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6 red flags in a business partnership

Entering a business partnership can come with diverse benefits, such as additional expertise, resources and growth. However, there will always be risks, no matter how well you prepare. Statistics show that these arrangements can be unpredictable, with around 80% of all partnerships failing.

These odds should motivate you to pay close attention to who you choose as a business partner and how you negotiate the contract. There can be a lot at risk, making it essential for you to spot red flags before signing off on the partnership, including the following:

  • Imbalanced investments and stakes – A partnership can foster resentment and inequality if one partner invests significantly more than the other.
  • Misaligned principles, goals and values – Your partnership’s success can hinge on whether you and the other party are working toward the same objectives. 
  • Resistance to change and progress – In a consistently evolving landscape, refusing to adapt to recent tech and developments can be a pitfall. If your potential business partner is stuck in their old practices, they might keep you down with them.
  • Distrust exists between partners – You may micromanage each other, leading to business disputes and conflicts.
  • One partner focuses only on issues – There is no such thing as a perfect partnership. You should expect to encounter roadblocks, but it could be a significant issue if your partner cannot offer insight on solving them.
  • Unsolvable disputes between partners – It might be best to think twice about the partnership if it is impossible to agree or find common ground with the other party.

You could include terms in the partnership agreement to address these red flags. Still, there is no assurance that it can remove the risk of failure.

Knowing how to negotiate an effective agreement

If you notice red flags in your business partnership, you could refuse it altogether or find ways to make it safer for you and your investments. However, evaluating and negotiating a partnership could require legal expertise, helping you place necessary safeguards where there are risks. It might seem troublesome, but doing so can help you address issues early and secure your interest before signing the agreement.