Reasons Why About 70% of Start-Up Business Partnerships Fail

By Phesheya Mkhonta

As an entrepreneur, getting into business with someone or a group of people has several benefits. Business Partnerships allow you to explore your business idea(s) with others, tap into complementary skill sets, and share start-up costs.

Unfortunately, many of the advantages of partnerships can also be disadvantages, and statistics show that up to 70% of business partnerships ultimately fail. Forbes Magazine notes that the above statistics tend to be the same for entrepreneurs operating on different continents.

However, this is not to say getting into a business partnership is tantamount to a business doomed for failure. That’s not necessarily the case. Having co-founders has a number of upsides. This includes benefits from shared business networks, the shared delegation of resources, and the safety net of going into business with someone else, as opposed to facing the harsh business world alone.

There are tricks to the partnership business trade though that we have to look into. There are hard conversations that need to be had prior to formalizing your business partnership. There are red flags that need to be flagged.

According to one of the most prominent books on business partnerships, especially for startups, ‘The Founder’s Dilemmas’ by Harvard Business School Professor, Noam Wasserman, there are common reasons why business partnerships break down.

The book’s central message is that ‘’founding decisions need to be made by design and not by default. Founders/Partners have to be intentional. Each decision requires the founder(s) to assess multiple options which many founders, unfortunately, realize much late in the game.’’

Wasserman further states that founders who consistently make decisions that build wealth are more likely to achieve what the author calls a ‘’Rich’’ outcome (meaning, greater financial gains, lesser control) while founders who consistently make decisions that enable them to maintain control of the startup are more likely to achieve what he calls a “King’’ outcome (that is, greater control, lesser financial gains).

Founders who gain insight into their core motivations for embarking on the startup journey should gain an understanding of the trade-offs they will have to make each step of the way and which choices will help them to reach their destinations. And they should be clear on their objectives and expected outcomes.

We spoke to local entrepreneur and business coach, Kerry James, owner of Tsandza Weaving and Kerry James Coaching, who shared her experiences about getting into partnerships and what she thinks potential partners need to look out for and talk about before going into a formal business partnership., As a business and leadership coach, she was generous enough to share with us some of the key tips she has shared with her clients, friends, and family.

She opens up by stating ‘’I have entered into various business ventures in my life, with over twenty years in business and in business coaching now. It is so easy to lose your way or to lose your business relationship and, ultimately the business itself due to conflict that emanates from misunderstandings, and most of the time these are due to issues that were not addressed early in the formation of the partnership.

In just one personal example, of a partnership I entered into when setting up a software consultancy, within the second year of trading, conflicts occurred with my business partner, caused as a result of us not setting clear outcomes, motivations, and strategies for what we both wanted to achieve from the business, both personally, and for the business itself. Ultimately, these were not aligned and the partnership was dissolved.

Kerry shares the following tips for budding entrepreneurs looking to get into business partnerships.

1. Sign a non-disclosure agreement that allows each partner to feel comfortable to freely express their ideas.

2. Discuss early on, what the motivations of each partner are, what they want to achieve as a result, and their vision for the future, both for themselves as individuals, and for the business. And why? The why is key!  From here you can also determine the role of each partner, and what and how they intend to contribute to the success of the business. 

3. Business is all about relationships, and in relationships, trust and communication are fundamental. Take the time to understand each partner’s ‘personal drivers’. That basically means understanding the reasons why your partners(s) are in business with you. Is it just because of you?

Is it because they hate their current job or situation? Are they looking to make quick money to get out of a current bad financial situation or do they plan to use this business for their future investments? Is it because they’ve always loved the business or the industry?

Is it because of family pressures or because they are your friend? Is their plan to sell their shares or the business and cash out in a few years or are they in for the long haul, and if so, why and how? There are so many reasons that drive people into a business, you need to know your partners’ reasons.

4. Together with your partner create a business strategy that includes short, medium, and long-term goals and SWOT analysis, for the business as a whole, and for specific functions within the business such as finance, sales, and marketing.

5. Key within this process is to also ask what could prevent the business from achieving its goals. Asking this question provides the space for each partner to explore what could happen to prevent them and the business from reaching their desired outcomes, and how they would want to deal with certain eventualities, controlled or uncontrolled that may derail them. The plan is obviously to make a success of the venture, but how do you plan to deal with the unexpected?

6. Ensure all the legalities and logistics of setting up the partnership are in place, such as shareholding and signatory powers.

7. And lastly, continue to communicate and relate. Schedule the time to meet regularly to check in on each other, to discuss the direction of the business, progress to date, areas to address, and what the future holds.

The business landscape can change, sometimes, as many of us have experienced with the onset of the Covid-19 pandemic, this change can happen suddenly. This combined with the times when partners may not agree on a particular situation, all require a willingness to be flexible, in our thinking, our behaviour, and our communication. The greater flexibility each partner has in being able to adapt, the greater the likelihood that their business and partnership will succeed.        

Kerry James is an Australian-born social entrepreneur and business and leadership coach who now calls Eswatini home. She is available for individual business coaching and mentorship as well as executive coaching and leadership development training.  You can contact Kerry at 7681 3595 or via email at

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