Failed Business Partnerships: Why 70% of Business Partnerships Fail (and How to Beat the Odds)

In this episode, Sam and Kate delve into the sensitive and often tricky topic of business partnership failures. Globally, around 70% of business partnerships end up dissolving. In a candid and honest conversation, Kate and Sam explore the challenges that arise in business collaborations, acknowledging that while “failure” is possibly an unfair term (because often our biggest learnings come through these experiences), many partnerships naturally come to an end or evolve over time. 

Sam and Kate offer insights based on their personal experiences and those of their clients, sharing that while business failure can feel discouraging, it often leads to valuable personal growth and important lessons. The pair discuss the key reasons behind these failures, and what you can do to prepare yourself when entering a business partnership. You’ll walk away with actionable insights to navigate the complexities of business partnerships.

Key Takeaways:

• The Reality of Business Partnership Failures: Sam and Kate discuss their personal experiences with business partnerships, both successful and unsuccessful, and explore the common reasons why partnerships fail.
• Learning Through Partnership Failures: The hosts reflect on the personal growth that comes from business partnerships, emphasising how working alongside a partner can accelerate learning and self-awareness.
• Key Reasons Why Partnerships Fail: And what you can do to prepare yourself if considering entering a partnership.
  
  

This episode offers valuable perspective for entrepreneurs navigating or considering business partnerships, emphasising that failure isn’t the end but often the beginning of valuable learning. 

Thanks for tuning in! 

Connect with the Hosts:

