Should I Fire My Business Partner | Signs of Bad Partnership

Published by Delina Chantel Yasmeh | Author

Last updated: September 20, 2024

FACT CHECKED by Lou Viveros, Growth & Transition Advisor

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Partnerships are mutually formed to accumulate capital, expertise and labor, with the common goal of sharing the profits of a business venture.

As with any relationship, conflicts and disagreements may arise from business decision, management, and performance.

As a Mergers and Acquisitions specialist who helped several individuals form their companies, entrepreneurs seek my guidance regarding business partnerships.

I’ll provide my insights on how to identify the signs that constitute a bad partnership and how to resolve the issue.

Quick Summary

7 Signs You Need A Break From Your Business Partner

If you are facing any of the following issues, then it might be time to part ways with your business partner.

1. Value Conflict

Business values reflect the priorities of an entity with regard to its goals and operation. It may be motivated by profit, growth, customer service, or a combination of factors relevant to the partnership.

Any significant difference in value would create conflict in management decisions and impact the business, its client base, and the market network.

According to the U.S. Small Business Administration (SBA),  20-30% of partnerships dissolve within the first 5 year.

2. Lack of Communication

Openly discussing business strategies and sharing profitable ideas would benefit any partnership, and create a positive working environment [1].

According to a few of my clients, business partners who refuse to voice-out input may be regarded as indifferent to the goals of the firm, and counterproductive to the business.

3. Different Financial Acumen

The survival and growth of any business entity hinges on how the company’s finances are managed, allocated, and invested. Most disagreements arise from conflicting financial decisions and asset management.

In my experience, most partnerships terminate due to financial issues.

This is the reason why I advise newly formed partnerships to establish a written agreement that outlines the company’s financial management structure.

According to the U.S. Small Business Administration (SBA), approximately 15% of business partnerships experience such disagreements, which may arise due to differences in financial management styles, profit sharing, or investment strategies.

4. Lack of Work Ethics

In a partnership, the members should exhibit equal accountability, commitment, dedication and work effort.

Inasmuch as the duties and responsibilities of each party are indicated in the partnership agreement, problems may arise in the actual day-to-day operations of the firm.

"A partnership is more than a legal agreement between two parties; it's a bond of mutual commitment aimed at ensuring each other's success."

- Jon Morgan, CEO & Editor-in-Chief of Venture Smarter

5. Rigid and Not Flexible

If a partner is rigid and not flexible in terms of business innovations, the partnership may stagnate and be unable to keep up with the competition and common market trends.

Consumer demands are dynamic, and changes have to be implemented to keep your partnership updated and competitive.

Resolving the Issue of an Under-Performing Partner

If the partnership continuously poses conflicts regarding management, financial, and operating decisions, it may be ideal to terminate the business relationship.

However, your only option to relieve a partner requires legal action, that involves filing a complaint claiming unethical or poor performance of a business partner.

To avoid legal action, which may actually take years, you can resolve any conflicts through other methods:

• Consult the partnership agreement: If a partnership agreement is in place, you may simply resolve the issue by consulting the specific provision that dictates the terms of settlement.
• Business or legal counsel: You may seek the involvement of a third party such as a business consultant or a lawyer to objectively define the specific business conflict and offer legal settlement.
• Buy-out option: You can offer to purchase the ownership interest of the partner and gain control of the business.
• Dissolution: You may choose to dissolve the business altogether as a final option if no other settlement options are acceptable to both parties. I had a client who officially dissolved their partnership and distributed the remaining assets to start their own personal business.

FAQs

References:

1. https://www.indeed.com/career-advice/career-development/importance-of-business-communication