Business partnerships are like marriages, they are just more complicated! Over the last several years, I’ve coached several business partnerships (individuals or all partners) and one resounding theme comes through – they are messy, can be complicated, are emotional and they are certainly not easy. While the initial concept seems like a win-win, they can also go bad when things change for either party or the business itself.
I’m speaking from a position of experience on this subject. I’m the product of a past failed partnership. It started off great, we invested in a great partnership agreement, spent hours ideating on the future, had a rough plan in place, then set out to change the world. Then it happened. The one situation that we had not planned for was the one situation that we had not discussed nor planned for. Things got tense quickly. And the whole thing blew up quickly. For that, I am forever remorseful. However, there were signs before we even started that we both should have talked about and flushed out before proceeding. Maybe we should have “dated” before getting married. But in the end, the partnership was ended and we both moved on.
But out of that situation and after working with several clients that have had similar experiences, a few things come to mind that others considering partnerships should at least take into account prior to galloping off into the sunset of partnership bliss:
1) Have a Partnership Agreement discussion before you pay to have a Partnership Agreement drafted with legal counsel. Have the tough conversation now! Early, often and real. What happens if one partner….gets sick? Dies? Is unable to work due to a spouse being sick? Decides to do something stupid that affects the business? What happens if the business is really successful? What if the business runs out of money?
2) Have a Partnership Agreement – Yes, a Prenuptial Agreement. What happens if/when…there are many common reasons for partnerships to have conflict, and a good business lawyer will likely have heard/seen/experienced them all. Some are above. Make a list of many situations as you can and review together how each would wish to respond (and more importantly agree and get the responses in writing). Maybe even pay an outside third party to role play this with you. This is serious business.
3) Define roles now – for the existing and future organization. Yes, org chart, job descriptions, who is responsible!? What happens when a partner does not fulfill their responsibilities? What happens if one partner is delivering more value to the business than the other? Is this a 50/50 relationship? 33/33/33? Is there a board?
4) Consider dating for a while prior to jumping into bed with a business partner. Create a way to test relationships before going more formal. Get comfortable with how another business partner operates as a business owner before forming a partnership that is very difficult to split up without destroying the business itself.
Ok, what is I’m already in a partnership and it’s already a mess?? Well, there are a few things you can do and I would recommend:
1) Seek outside counsel immediately – business lawyer, business coach, another business owner (or all three!). Seek out their counsel on how to proceed and what steps to take.
2) Consider your options – all options are on the table and should be explored.
a. Resolution – can the conflict be resolved? Is it worth resolving? Is it better just to cut it off now? Did your Partnership agreement cover the source of the conflict? Document what you want from the entire situation. Create a plan and stick to it – a plan with accountabilities that you may have not had defined before.
b. Buy Out – Can you afford to buy out the other partner(s)? Can they buy you out? Can another future partner buy in and you out?
c. Dissolution – Be willing to walk away. If it comes down to it, are you ready to walk away and live with the consequences? It may be the least painful option long-term.
3) Use an outside third-party to help you and your partner(s) resolve or come to a conclusion. Sometimes, saving or defining the partnership is worth saving (it costs less to resolve and repour the agreement than to part ways/dissolve/buy out). And you may find it’s the very thing you likely should have done to start with!
4) Don’t beat yourself up – it is very normal for partnerships to hit a rough spot or have conflict. It’s one of the most difficult relationships outside of marriage. In fact, I believe it is even more complicated because of the “tentacles” involved – employees, other employees, business finances, emotions of the current times, and the mixing of personal and business relationships…all making for a potential powder-keg waiting to explode.
Does all this all negative? Yes, maybe it does. If a partnership exists that is running smoothly, seek that partnership out and find out why it’s working! I would suspect, the reason is they’ve done their homework, have set out a plan, have agreed responsibilities in detail, and continuously work ON the partnership, not just within it.
Partnerships are like Marriages – Just More Complicated!