Were you ever a part of a business partnership that fell apart? If so, you’re not alone. According to research, 70% of small business partnerships end in a breakup. In most cases, a painful breakup. While different sources propose different reasons for those breakups, for the most part, the main reason is distrust.
First, why do you need a partner to start with? Here are the main reasons:
There is too much work for one person to handle
You may only possess some of the skills required for the business to be successful, and a partner might hold skills complementary to yours
When you brainstorm with a partner, you get better ideas
A partner is someone you can talk to about the business as often as you need to, they can be your sounding board, and they are someone who understands the pressure of the business because they are right there with you
But when a partnership falls apart, there could be significant consequences. They could start with adverse financial outcomes (such as having to buy your partner out of the relationship) to the dissolution of the partnership and the business itself.
So, why would business partnerships suffer from distrust?
We often bring a partner we feel comfortable with, someone we have known for a long time, and ignore whether they have the education, knowledge, skills, or experience to do their professional part. We choose “the devil we know.” Competence (in the appropriate context) is a key component of trustworthiness, and a lack of competence that remains uncured will cause erosion in trust.
In one of my surveys, I found that personality compatibility, specifically shared values, has the highest correlation with trust (86%). Here are a few questions you and your partner must ask yourselves:
Are we partnering for the same reasons?
Do we share the vision for our business?
Do we share the mission that our business was created to fulfill?
Do we share the same business-related values?
Personality compatibility goes beyond shared values, though. You and your partner don’t have to think identically about everything. You can be complementary in your characteristics and still be considered compatible. For example, if both of you are “idea people” and none of you gets excited about execution, you may generate many great ideas for the business but nobody to implement them.
As partners, you must employ empathy to see things from the other partner’s perspective as if you were them. Understand their concerns, what they value, and where they are on the hierarchy of needs to determine how compatible (or incompatible) your personalities and situations are.
In my experience, symmetry is one of the biggest reasons for business partnership breakups. We often tend to overlook asymmetry in our involvement in the business or even intentionally create asymmetry, which eventually leads to the demise of that partnership.
Both partners must be able and willing to contribute equally to the business. This contribution may include monetary investment, time, energy, and more. When one partner is still working in another business “until our partnership generates enough income” while the other enters the business full-time, the partnership is asymmetrical and would cause problems.
Even when one partner commits to finding a way to make symmetrical contributions in the future, the lack of symmetry causes distrust. These are examples of distrust as a result of the asymmetry of contribution.
When the partners get different equity positions (90%/10%, or even 60%/40%), it constitutes an asymmetry of benefit. Even when equity is split 50.01% to 49.99% (very close financial equity position, just so that one partner will have the decision, voting, or veto rights), it is still a significant cause of asymmetry of benefit that would cause distrust.
Often, you enter a partnership with someone you don’t know. There are three main ways to get to know them:
Transferrable: you may be introduced to your future partner through an intermediary. Someone you trust who told you about that partner. Remember that they may not know how competent or personality-compatible is that person with you. Furthermore, they may only tell you positive things about them, ignoring negative things.
Digital footprint: you can check out your future partner’s social media (and other) footprint. If you spend enough time researching them, you can construct a profile of who they are, their values, how competent they are in the areas where you need them in the business, and how compatible they might be with you.
Time & Intimacy: at the end, there is no substitution for spending time with them in-person. The more you spend time with them, the more you know how competent they are, their values, and how compatible their personality is with yours. Pay attention to all the components of the trustworthiness model when carefully observing their behavior. Also, pay attention to their contribution to your interactions. Are their contributions generally positive?
The Gradual Approach to Partnership
Remember that trust allows you to compensate for risk. If you extend too much trust to a partner, you will be exposing yourself to risk that the partnership is not what you hoped it would be, to the point it will be really hard and costly to get out of. Instead, increase the risk the partnership (and you) are willing to take as you build the level of trust you have in your partner. The more time you spend together, the more problems you encounter and solve, the more stressful situations you enter and exit, the more you would know your partner, and whether you can trust them enough to continue building this business partnership with them. Trust is reciprocal. Your partner will be more trustworthy if you trust them and show them that your trust them. I’m not advocating for extending 100% trust without any foundation for it, but rather to extend (and show you extend) a little more trust than your partner demonstrated they should get from you. Keep that cycle going while increasing the level of risk your partnership is willing to take.
Dr. Yoram Solomon is a trust expert, author of The Book of Trust, host of The Trust Show podcast, a two-time TEDx speaker, and facilitator of the Trust Habits workshop that helps build trust in organizations.