When people want to be entrepreneurs, they look at friends or buddies to be their business partners. They think that they could hit off well in business too. All is hunky dory in the initial months but the relationship over time breaks and the start-up turns into a big failure. Many of them fail in the first year itself.
Have we ever wondered the friendship that was nurtured over many years suddenly becomes acrimonious?
Let us look at a few reasons that we commonly observe in partnership business failures:
1. The aspiring entrepreneurs never ask these questions – what value my friend brings in? How it is going to help achieve my vision? If the value the friend brings in is substantial, then the focus needs to be on how the inter-personal relations are to be dealt as they move forward so that the close friends become successful business partners too? Never assume that they will not be any issues between friends.
2. The role clarity is never defined for the friends turned into business partners. A start-up needs to have people who are good at matters related to technology, finance and marketing. It so happens that either all of them are good at only one aspect or on all the the aspects. But a clear responsibility matrix has to be in place at the very start of the business. An overlap of responsibilities hinders the decision making process. The team that is working under them gets confused with more than one direction to execute tasks.
3. Vision setting, policy formation and issue resolution must have alternate views to choose the right one for the start-up. Friends tend to carry the personal differences deep into the venture that ultimately become a huge issue to be resolved. They start questioning their loyalty to each other due to their alternate views on matters.
4. The ownership pattern determines the hierarchy of the enterprise for the regulators and the employees. They don’t see it as a major issue in the beginning but over the years it becomes a thorn in their relationship and it becomes a question of who is No.1 or No.2 etc. Cracks start to develop at this stage and that’s the beginning of the slide of the business.
5. Every partner has a need for a remuneration that befits the experience, social status, family size and life style. If they are to be factored in a start-up then the business is on the wrong footing. These are never considered in an equally funded partnership that is founded solely on expertise of each one of them and the remuneration has to be the same, at least in the initial years.
6. The involvement other family members is strictly a No-Go, unless that family member is being hired as a paid employee based on the job skills. A family member having no ownership and also is not an employee should not be allowed to run or help the business. There needs to be a formal arrangement that gets respect from everyone in the organisation.
We have seen some start-ups turning into a huge successes in the last few decades and they are the shining examples of entrepreneurship to every aspiring entrepreneur.
THE PULSE by Sivakumar Gopal 