Kate De Jong, PhD | Inspired Business

Website: https://katedejong.com/

Instagram: katedejong.inspiredbusiness

Email: kate@katedejong.com

Sam Morris | Digital Systers

Website: https://www.digitalsysters.com/

Instagram: sammorris.businesscoach

Transcript

0:03

Good afternoon, everyone, and welcome back to the Thriving Business Podcast. Hello, Sam. Hello, Kate. Good to be back with you. Yes, we've got a juicy topic to get into today. We do. And it's one that we imagine will be interesting to a lot of our audience because it's aboutA failure of business partnerships, let's put it that way, or collaborative, yeah. Yes. And it's a topic that can be tricky to talk about, because not everyone likes to admit failure or acknowledge failure, or is that even the correct word for it?Because sometimes it's just the natural coming to an end of a, you know, of a business collaboration. Yes. However, we do feel there might be some good things to explore based on both of us have had many different experiences over our time, some recent, some not so recent. And yeah, we thought it would be good to unpack that for the audience because we know there's a lot of, a lot of small businesses are business partnerships of either two or, typically 22 business partners that come together. And we've seen through our own clients over the years, Sam, haven't we, through where clients are in business partnership that often it fails. And we were just looking at the stats. So how about you give us a rundown, because that was interesting. Yes. And I wanted some stats today, Kate, because I wanted people to feel like they were in good company if they're saying, yes, that's me, I've had a failed partnership for business. Yeah, absolutely. Yeah. So let's have a look. Around the world, globally, across the board, it's about a 49% failure rate for business partnerships. So almost half don't work out for whatever reason. Yeah. So if we have a look at the United States, they're not great. They have the highest rate of business partnership failure across the board. It's about 70%. Wow, does it give a time frame or just? No, it doesn't. It just says on average about 70% of partnerships fail. Right, okay. So not great in the US. Europe, they're behind the US, but not too far behind because it's about 50 to 70% for them as well. And Australia? Australia, we're not doing too bad. So we don't have really strong statistics for business partnership failure, but it's suggesting that around 20 to 30% might be our rate. But it is tied a little bit, that statistic is tied in a little bit with startup failure. Oh, is it?Okay. Yes, it is. But. because I did read, but that was globally, 60 to 65 of, up to 70% of business partnerships fail over time. Yes. Yeah, and in Australia, you're saying that slightly less, but it's tied in with entrepreneur or startup failures, but they're also pretty high in Australia. When I was doing my research for my book, it's around, it's about 50% of startups fail within the first two to three years, isn't it?That's Kate. startup value percentage in the US is 90%. Wow, okay, so we're doing pretty good. Fascinating. I feel like us Aussies are not doing too badly when it comes to failure rates. That's insane, okay. I think I should clarify too that when they assess the success or failure of a business for the purpose of these statistics, they're not separatingpeople that just decide to not proceed anymore. They're classifying that as a business failure. So I don't know that those statistics are really great representative of what happens. Yeah, and it's possibly the terminology is not accurate. It should be a business closure rate, potentially, you know. Yes, So what they're saying, what they're measuring up, businesses that have closed their doors, so they've deregistered their ABN and then trading, yeah. And that could be a failed business partnership or it could just be they've decided to move on to something else. Yeah. Definitely, But look, let's talk about the business failures today because you and I have experienced this firsthand. Yes. And we have both experienced different types of collaboration and business partnership failure. Yeah. And failure is a harsh word, isn't it?It is a really harsh word. Because is it just a learning experience?It's not always a positive experience and it can feel a lot like failure, but is it actually failure?Is it actually, because some of the lessons I've learned through business so-called failures have been the biggest lessons that have helped me grow and strengthen as well. Absolutely, absolutely. I don't, I would never avoid partnering with somebody. or fear of that failing, because I think this is where I'm somebody who loves to run at learning, particularly, learning about myself. And I feel like you get accelerated personal growth when you're working inside a partnership. For sure, like business, running a business in itself is the biggest personal growth journey you can go on, but then throw in a business partner and it's accelerated tenfold. Yes, yeah. So I'd love to read out some of the reasons why they fail because, we were chatting before this show and it's fascinating and it's probably a good segue for us to talk about where ours, went S. So the top reasons areAnd again, we used AI as we do, but it's got sources for this, which we love. For those listening who love AI as well, you can use the research function of AI to actually get citations of the sources. So you can go and fact check this stuff, which is always recommended. We talk about that a lot, don't we?Pushing back on AI and making sure it's factually correct and not hallucinating all that. Anyway, so top reasons for partnership failures, communication and alignment issues. So communication breakdowns and goal misalignment, you and I have experienced that. Different and conflicting values, we have definitely experienced that. Yes. Lack of internal communication and trust, which we've experienced also. The other part that comes, so number one was communication and alignment issues. Number 2 is financial and control problems, which you and I have experienced. A lack of transparency around finances, control issues