Introduction

Everybody has a story about a partnership that has fallen apart. Unfortunately, it is a somewhat common occurrence, as about 2 out of every 3 partnerships fail. Yet entering into partnerships can greatly expand a company’s opportunities and markets. This SkillBite discusses how to build durable partner relationships. In particular, it covers: How to investigate a prospective partner prior to entering into a business alliance; Key business issues to address up front or as early as possible; and Critical legal issues to include in a partnership agreement to protect yourself in the event that the partnership doesn’t succeed.

While it is most beneficial to conduct an investigation and address the business and legal issues prior to entering into a partnership, it is still worthwhile to go through these steps even after the partnership has been formed. The exercise of discussing the issues will not only help reduce the risk that the partnership will fail, but also enhance the collaboration, communication and alignment of the parties and their interests, thereby strengthening their relationship and the business.

Let me illustrate the value of engaging in this type of exercise with a scenario: Bob and Jack decided to open an online training business together. They had both been in the training business for many years, and between them they knew every aspect of the business. Bob had worked on the marketing and sales side of the business for a large training company, while Jack managed operations in a computer training boutique. They had been good friends for many years and their kids were on the same soccer team.

A year later, they were barely speaking to each other. Jack felt that Bob had not met his commitments to bring in new clients. Bob felt that Jack had spent way too much money developing the product.