Launching a new business means having to encounter some unexpected challenges and occasional setbacks. Having a business partner can make many of these moments more manageable as long as you have the right person. It also requires that you both have the skills to cultivate a positive, resilient and collaborative working relationship.
However, this is not a given. Business partnerships actually have a 75-80% likelihood of ending in a business divorce. The risk is certainly higher among those that have not done the work of preemptively divorce proofing their business. While you can’t account for everything, there is much that you can do to give yourself the best shot possible. Divorce proofing your business is all about being proactive in order to ensure your quality of life, a constructive working relationship, and solid business growth.
If you are in the early stages of having found a potential business partner, before you go to a tax attorney and a lawyer to file a partnership agreement, here are seven strategies that will help to put you in the best position to have a thriving business partnership. .
1. SELECTING THE RIGHT PARTNER FOR THE POSITION AND FOR YOU
The first step is ensure you have a business partner who is a compatible fit in all the important areas, some of which you might not have already considered. It is well worth addressing significant differences or incompatibilities now, and having a plan in place that will hold you together before any crisis hits. Click here for more info. (Link to Selecting the Right Business Partner blog) If you have already done sufficient work on this piece, bravo! You are ahead of the pack! If not, anything you skip here will most likely come back to haunt you later.
2. AGREEING ON THE BASICS OF STRUCTURE AND STRATEGY
You’ve likely already agreed on the foundational areas including your strategic plan, your roles, domains of responsibility, etc., based on the companies needs and your own strengths and areas of interest. But have you discussed the specifics, such as your decision-making rule, which decisions can each of you make autonomously and which ones require agreement? How much input each of you can provide on work completed by the other?
3. DETERMINING EQUITY SPLIT
The default may be to do an equal split. However, it is important to ensure that the decision you land on feels truly fair to both/all parties. The partnership will certainly be undermined if one or both parties end up feeling resentful for believing their initial or ongoing contribution was more responsible for the company’s bottom line. No matter what you determine initially, be sure to revisit your agreement, and to factor in that human nature means we notice more of our own sacrifices and contributions more than the others; so come into the re-contracting conversation having put some time into identifying the value of all the other has brought.
4. DESIGNING A GOOD PROCESS FLOW
What your expectations are of the other in the tasks that require a handoff of one of you to the other, etc. How will each person recover when a deadline gets missed? Realizing it is inevitable that you will have ways in which the other person’s work style makes life harder for you. It is not unusual for this to be a significant area of work stress. The more you can build in about having clarity and explicit agreements in this area, as well as a mindset of problem-solving the glitches together, the better you will be. The more you can each acknowledge your own mistakes early and your recommitment to getting back on track, the less you will pull your partner into being judgmental, critical, or controlling.
5. HOT BUTTON ISSUES
There are so many conversations that are avoided by at least one, if not both, partners. At least small concerns about ability to fully trust the other, personally or professionally. Different values and positions about risk level and how much money to borrow, save, invest, and spend. Negotiations around power, dominance, and respect, and how to negotiate deep values and differences in your sense of ethics. All of these are typically hot button issues because they tap into deeply held beliefs, and powerful emotions.
6. PUTTING A PLAN IN PLACE TO MANAGE CONFLICT
How will you address conflicts when they pop up during the workday? You definitely want to put in place some systems for working through frustrations, miscommunications, upsets, and disputes. Best practice is to have a regular communication time in place and regularly followed. You might also want to have a have a Business Partnership Coach in mind for when you can’t do it on your own rather than scrambling to find one who is a good fit when things are at a crunch point. The more you delay your ability to resolve crunches when there is a crisis, the more damage can occur. Link to (how to select Business Partnership Coach)
7. ANTICIPATING YOUR EXIT SCENARIOS AND STRATEGY
It is unrealistic to assume both of you will even want to work this business to your graves. Many partnerships don’t anticipate early enough the life circumstances, business developments and shifts, or the relational circumstances that would lead anyone to want to leave. Of these, it is the later category that tends to take the other partner by surprise. What is a relational deal-breaker for one is often not the same as what is one for the other. In any case, your business attorney will help you think about what kind of role, ownership each person will retain. Will all contacts and intellectual property belong to the business or the partner who contributed them in the first place? Anticipating the various circumstances as well as the likely resolutions will help the business and the partners to be as stable as possible during what will still be a stressful and difficult time.
So many times, these conversations get rushed, skimmed over, or neglected altogether due to situational factors, natural avoidance, or inexperience in this arena of forming, building, and maintaining a strong cofounder and business partnership working alliance. The result of not doing so means the conversations have to happen after the problem has surfaced when difficult feelings have already emerged. The result also is a higher chance of the small problems growing into bigger ones that can threaten the business partnership itself. My wish is for all of you to put the strong foundation into place so you can bring your much needed offering into the world, and hopefully avoid being among the large majority who end up in a business divorce.
I am the Business Therapist for partnerships, co-founders, and entrepreneur couples. I will help you gain clarity about what you need to consider in choosing and establishing a business partnership to not just have a profitable business, but to really enjoy working together.
Contact me for your free 15 minute phone consultation today to discuss your business partnership needs at (415) 895-0786. Concierge, and traditional office sessions available in the Bay Area. Virtual business therapy sessions available worldwide.