with one partner treating others as staff is what it says here. Disagreements over profit distribution and resource allocation, we have experienced that. Yes. Work contribution imbalances also, yes. So unequal time and energy contributions and mismatched hunger levels for business success. So that's a really good overview, I think, because that's certainly been my experience. Yeah, so Sam,On those topics of communication and alignment issues, I think under that one, it talks of different and conflicting values. That's certainly been something that we'veexperienced. And yeah, the interesting thing there is thatThat misalignment is definitely not always apparent in the beginning of a businessrelationship or any relationship for that matter. No, not apparent. And also Kate, all too often not discussed. Yeah. And to make that like tonot make that mistake again, I personally would want to know next time going into a business partnership, I would like to know more about that person's personality profile. Yes. And we've talked before about the Harrison assessment, but I do love that one because it helps you see, behaviours are just the tip of the iceberg and it helps you see with someone what's below, the 90% below the surface of the iceberg,So it tells you their values, their strengths, their not such strong points and their blind spots and their potential flip behaviours, meaning when they're under stress or duress, the behaviours they might display in that situation. And you know, I've done it for myself and I know what my flip behaviours are and I agree, I tend to be too permissivewith people until I get pushed too much and then I can flip into dogmatic and do you know what I mean?Yes. And yeah, but I think if you're going to a business partnership, being aware of that emotional landscape is very important because that could have helped us either make a different decision in the business partnership that you and I were involved in, or at least you can have a conversation with the person and hopefully they're self-aware enough or open enough to have a conversation about that and how you're going to manage it under stress. But that requires a lot of courage. It does. It does. And I like that your Harrison assessment does those because not everybody is self-aware enough to know what their triggers can be and how they're going to react. Yeah. And also, you know, look,Everyone is going to have things that trigger them and everyone does have ways of reacting. And I imagine too, having that assessment means that you can see if that those, what did you call them, flip behaviours?Flip behaviours, yeah, they're. Yeah. If those flip behaviours are going to really work against each other, then that's going to end up to be a really toxic relationship. Yes, which I believe it did in sort of our, it was overly toxic, but no one, no one felt good in the situation that we were in. Nobody involved felt good about how things ended. And obviously, you know, for privacy reasons, we can't say a lot on a public podcast, but it's also not something thatthat is unique to us. This happens all the time. And the research shows that this is the number one thing is where there's a values alignment. And I do love Harrison for that reason, because it can sort of draw those out. It's A strengths based personality analysis. But from there, you can derive what someone's priorities and focus and values are. Yeah. And it's just good before you go into any partnership to know the lay of the land with the person you're going. And like you said, have a conversation aboutthe potential flip behaviors under stress, but also being, if they are going to work against each other, like you said, it might be a wise decision not to go into that business partnership because unless that person is really self-aware and able to be open and reflective and work on themselves and work with you to have the tough conversations, because I think that's where it went wrong in our situation. we weren't able to have those tough conversations early enough. Yeah. And also, Kate, I think we did, being totally honest and reflecting, I think we were too soft in those conversations too. And we didn't fully communicate just how much things wereaffecting us all. Yeah. as women, we all want to get along and we want everything to be nice all the time. The problem was that sometimes we tend to bury things. Yeah. And I think we probably, as a collective group, I think we probably all did that a little bit too much. Yeah, and I think we fell into the trap that a lot of business partnerships fall into, which in the beginning, the honeymoon phase, it's all rose-coloured glasses because the company mission resonates with all of us. Like we've got these company values and we're all on board and we're all working towards the same mission and we're all excited and it's all great. But then what we're not seeing at that point when everybody wants it to work so badly is, okay, you've got the companyvalues, but are they everybody's individual values? And yeah, are you being transparent enough to be honest aboutthat?And Yeah, you're right. It's, yeah, the rose-coloured glasses mean that you tend to absorb a lot more of that discomfort, as you said, without bringing it up. And yeah, I think all of us, what happened in the end was exactly what my flip behaviour is. We take your permissive and allowing and very collaborativeand you take a lot, take a lot, take a lot. And because you don't have the courage to have those tough conversations earlier on, you end up in the flip behavior where suddenly you've been pushed to your edge and now the foot comes down. Yeah, and then you don't want to budge because you feel like you've already been pushed far enough. Yeah. And you're like, this is my line in the sand now. I don't want to do this anymore. But there's too much anger, resentment there to actually find a good solution. And then the distrust comes in. And so speaking to another point on that list was the lack of transparency, which we certainly experienced. Yes, we did. Which meant that the trust was broken. And at that point, there is no going back. You know, there was no transparency around