Are you setting your business partnership up to fail?

Are you setting your business partnership up to fail?

| Jul 1, 2021 | Business Law |

If someone told you that your new business partnership is doomed to failure, you are unlikely to be happy. Yet, statistics show it is the truth.

Various studies have been done to assess the percentage of business partnerships that fail, and the consensus seems to be that up to 70% will fail to achieve their goals. Does that mean that you should give up your partnership plans? Not necessarily. 

Your business partnership does not need to last forever

How many companies can you think of that have reached 100 years old? What about 50 years old? Does that mean all those old companies set up when your grandparents and great-grandparents were kids were a waste of time? No. Many of their owners did well. 

The U.S. Bureau of Labor Statistics found two-thirds of companies do not last more than 10 years; half are gone within five years and one-fifth within the first year. These statistics refer to businesses in general rather than partnerships. Therefore, rather than worrying about your business closing, it pays to assume that it will.

If you can create a business that outlasts most companies, then so much the better. However, if you can revise your plans to ensure that your partnership achieves its goals within five or 10 years, this might be better.

When starting your partnership, make a plan for the end

It might seem pessimistic to think about how you will end your partnership. Yet, if you do not make provisions for it in your partnership agreement, the end could be both difficult and costly. Having worked hard together for years, the last thing you need is to waste your earnings in courtroom dramas with each other. Including clauses that allow either side a graceful retreat will be better for your wallets, sanity, and relationship.