Most Business Partnerships Fail

The Recipe for Preventing The Dysfunctional Circus

By Tom Shipley | February 23, 2024

What You'll Learn...

The allure of a partner

The idea of a business partner is an attractive one. 

As founders, we’re attracted to the alluring prospect of shared burdens, complementary talents, and twice the rocket fuel to propel your startup to the stratosphere. 

We are attracted to the advantage of the confidence and (even more critical) momentum that comes with having a partner.

We are attracted to the idea of a skilled co-pilot who can navigate rough patches, a tech wizard who can conjure marketing magic, or a charismatic frontman who can charm investors and clients. 

We are attracted to the idea that we can share the hard times and the good times with someone who makes us better. 

But here’s the harsh reality: Most partnerships will fail! 

There’s a shockingly fine line between a dream team and a dysfunctional circus

The risk and reward of partnership

My entire life’s journey, from the rigorous discipline of the IDF Special Forces to the fast-paced world of serial entrepreneurship, has taught me invaluable lessons on the importance of good partnership. 

Most recently, through navigating the complexities of mergers and acquisitions, I’ve learned that a strong partnership will help you find ten times the amount of success you would on your own. 

People who have been around the block a few times know this too, but I also learned there’s a shockingly fine line between a dream team and a dysfunctional circus. Ultimately, the culture of a company comes from its leaders. If there is dysfunction between partners, the side effects are experienced by the team and will impact the results and the future.

Dysfunctional partnerships significantly elevate the likelihood of failure, with over 40% of business partnerships eventually meeting this fate.

The consequences of a bad partnership

Now, let’s talk about the toxic culture trickle-down: A dysfunctional partnership doesn’t just slow the business down; it breeds a negative company culture. The repercussions are far-reaching, causing distrust, low morale, and a lack of commitment among employees. This ripple effect impacts customer service, productivity, and, ultimately, the bottom-line results, as highlighted by Forbes in their insightful piece titled “How Toxic Leadership Creates a Toxic Culture” (2023).

Partnership misalignment is another critical factor: When values, communication styles, and decision-making approaches among partners clash, it creates friction and wastes a lot of time. 

This misalignment often fosters resentment and blame and, ultimately, leads to the partnership’s demise. 

In my personal experiences, I’ve witnessed that in such situations, employees find themselves compelled to choose sides, perpetuating a negative reinforcing loop.

The erosion of employee trust is another consequence of a bad partnership: Employees lose faith in a company where leaders are in constant conflict. This loss of confidence translates into disengagement, decreased effort, and increased turnover, further destabilizing the business.

Remember, the impact of dysfunctional partnerships goes beyond the immediate partners; it affects every aspect of the business and its workforce.

We’ve all heard horror stories of power struggles, diverging visions, and egos clashing louder than cymbals in a rock concert. 

Here’s the good news: Dysfunctional relationships can often be prevented before the whiskey glasses are even raised. 

You have to understand that dysfunctional business partnerships are often more difficult to unwind than a bad marriage. So, just like one would be very deliberate before getting married, the same should be for entering business partnerships.


Here’s the harsh reality: Most partnerships will fail

The Recipe for Evaluating a Partner

Here’s the harsh truth: friction will happen. It’s not about finding a partner who agrees with everything but someone who can navigate disagreement with respect and reason.

And remember, just getting along isn’t enough. Like two gears meshing flawlessly, your values, communication styles, speed, drive, and risk appetites must align perfectly.

Here’s how to create the kind of partnership that will build your business, inspire people, and leave a mark in the business world:

Step 1: Learn if the partnership could work

Before you commit to anything, you need to do the work to find out if you’re going to actually be a good fit! It’s better to figure it out now than wait until you’ve lost a lot of time, money and possibly a friendship. Here are some suggestions on pre-partnership assessments. Yes, our typical response is that I don’t have time for this; I am launching a business.  

From my experience, you don’t have time to not do this, the wrong partnership will waste years of your life.

