership path together.
  • Be prepared: sometimes partnerships just don’t work out, whether it’s due to factors in your control or not.  Bracing yourself for the possibility that a partnership may not survive indefinitely will enable you to seek alternative options to protect yourself should the worst occur.

Read more at Why Deals Die – Forbes.

About Kelly Business Advisors, LLC

Early in his career John started-up and sold 7 years later a Moving and Storage Company in Milwaukee. He acquired and was President of Kelly Pickle Company f/k/a Bond Pickle Company, in Oconto, WI for 12 years. Built a monthly round-table networking group of manufactures in Oconto. Developed marketing plans, sales plans, products and implemented lean manufacturing practices with many North American companies. Worked with non-profits as both a front line leader and behind the scenes. He is active in his church, a member of the Green Bay Chamber of Commerce,Business Networkers International (BNI) and now is joining the Green Bay Downtown Rotary.

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