A marriage and a business partnership have a lot in common, including an
aversion to creating a prenuptial agreement. "Till Death Do Us Part" is a
meaningful custom to express your commitment to a spouse, but it is a
short-sighted and risky way to approach a business partnership. Most
business partners skip a critical step to building a successful
partnership: formalizing their agreements. Even if you create a wildly
successful company with your partner(s), do you imagine partnering together
for the rest of your life? Imagine yourself at ninety years old - are you
still working in the same partnership? At some point, you face the
inevitable prospect of disolving your partnership, regardless of whether
it's a profitable or disastrous experience.
Given this reality, begin your partnership with the end in mind. Using
this approach to shape your partnership experience will enable you to reap
the benefits of the four "P"'s: 1) Prevent an inadvisable partnership. 2)
Plan your business with the same goals in mind. 3) Produce at maximum
effectiveness. 4) Protect your interests.
Prevention: Some partnerships are disasters waiting to happen. Sheila
and Linda
were both therapists with private practices in the US when they teamed up
to launch a counseling center in Israel. When they consulted a lawyer to
help them form a non profit corporation, he advised they put together a
partnership agreement as well. As the lawyer elicited their points of
view, Sheila rejected Linda's requirements as completely unacceptable.
Linda was adamant in her position and the tension escalated. After two
months of negotiations and mounting legal fees, Sheila stormed out of the
lawyer's office in the middle of a heated discussion. She and Linda never
spoke again, even though they both still work in the same profession. This
partnership dissolved before the counseling center moved beyond the
planning stage.
Planning: Partners with identical short-term goals - "let's bring this
product to market," may have entirely different, and conflicting, long term
personal and business goals. Kevin and Scott worked together effectively
as 50/50 partners in the lean, start-up years, until the business succeeded
beyond their expectations. The more profitable they became, the more
resentment developed between them. Kevin complained: "Scott got greedy
and lost sight of our original commitment to serving a loyal customer base
with a quality product. All he cared about was being the President of a
large company and making millions of dollars."
Kevin, father of four children, was unwilling to allow work to consume
sixteen hours a day, even in exchange for a seven figure income. He just
wanted to earn what he needed to support his family. Scott, on the other
hand, was divorced, with grown kids - his work was his life. Scott
complained: "Kevin is holding this company back. We could be set for
life, but he's not willing to do what it takes to grow the business."
If Kevin and Scott had begun with the end in mind, with an honest up-front
discussion of long term goals, their different motivations and ambitions
could have been brought out into the open. To address this significant
difference, they could have put in place a buy/sell agreement that would
allow Scott to buy out Kevin's share of the partnership. Or, they could
agree to bring in a third partner to share the workload once sales exceeded
a certain dollar volume. Or, they could shift their partnership to 60/40
to compensate Scott for his additional work hours. The best time to
discuss those options is at the front end, when their relationship is
friendly and recognition of workstyle differences is not an issue for
contention.
Productivity: Once some fears regarding "what if. . " are resolved, and
partners are freely communicating with one another, they can get down to
the primary business of creating a successful company. Though the
formalization process may evoke friction and uncomfortable discussions,
after negotiations are resolved, the partnership is on much more solid
footing. Rather than divert energy to resolving basic partnership
disagreements, the partners can put their full attention into running the
business. Jane, a midwest floral designer recalls how the absence of a
formal partnership agreement got in the way of productivity when her
partner, Charles, came to her one year after their flower shop was opened,
and demanded a change in his compensation. That request embroiled them in
heateas productive as they were capable, and the business was hurt as a result.
Protection: Most of us have heard at least a couple of business partner
war-stories, when bitter entrepreneurs relate the disasters of partnering
with an unethical eccentric, an incompetent sloth, or a control freak.
Consider this story that Mike, a business consultant, relayed to me:
"My business partner sold out on me, pulled the rug right out from
underneath me. We built our company from nothing to sales of sixty million
dollars a year, working together night and day for eight years. There was
nothing I wouldn't have done for the guy. But behind my back, since he
owned 60% of the firm, he found a buyer. He forced me to sell out; I
couldn't afford to buy him out. Everyone thought I was so lucky - getting
this big pot of money. But I didn't care about the money. I lost my best
friend and my favorite job in the whole world. The betrayal was so
shocking, I'm still getting over it."
Beginning with the end in mind is not a pessimistic approach to
partnership. Rather, it is a realistic strategy that recognizes the
unpredictability of life and human relationships. It not only answers the
question "what if. . . (A partner dies, leaves, wants out, betrays the
company, etc.), but also answers the question: Do my partner and I have
the same end in mind?
Azriela Jaffe - az@azriela.com
Author, Speaker, Columnist, Business Coach
Azriela Jaffe is the nation's leading expert on entrepreneurial couples, and highly sought after by the media for her expertise on the emotional, interpersonal, marital and family concerns of self-employed professionals, entrepreneurial couples, and business partners. She is one of the country's foremost spokespersons on work/family concerns. Azriela is also a recognized expert in reconciling differing levels of Jewish observance in marriage and extended family.
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