Avoid These Top Business Partnership Mistakes



Posted: Monday, August 09, 2010

by Nina Kaufman
Ask The Business Lawyer

A business partnership is really about partnership and business. Many business partnerships go wrong when they overlook this major principle. Women entrepreneurs tend to place more importance on the relationship benefits of their partnerships and ignore the money aspects of running a business. Here are some reflections on money, business and partnerships learned the hard way (real names changed):

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. Understand financial statements. Many business owners shy away from balance sheets and P&L statements, and do nothing about their financial illiteracy. Sticking your head in the sand when it comes to financial statements is poor business management. You need to know what the numbers are saying, and to find help from the outside to understand them fully.

3. Do your partners have a prosperity or poverty consciousness? Are they always complaining about not enough? How are their personal finances? Do they pay their creditors on time or are they unable to balance their checkbooks? Have they filed for bankruptcy in the past? What kind of language do they use with regards to money? These are telling signs as to their approaches to managing business finances. Richard took several years before he recognized that his partner's scarcity mindset towards money had a negative impact on everything he did.

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.

Copyright (c) 2010 Ask The Business Lawyer

Want to save time, money, and aggravation with pesky business law issues? Award-winning business lawyer and Entrepreneur Magazine online columnist/blogger Nina Kaufman has user-friendly business law resources for entrepreneurs that demystify legalese. Get your free copy of her Entrepreneurs Business Law Primer from GreatBusinessLawResources.com today!
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Top-level comments on this article: (2 total)
» left by Jennifer Stewart
 1 year 276 days ago.
152 fans.
I think is such good advice - I've had a partnership I thought would be a joy ride that morphed into a ride to hell! I learned my lesson...
» left by Nina Kaufman 1 year 275 days ago.
2 fans.
I know, Jennifer -- it can hurt having to pay tuition to the "School of Hard Knocks" . . . but the lessons learned are invaluable! I turned my into a program called "The Entrepreneurs Prenup: How to Choose a Business Partner Who Won't [BLEEP] You."  :-)
» left by Dr. Carla Goddard
 1 year 276 days ago.
39 fans. Follow Dr. Carla Goddard on twitter!
Nina
 
I so agree that it has to be about business for profit and that partners have to have same goals. Ride from hell does not even begin to come close to describing it....shudders
» left by Nina Kaufman 1 year 275 days ago.
2 fans.
Thank you, Carla . . . you're right that business partnerships are not like doing after-school science projects together. Muck about and have fun all you like, but if the money isn't flowing in sufficiently for you to support yourself, you're in big trouble.
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