Navigating the Entrepreneurial Seas:
A Cautionary Tale of Partnerships
It’s a tale as old as time – the allure of a partnership, a venture fueled by the combined efforts and skills of like-minded individuals, aiming to create a business destined for success. A business built on the foundation of your passions and interests. Many of us have walked down this path or desire to walk down this path. However, what I learned from my own journey has led me to share a cautionary tale that I hope every aspiring business owner will heed.
In the early days of my entrepreneurial endeavours, I invited a close friend to join me on this rollercoaster of building something from the ground up. The belief that his intelligence and network would be invaluable to the business blinded me to the necessity of formal agreements. We worked on the basis of trust and confidence and our word was our bond.
Soon after diving into the trenches and executing our ideas, unforeseen challenges emerged, causing a rift between my business partner and me. My partner was doing far too little of his share of designated responsibilities. I had no choice but to do some of his share of the work to make the business function. Once the dust had settled, I realised I was running the operations in full, from dealing with customers down to arranging the logistical delivery of the goods in the business, whilst singlehandedly juggling all the other business functions as well. In comparison, my partner had checked out of making the business work entirely. My fear of damaging the personal relationship we shared led to inaction, allowing my partner to reap the rewards of ownership without putting in the required effort.
As the business was founded on trust alone, there were no agreements or written contracts I could effectively rely on to compel my partner to fulfil his responsibilities. In fact, we argued on even what the initially agreed share of responsibilities were! Any discussions of a potential exit by my partner were also marred by the absence of exit mechanisms and dispute resolution mechanisms which would have been properly covered in clear contractual agreements.
There was no clear path forward to discussing a reduction in compensation, an exit by that partner or any other viable alternatives as a result of this absence of formal paperwork and contractual agreements. The feeling of being stuck and lost at the time serves as a very painful reminder of the lessons I took away from that foray into business ownership.
This cautionary tale serves as a warning to those with dreams of turning their passion into a thriving business. As you embark on this journey, aiming for financial freedom and the freedom of steering your own ship, it’s crucial to consider the perils of neglecting to agree on entry and exit mechanisms in fleshed out business agreements.
The unfiltered truth is this: when a friend or family member becomes a business partner without clear agreements in place, you risk not only an ailing business but also a damaged relationship. As you pursue your passion, do it with the foresight necessary to protect your dreams. Consult experts, think through the entry and exit mechanisms, define roles and responsibilities and ensure that your journey is guided by informed decisions. Transitioning your passion into a business should be an informed and structurally thought out process.
Your passion deserves nothing less. Learn from stories like mine, and may your entrepreneurial voyage be one of success, growth, and longevity.