5 Red Flags of a Bad Business Partnership

Red Flags of a Bad Business Partnership

A bad business partnership is more common than you think.

Research on the success rates of business alliances actually says that around 80% of strategic alliances fail. But does that mean you should not consider entering into a business partnership? Definitely not. The combined business skills as well as a bigger business capital is essential for huge investments.

But the fact still remains that only one-fifth of business partnerships succeed. Misunderstandings happen. Some may just not work out properly. It’s up to you to know how to predict if your business alliance would work out or not.

To start, here are some red flags that are indicative of a bad business partnership.

1. Unbalanced Responsibilities

As partners, you should expect a level of specialization and division of labor. Ideally, this should be based on your strengths and weaknesses. The perfect business partner would be someone who can cover the areas you are weak, and whose weakness you can compensate.

While this rarely happens in real life, it should be something you strive for. You and your partner should take this into consideration while drafting your list of tasks and responsibilities. If this list paints a picture of a business alliance that is more of a parasite-host relationship than a partnership. Mark that as a red flag.

2. Incompatible Values

It’s important to choose a partner that you share common values with. Think of business partnership as a marriage commitment. You will work with your business partner on your shared goals for quite a long time.

Difference in perspectives

If you have different ideas on how to achieve these shared goals, this would pose a problem in the long run. It’s easier to make a relationship work if you are on the same page with similar perspectives and approaches to work.

3. Problematic Communication

Proper communication is critical in any relationship. Business partnerships are no different.

There are several kinds of communication problems that you should look out for in your partner. First is the frequent lulls in communication. If your partner takes a long time to respond to your emails and calls, it shows a lack of priority for their project with you.

Another is inconsistent information. If your partner frequently changes stories or facts in subsequent communications, it shows dishonesty. Frankly, if they are not 100% honest in the beginning, you should stop pursuing the business partnership.

4. Inability to Compromise

As I have previously mentioned, misunderstandings happen. Even best friends for 20 years can have disagreements every now and then. In my opinion, having these kinds of conflicts is beneficial, especially in a business context. Two or more brains working on an issue are bound to have differences of opinion.

MORE: 6 Best Psychological Techniques for Effective Business Negotiation

The only problem with these conflicts is when no proper resolution is achieved. An ideal partnership would be to have the partners considering the advantages and disadvantages of each others’ positions and then attempt to compromise for mutual benefit. If your partner does not make any attempt to compromise with you, it might be time to consider calling the partnership off.

5. Financial Disagreements

At the end of the day, business is all about money. You will be making most of your decisions on the topic of spending your available cash and controlling your cash flows. Successful partnerships usually talk about money matters on the get go. Having a well-formed discussion on how you’ll handle money is crucial for a great working relationship.

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If you have significant disagreements on your methods of handling money, you will inevitably get tired of squabbling over this important issue. Before you invest more time, effort, and obviously, money, on the partnership, it’s probably best that you move on.

What other things do you consider as red flags for a bad business partnership? Tell me your thoughts below.