65% of start-ups fail due to co-founder conflict – here’s how to...

65% of start-ups fail due to co-founder conflict – here’s how to create the most productive co-founder relationship

3
SHARE

With approximately 700-800 start-ups created each year in Australia  and only 40% surviving , where do the majority of them go wrong? It might come as a surprise, but 65% of start-ups fail due to co-founder conflict. That’s actually higher than the divorce rate in Australia.

A business partnership can present a variety of difficulties, however, it can also deliver great benefits. I have extensively analysed the dynamics of co-founder relationships. My tech platform, Fingerprint for Success (F4S), which is based on a 20-year study of business owners and entrepreneurs, found that certain ingredients were critical in a successful business partnership, and understanding them is crucial.

These ingredients allow each partner to play to their strengths and the business to flourish. Here are the five most important aspects to look for in business partners to ensure the best chance for success.

1. Relationship to rules

What we tend to find in early start ventures is that a successful partnership needs individuals with a high tolerance or a culture of tolerance within the workplace. Tolerance typically refers to an attitude of ‘you have your style, I have mine and we will figure it out.’ A successful partnership also tend to have low assertiveness, low compliance and some indifference.

High Indifference generally means they are not limited by rules and are not constrained by industry expectations of what they should do. These people are creative and disruptive. For a company to be adaptable and succeed, it needs co-founders with these qualities, especially high tolerance. If one partner has low tolerance and high assertiveness (needs to stick to rules, is judgemental, needs things to be done their way), then there can be a lot of friction, criticism and irritation between the partners.

2. Decision-making attitudes

Decision-making attitudes are very important to the success of a business partnership. Some business partners can have high initiation which means when they get an idea, they get the ball rolling immediately. Other business partners can have low initiation but have a lot of patience and like to reflect before making decisions.

These people generally sit on things much longer until it feels right or something forces them to take action. There can often be friction between these two types of people. However, the one who sits on it longer will be much more strategic and a valuable asset to the company and the other person who is high on initiative will get things done quickly.

3. Communication style

When working in any business, it is vital to acknowledge different communication styles and even more so in a business partnership. There are some partners who are affective communicators. These people are great at communicating, they gesture and use their emotions a lot and have no problem expressing how they feel. Other partners are neutral communicators which is the complete opposite.

Neutral communicators usually hide their emotions and choose their words carefully. If there are two business partners, one with a a neutral communication style and the other with an affective communication style, it can lead to friction. They will both feel like they are not being heard or listened to. If the two founders both have high affective communication they won’t be able to switch off their emotions.

4. Responsibility

Most people tend to have differing views on how to handle certain responsibilities. Some business partners have high sole responsibility meaning they want to own everything, they don’t like to share and they deal with things in their own way.

Other business partners can be high in shared responsibility, so they tend to like sharing the workload and enjoy tag teaming projects and communicating about various aspects of the company.

5. Detail

Any business has a multitude of tasks to get it off the ground and to keep it running. These tasks are comprised of both small details and big picture thinking. Business partners can either be orientated to work with details or would prefer to look at the bigger picture and how it all fits together as a whole.

When you and your business partner have a different level of depth this can be the cause of many arguments and create friction if neither of you are aware of this. However, having a business partner who sees details and another one who sees the bigger picture is very complementary for a business because both of these things are vital.

As business partners, you don’t need to be identical to have a successful business. In fact, it is more beneficial to complement each other with your different assets. The most important aspect of a successful partnership is awareness of each other’s professional styles so you can play to each other’s strengths instead of tearing each other’s hair out.

Michelle Duval is the founder of tech startup Fingerprint for Success which uses evidence-based analysis from 15-years of research benchmarking the attitudes and motivations that correlate with venture success, providing invaluable insight for aspiring entrepreneurs, entrepreneurs building their business, co-founders and angel investors, VCs, accelerators and incubators.

Michelle Duval
Michelle Duval
Get unlimited access to our FREE business tools…

Need to raise capital? Want to become a more persuasive presenter? Want to master social media? Is it time to overhaul your website? Unlock the library to get free access to free cheat sheets and business tools. Click here for free business tools.

  • Malcolm Burrows

    700 – 800 startups really?
    I’d have thought that the number is a lot higher than this when you consider the number of companies incorporated with ASIC each year. Given that a lot of those entities are not technically start ups but may be bucket companies and asset holding vehicles, I’d think that the number predicted may be missing a zero. I’d be interested in your view.

  • https://tripcover.com.au/ Desmond Sherlock

    I like your approach but find it a little like you have to find the right partner, where as I believe a team can subscribe to a series of agreements (if they agree, that is) and get along well. How we create these agreements and improve them and resolve when we don’t keep them is the key, in my view.

    • Malcolm Burrows

      You’re point Des is right on the money. It’s all very well preparing a range of contracts to protect one side of a transaction, however the preparation and understanding of agreements between founders should be a journey and not something that is understood only at the time of a dispute. Unfortunately a lot of startup founders don’t take the time to consider or understand the legal issues that can arise….