Growth Phase: How Partners Can Derail a Growing Business: Ameen Ahsan, The Strategy Advisor
In the dynamic business landscape of the GCC region, growth is often seen as the ultimate goal for any enterprise. However, achieving and sustaining growth in a partnership business is not always straightforward. The very partners who contributed to the business’s success can sometimes become the biggest obstacles during its growth phase.
This article explores scenarios, offering insights into the underlying causes and providing strategies for avoiding these pitfalls.
Scenario 1: Disagreement on How to Grow
As a business begins to grow, one of the first major challenges partners may face is agreeing on the growth strategy. Should the growth be organic or inorganic? Should the business expand vertically, horizontally, locally, or globally? When partners lack a shared vision or agreed-upon milestones, disagreements on these critical questions can stall growth.
Issue Area: Disagreement on the strategy for growth—whether it should be organic or inorganic, vertical or horizontal, local or global.
Reason for the Issue: The core reason behind this disagreement is often a lack of shared vision and shared milestones among the partners.
Impact on the Business: When partners cannot agree on how to grow, the business may end up taking no action at all. This stagnation allows competitors to overtake, and partners may become unhappy, leading to further discord.
How to Avoid This: To avoid such disagreements, it is crucial that partners establish a clear, shared vision for the business’s growth from the outset. This includes setting specific milestones and agreeing on the strategies to achieve them. Regular strategy sessions can help ensure that all partners remain aligned and committed to the agreed-upon goals.
Scenario 2: Disagreement on Handling Profits
Another common issue during the growth phase is how to handle profits. Should profits be distributed among the partners, or should they be reinvested into the business? This disagreement can create significant tension, especially if partners have differing financial expectations or cultural perspectives on money.
Issue Area: Disagreement on whether profits should be distributed among partners or reinvested in the business.
Reason for the Issue: The lack of a shared vision and big-picture thinking, cultural differences, poor financial forecasting, or having a partner with incompatible financial expectations can lead to this issue.
Impact on the Business: If profits are not reinvested, the business may struggle to sustain its growth. On the other hand, if profits are reinvested under high pressure without consensus, it can create friction and dissatisfaction among partners.
How to Avoid This: To navigate this challenge, partners should have open and honest discussions about their financial expectations and the long-term goals for the business. It may also be beneficial to involve an advisor who can provide objective guidance on the best course of action based on the business’s financial health and growth trajectory.
Scenario 3: Disagreement on Bringing in New Shareholders or Capital
During the growth phase, businesses often need to raise fresh capital to fund expansion. However, partners may disagree on whether to bring in new shareholders, dilute equity, or adjust valuations. This disagreement is often rooted in a lack of knowledge or exposure to the processes involved in growing a business through external investment.
Issue Area: Disagreement on getting new shareholders or raising new capital, including decisions on investment intake, share dilution, and equity premium.
Reason for the Issue: Partners may lack the knowledge or exposure to the benefits and risks of bringing in new shareholders, or they may not fully understand the implications of share dilution and valuation.
Impact on the Business: Failing to agree on raising new capital can leave the business unable to compete effectively. Competitors may raise capital to enter new markets or upgrade their production facilities, leaving the business behind.
How to Avoid This: To overcome this issue, partners should educate themselves on the various aspects of raising capital, share dilution, and valuation. Engaging with experts or consultants who specialise in business growth and investment can also help partners make informed decisions that align with the business’s long-term strategy.
Conclusion: Navigating the Growth Phase Successfully
The growth phase is a critical time for any business, but it is also fraught with challenges that can test the strength of partnerships. By understanding the common pitfalls and taking proactive steps to address them, partners can ensure that their business not only grows but thrives.
For more insights and resources on improving the effectiveness of partners in a business venture, visit ameenahsan.com. At Ameen Ahsan, we specialize in helping businesses in the GCC region navigate the complexities of growth, strengthen their partnerships, and achieve lasting success.
