Choosing the wrong partner: making a practical choice

By Peter Cox April 01, 2015 Money Matters

A rule of thumb I have always been taught and have seen in real life is that good friends make poor business partners. Like oil and water, business and social relationships simply do not always mix.

The problem is one of emotions. Friendships are based on emotional ties – on sensitive handling of personal needs and feelings. The idea is to shield, protect and support friends in the trials and tribulations of their daily lives.

Although admirable in a social context, this protective instinct can have adverse effects on a hardware operation. To be successful in this industry, given its competitive nature and margins, store owners require accurate, straightforward and timely information at all times.



Owners and management need to insist on a policy of “no surprises”. Tough, negative and even devastating information must come to the surface immediately. To me that’s the only way to deal with a problem before it mushrooms out of control.

By attempting to shield a partner from this kind of bad news, the friend is actually doing the business a severe disservice. And that is the very reason for avoiding friendship or partnership relationships.

Partners simply cannot always be relied on to serve up clear and objective business opinions. Emotional binds can confuse and distort what should be a simple and responsive business relationship.

For a partnership to be effective, both parties must pledge their allegiance to the business, rather than to each other. This is for the good of the operation. It is far more important for the partners to worry about the performance of the store than to worry about each other while the business goes to the wall.

Whilst choosing a friend for a business partner is understandable, it should not be the only basis for selection. The best partnerships I have found are based on pure business, usually with each individual bringing certain strengths to the operation of the business.

For example one partner could be good on the financial management side of the business – margin, inventory, debtor and expense skills – while the other is good in the sales and customer relationship areas.



The following is a checklist to help in selecting a business partner or second in charge:

  1. 1. Seek an individual capable of balancing your strengths. If you are good at selling then look for a person who possesses better skills in other areas of management. Stores need well rounded management!
  2. 2. Be certain the prospective partner or senior executive has had experience working with others. In most cases I have found a loner is a loner. In a store, cooperation is crucial to a partnership so make sure you get it from the start!
  3. 3. Inquire about the person’s past business track record.
  4. 4. I have found the best bet is to go with an experienced entrepreneur, one who has had experience in either owning or running a store. Inexperienced and incompetent management accounts for a lot of business failures!
  5. 5. Ascertain that the prospective partner will be equally committed to the company’s success. Nothing causes more bad blood in partnerships than the feeling, right or wrong, that one partner is carrying more of the load. In most cases I have found that requiring your partner to contribute some capital to the business will help to encourage commitment – after all, most people will work harder when the own money is at stake!

So, if you are looking at succession planning into the future with either a current staff member or an outsider do use these points as a checklist.


Peter Cox is a senior consultant for Macquarie Advisory Partnership based in Sydney. He has over a decade of experience training and consulting in the retail hardware industry. He conducts key-note addresses, and management and sales workshops, which are aimed at improving profitability and liquidity in one of Australasia’s most competitive retail environments. Phone 0061 438 712 200 or visit

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