Compatibility Assessment

  • Respond to professionally developed questionnaires or interviews. Having this document at the outset and referred back to will be invaluable.
  • Delve into individual values, work styles, risk tolerance, communication preferences, goal alignment, and non-negotiables.

Personality Assessments

  • Similar to MBTI, DISC identifies behavioral styles.
  • DISC is straightforward and helpful for working together; it’s my personal favorite.

Shared Vision and Values

  • Discuss and document long-term business vision, core values, and decision-making principles.
  • Look for alignment and a willingness to compromise.

Scenario-Based Discussions

  • Present hypothetical challenges and talk through them.
  • Observe communication patterns, problem-solving methods, and conflict-resolution styles.
  • Understanding the pace of growth, navigating obstacles, and handling financial needs is incredibly crucial.

Trial Period

  • Consider a project-based collaboration or short-term consulting arrangement.
  • Test compatibility before diving into a full-fledged partnership.

Here’s the good news: Dysfunctional relationships can often be prevented before the whiskey glasses are even raised.

Step 2: Define your rules and agreements

Once you’ve figured out you’re compatible with someone, you need to do the work to keep the relationship healthy. Here’s what I’ve found has helped me keep my partnerships strong.

Define Roles and Responsibilities

  • No ambiguity; crystallize ownership, decision-making power, and accountability.
  • A captainless ship drifts, not soars.

Detailed Partnership Agreement

  • Include explicit buy-sell provisions and continued capital requirements. Consider including either a Texas Shootout buyout or Russian Roulette structures.
  • Clarity on continued investment requirements that incorporate what if a partner does not have the resources to contribute or support requirements for personal guarantees. 

Communication is the Oxygen of Trust

  • Talk frankly, often, and directly.
  • Drawing from my IDF special forces experience, trust is everything.

Embrace Transparency, Not Secrecy

  • Keep each other in the loop, from financial statements to strategic decisions.
  • Set expectations for transparency in advance, in writing.

Align Values, Not Just Skill Sets

  • A shared moral compass is more valuable than a shared spreadsheet.
  • Integrity, work ethic, and vision should be bedrock, not negotiable add-ons.

Prepare for the Tango’s Twists and Turns:

  • Build an exit strategy into your partnership agreement.
  • It’s not about planning for failure but ensuring a clean break if the music stops.

Step 3: Determine equity and compensation

Now, let’s dive into a critical factor that can spell doom for a partnership—equity and compensation structures. In the dynamic business landscape, change and a shift in roles and expectations among partners are inevitable. 

Here’s the question: when the business undergoes transformations and one partner shoulders the lion’s share of responsibilities and results, does a 50/50 split of equity and compensation still hold water? 

Many partnerships, including those among founders, wisely incorporate vesting provisions tied to milestones, results, and commitments. It’s a strategic move to ensure alignment remains intact as the business evolves. Figure this out before you sign anything, and you will remove a considerable amount of risk from the partnership.

Here’s the harsh truth: friction will happen. It’s not about finding a partner who agrees with everything but someone who can navigate disagreement with respect and reason.

The reality of a partnership

Remember, a partnership is a marathon, not a sprint. Choose wisely, nurture the relationship, and be flexible! Life is going to throw a lot of things at you and your business partner. It’ll come at you on a professional level and a personal level, but if done right, your partnership will thrive, and your company will be better for it. 

But what if it doesn’t work out? 

Even following all the steps above, the reality is your partnership might fail. If it does, dust yourself off, learn from the missteps, and try again. Remember that even the Lone Wolf sometimes needs a pack. Just choose your packmates wisely because the right partnership can make all the difference between being the hunted and the hunter in the business jungle.

  • Tom Shipley

    Tom Shipley is a serial entrepreneur, served in the IDF special forces teams (669), investor, and strategic advisor. With expertise in brand building and business roll-ups, his brands have amassed over $2 billion in sales through Direct-to-Consumer Marketing and Retail. Tom raised $100 million from private equity to launch the Amazon aggregator FOUNDRY Brands. His latest aggregator venture, AVA along with The Deal Boardroom aims to revolutionize the agency global holding model, with people-first model