the financials, which meant that we did not know. Yeah, we just had, it just meant that we couldn't trust anything that was going on. AndIt's a downward spiral from there, isn't it?So. It is, it is. And Kate, too, I think, you know, another thing that sits alongside, you know, everyone's got their values and you've got your trust, but also you spoke about the mission. company that we all bought into. And here's where I think a lot of things go wrong as well, because it's really great to be on a mission and it's really great to set goals to achieve that mission and that vision. But another area where the wheels fall off this magical collaboration cart is that there are so many different ways in which you can achieve a certain goal. And Like you say, in the honeymoon phase, everybody's on board, you know, this is what we're going to do. But without discussing the nuances of this is how we're going to do it. When you start walking the path, it's like, anybody that knows me, I always say all roads lead to Rome. There are so many of them though. One person might be walking one path thinking, oh yeah, because we're going to Rome, we're all going this way. But if you've got, two, three, 4, 5 people in this collaboration or partnership and they're all doing things or they all have their own preconceived ideas of this is how we achieve this goal, this is how we drive this mission, none of those are aligned. Yeah. That can be a real problem, a very big problem. Yeah, which is what happened in the end with our situation where we couldn't agree on how to reach the outcome that we needed to. And we had different opinions on that. But the team dynamics at that point were just not healthy enough to work through that as a group. So yeah. It's a tough one to talk about, isn't it?Because you don't want to, I think theimportant thing to acknowledge is we're all at fault. There's no one person that's to blame in a business partnership. And it's important to go into things with eyes wide open. I mean, I'm the first to admit that I was overly optimistic. ignored the red flags about intellectual property. And I had several, I had two lawyers tell me this is, this situation is going to leave you dry in terms of IP, you know, and which it did. And that's been something I've had to lick my wounds and rebuild. And, you know, but I accepted that. I entered into that arrangement knowingly, you know, knowing that whatever IP I create is not mine and shall be given and sold on, et cetera. So Yes. And the rose-coloured glasses come from walking into it, knowing that you're going to give all of that. But you had this internal expectation of reciprocation. Yeah. And so optimistic about what we could achieve together. Yeah. And none of us sat down and said,What is the plan?How are we going to do this?Tell us exactly what all the steps are involved. Because I know for me, even now, I've had to learn so much about how I'm willing to do things and how I'm willing to show up. And I had no idea about that background. in the day, like years ago, when I first started out, I didn't know things about myself. And where my lines were, as far as I'm willing to do this in business, but I'm not willing to do that. Yes. Yeah. And those, those boundaries, we sort of only do learn through pain and failure. Yes. Yeah. YeahI mean, a lot of people are more naturally self boundary enforcing if like,if you know what I mean. I've known people in my life that I've just naturally very good at protecting their own boundaries and that's not something, growing up a chronic people pleaser, that's not something that was innate to me. I'm much more likely to work for the greater good than consider my own boundaries and then I get in trouble and resentful as a result. And I know a lot of women suffer with that. Yes. And particularly true, if you are new to business,you may not know what your boundaries in business are. Yeah, that's right. And that was kind of the case for us in this kind of business. We were very much naive to the layers. Yeah, it was a very new landscape for all of us stepping into that. All I can say is that, well done us forfor coming out the other side, having learned a lot. Because you do have to take away what we, it wasn't, it ended up being a negative experience, but I don't, we're the people who've had it in us to. learn from it. Yeah, and I think that's where the language of failure is often not kind because it's just, it's an experience that you had that tested you on many levels and yes, left some pain and... But you grew through it and you couldn't do what you're doing now in the same way without that experience. And growth is not always pretty. No, it's called growing pains for a reason. Exactly. Well, that's true. Yeah. And look, you know, we've gone on to have other collaborations and other partnerships and do joint ventures and things like that. So it's not like It's not like we didn't accept that it was impossible and not for us to do that and work with other people. Yeah, that's right. Yeah. And I think the lesson, well, the key takeaways for the audience, and I know many of our listeners would have had similar experiences with business partnerships, but it's an experience thing, isn't it?And going into something with eyes wide open andAnd perhaps listening to the people that tell you, there's big red flags here. It's really hard to listen to that when you're so excited about the opportunity. And I think that's, as I said, so many partners, business partnerships fail because the idea is so exciting and the potential, you know, if you could make this work, how cool would it be?And we did have a couple of years, you know, several years of good times and good, greatexperiences. but I suppose just being a bit more discerning, do your research, make sure, which, and I definitely would not enter into a partnership with anyone without knowing, doing, us both doing the Harrison assessment and having a candid conversation, just look, this is what mine did. SoJust be aware that if you push me too much, I might be able to flip. If I don't feel that, you're being honest or transparent enough or this, there's whatever the things are that you