What Spoils a Business Partnership?

Copyright (c) 2010 Ask The Business Lawyer

Business partnerships go wrong for a variety of reasons. Many business owners forget that a business partnership has two components ' partnership and business. Women entrepreneurs tend to focus on the relationships in a partnership, and less on the monetary aspects of business-building. Here are some lessons learned (real names not used) about business partnerships:

1. If you're not earning enough, get out. If your start-up phase exceeds the gestational period for an African elephant, you may have to face that what you're doing, how you're doing it, or those with whom you're doing it isn't working. You must meet your personal expenses. Just as you wouldn't dream of taking a salaried job that underpays you, so your business should not underpay you. This means you need to be mindful of your needs as they grow and change. When Laila started her business, she was single. By the time it ended, she was married and actively trying to get pregnant. These lifestyle changes gave Laila a totally new perspective on work, the time she wanted (and could) spend, and the amounts of money she needed to generate to support her family. Your purpose in life is not just that you work for your business - your business needs to work for you.

2.Learn to read financial statements. As unpleasant as that sounds, not being able to read or understand the P&L statement or balance sheet is a poor business practice. Many business owners shy away from the numbers because they are not taught how to interpret or to use them. To be successful in business, you must know what you financial statements are telling you about the direction of your business and to know when to find outside help.

3. What is your partner's mindset towards money? There are some telling signs as how they are going to cope with shared business finances. Look to how they handle their own finances. Are they always leveraged, or are their personal finances in good order? Have they filed for bankruptcy? Do they have bad credit? What language do they use with regards to money? Are they always complaining of being broke, or they do have a positive, prosperity consciousness? Ben partnered with someone who was always complaining about being broke, and it took him a while to recognize that his partner's underlying negative mindset affected their business decisions.

As you tootle down the proverbial highway of business, be sure that you and your partners have a clear understanding of both your business and personal financial goals. A business partnership must be about business to be profitable. If not, you risk having your joy ride morph into the trip to Hell.


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Nina Kaufman, Esq. demystifies legal mumbo-jumbo to save small businesses time, money, and aggravation. She's an award-winning business attorney and columnist/blogger for Entrepreneur Magazine online. Go to GreatBusinessLawResources.com for her free Entrepreneurs Business Law Primer and to learn more about her user-friendly business law resources.