need, then, I have the potential to do this. I'm aware of it, but it's not something I'm proud of and it's something I'm working on, but I need you to work with me so that we don't get in that situation. And then it's a very courageous conversation about, well, what do you need and what do I need?AndAre we each able to do that? Can I like to, I like to now use, I just use a template I got off the internet as a starting point. There are many, if you go to the business bureau or, whatever is in your state, you can gettemplates for joint ventures and partnerships and things like that. And they're a really good starting point to have these conversations with people. Okay. Bring your personality test, bring your templated joint venture agreement, because it's going to force you to both sit there and answer questions that you might not be thinking about. And you know, if you keep the template and as you do more and morecollaborations or partnerships, you can, you know, developone for yourself. But starting with the template the first time I did this was really good because it forced us to create exit strategy. It forced us to really talk about some of these nuances that you do gloss over when you are so excited and in love with the idea. Did you use that template in your most recent collaboration? Yeah, And the last collaboration that I did, because we had the exit strategy in place, I think that really dramatically increased the possibility of that collaboration ending in a way that wasn't hurtful to people personally. That's a really good point, because we didn't really have an exit plan. No. In fact, we were tied into a five-year contract that in the end dissolved after about 3, but there was no way that we could get out that felt good to us. No, and even the way you were released compared to how I was released,was managed differently and it looked different for both of us. And I know that I certainly felt like I was choosing between the frying pan and the fire. I didn't feel like they were good choices. Yeah, that's right. That's a very good point. Yeah, so go in with the eyes wide open, get one of these templates from the, was it the Small Business Bureau, you said?Oh yes, like you just Google them and there are lots. Make sure you get one from some kind of business agency or someone with a reputation. Yeah. And having that exit strategy to protect you all is a great, great advice. Yeah. It's never an easy conversation to bring up. I don't think this is working. I think we need to separate. But you've done that very recently and you managed to do it in a way that was amicable and And I guess what you're saying is that's because you actually put some thought into, okay, let's be realistic and imagine the situation where this doesn't work out. Yeah. And then when it didn't work out, it did work for a while, your collaboration. Yeah, it did. It did. But then as things grew, each person inside of that part, you know, inside of that collaboration and I don't know, but yeah, partnership. But you get different ideas. And as you're doing, as you're going through personal growth, you do change and your values can sort of shuffle a little bit. And so as that happens to you as an individual, you can outgrow the original idea. And sad to say, sometimes you can outgrow the people that you are collaborating with. Yeah. So there are a variety of things that happen that aren't necessarily about the people you've partnered with. Sometimes it can be about you. Sometimes you can be partnered with wonderful people and maybe the business idea that you were so excited about when you started, but maybe your ideas and perceptions have shifted. And now maybe that's not something that's so important to you anymore. So this is where saying it's a failure is such a furphy, it's wrong. Yeah. Yeah, it's an experience that ended in people going separate ways. To pursue things that we were all passionate about and everyone is still extremely supportive of each other. And that's what I mean, like being able to set that up, to be able to exit gracefully and respectfully is so important to do right from the start. Yeah. And I definitely learned a lot through our negative experience about what my business values are and how I'm very clear now about how I do want to do business and how I don't want to do business, which is a beautiful thing. Yes. Yeah. And yeah, it allows you to be more discerning in any other, you know, futurecollaboration. Yeah, I mean, I've had one recently with guys in Queensland that were running a marketing agency and I was supporting them. Greatbusiness, three amazing men, and I was sort of just helping them with their client work, but everything was going great, but they had some big clients that signed on that in the end didn't pay their bills. Oh. And it was from no, from what I could see, it wasthrough no lack of results that were being, like a lot of marketing, there's an investment you've got to do up front in order to build the foundation to get the results. In a long, you know, marketing is not an overnight thing. Is it, you know, one company in the USpaid a decent sum to get the foundations built. But then before the foundation, we had the whole systems ready to go. And he pulled the pin because he said, I've invested all this money, but I haven't seen any results yet. And we did Zooms with him. And we're like, do you realize you are on the point of monetizing the money you've invested?You are on the verge of, you know, we're about to hit the trigger on all systems go to roll out this campaign for you. That's going to be amazing. And he pulled the pin, said no. And that happened a couple of times. And a small business like that can't carry that cost. No, they can't. Yeah, of work being done, but clients not paying. Oh, yeah. That's Kate, that's the eternal frustration with marketing is thatThere has to be infrastructure built first. People don't understand that because, it's like, oh, let's just do a couple of Facebook ads and make $1,000,000. No, I'm sorry. No. Do you have a brand?Do people know who you are?Do they do credibility and what?Yeah. Where's the system that's going to nurture those leads when you get the ad and that, you know, the click on the ad? Oh, it's a whole, yeah, it's a whole. thing that requires A systematic approach and it does not happen overnight. And yeah. Some of the people that I learn about marketing from, and they're seven and eight figure business owners that are, that mentor in marketing. And the reason I mentor with them is because they're very, very open about the fact that their own paid advertising is hit and miss. Yes. And we certainly found that, didn't we, with the campaigns we used to write that some would, just work really effectively and you could fill a whole room of 100, potential customers, use the same copy, the same imagery next time round and struggle to even get half a room. Yeah, crickets. Yeah. And that is just the challenging thing and that and so things like that put a lot of stress on businesses and partnerships andIt's great if all things are smooth sailing and it's like, oh yeah, let's invest a dollar, we get 3 back easy. But sometimes you invest a dollar and you don't get that back. And that puts a lot of stress because you've both got families you need to feed and bills to pass. So that financial stress then brings out the potential ugly behaviours. Yes. And that's particularly difficult when there's a division of labour and expertise in any kind of business partnership. That's a really good example of where one person might be in charge of the marketing because the other person doesn't really know anything about it and they'rethe advertise lies elsewhere. But the difficulty comes because the person that doesn't understand marketing is sitting there looking at their business partner going, what are you doing?Like, where's the marketing's failing?You're not very good at this. You know, it can be a big, big problem. Yeah. And we were putting in a lot of money each month for the marketing and not seeingthe return. And that's a tough, that's a tough thing for everyone. It's like anyone. And I think too, part of the problem there was not, for me, I felt like we were not treated as though we had enough intelligence to understand what was going on with the marketing. And so we were never, it was never brought to us and discussed, this is where your marketing budget's going, this is what's happening, have a look here. The lack of transparency thing. Yeah. And like you said, that led to a lack of trust because straight away you're like, you're not trusting us with this information because you don't share it with us. You're not trusting that we're going to be able to understand this. Yeah, and provide feedback on what we think. Yeah. It's a tricky one because for trust to be there, you need transparency. We did not have thetransparency over the finances or the marketing budget and how that wasallocated. And yeah, that's what creates the distrust. And essentially in the end, we were all having to generate our own revenue. And so we questioned why we were,even in this situation, paying these monthly fees, if we could just operate individually and do our own marketing and win our own clients, which is what we were doing anyways in the end. Yeah, so yeah, transparency is key to create that trust. And yeah, I reckon, if I was to advise anyone going into a business partnership, I'd say, go in with eyes wide open, get the legal counsel, which I did and chose to ignore it. So I've only got myself to blame for that, you knowAnd yeah, so go in with eyes wide open, do your research, check all the things about exit strategies, finances, IP, how are you going to protect the intellectual property that you contribute, all that stuff. And then,have the courage to have really kind of tough conversations about yourself and them and strengths and weaknesses. And is this, do we have the ingredients to make this a good, successful partnership?And then I definitely, my advice would be if you're, if things are starting to go off, you need to engage quickly and be, provide honest feedback. AndYeah, act quickly if things start not feeling good. Yes, definitely. And also going back to, like division of labor, division of responsibility, I don't think that ever excuses somebody from remaining uneducated about what they're not responsible for. Because if you're in any kind of business partnership or joint venture or collaboration, youare still responsible. You are still a business owner. You still have responsibilities. And those responsibilities aren't negated because you sit there and say, oh, but she was going to do that. I don't know anything about that. That was her responsibility. You can't say that. No, you need to, yeah, like you say, educate yourself on the full picture. Yeah. Yeah But the other person has to be willing to share as well so that you have the full picture. Correct. Yes. So again, like any relationship, it comes down to good communication, the ability to have tough conversations, be kind to each other in working through conflict, you know, and then, and keeping that sense of trust alive. Because once that's broken, it's just a downward spiral. It definitely is, yes. I don't think there's a way, like in relationships, very challenging to come back from a break in trust. Yes, yes, that is very true. So yeah, we hope this has been helpful. We've come to the end of our discussion. Do you have any closing thoughts, Sam?What would you say to someone going into a business partnership?Oh, just... At some point, every business partnership ends in with a difficult conversation. So my suggestion is start with one. Get used to having difficult conversations. Yeah. Early, yeah. The sooner you talk about the things that are hard to talk about, that's a way to build the trust that you need rather than degrade it. And the open communication. Yeah. Yeah, good advice. Yeah, hopefully, we'd love to hear your thoughts, everyone. If you have been through something similar or are going through something similar, 70% of you out there must be. Yes, there must be a lot of horror stories out there. Yeah, So wishing everyone all the best with if business partnership is on the horizon. But yeah, we hope this episode has been helpful. We shall be back in two weeks. Bye for now. Byebye.