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When Partnerships Go Bad: Recognize the Signs & Take Proactive Steps

partnership break
(A compilation effort with the permission of businesshowto.com.) 

If you’re in a business partnership or a longstanding working relationship that isn’t working, ask yourself these questions. Then, if you need to change or end the partnership, we’ll provide you with a short to-do checklist towards that end. 

A client, we’ll call her Linda, had a business that was struggling financially and operationally. She was totally disgusted because her partner of  several years was no longer carrying his weight and didn’t seem to understand the gravity of the situation. She was stressed at the continued havoc that this partnership was causing in nearly every aspect of her life.

What to do? Her realized that her first commitment had to be to herself. Linda had to take command of this situation. She decided she wanted to give the business and her partner one last chance.

She created Job Roles for herself, her partner and each of her staff. Because of the longstanding relationship between her and her partner, we agreed it was best if a qualified consultant meet with the partner and her to present things up to this point.  NOTE: Using a third-party (like an attorney or mediator) can offer a different perspective to a known problem.

The partner was cordial and listened politely, as had been expected. But, of course, he didn’t really GET IT that things had to change. Linda gave it four months under the new plan. Unfortunately, she had to bite the bullet and make the decision to end the partnership.  Linda realized that with several changes to the business operating methods,  she didn’t actually need a partner. She had been carrying the business alone for several years anyway.

If you can answer yes to one or more of the following it may be time to take command of your business and make the necessary changes.
  • You’re feeling like you’re carrying more than your share of the work.
  • Your partner seems to have lost interest in the business.
  • You find more and more to disagree about.
  • There have been changes in your partner’s life that are interfering with his ability to function in the business.
  • Your interest in the direction of the business is different from that of your partner.

In Linda’s case, she had been performing nearly 100% of the work towards the end of the partnership, her partner had been unfocused for quite a while and he had allowed an enormous amount of drama occurring in his personal life (ex-wife divorce and child custody issues, an inexplicably rapidly formed new relationship, losing decades-long friendships with several close friends, etc.) to spill over into the business.   Although well-experienced with personality changes in people, the level of disconnect that the partner had to the business and the welfare it provided for Linda and other employees was shocking even to us.  Finally, he made the gross mistake of insisting on hiring his unqualified new girlfriend – in a position that required unimpeachable skills and confidentiality.  That’s when Linda finally realized that the partnership was truly over.   He’d simply lost his perspective on the type services that the company provided – those requiring absolute trust.

Here are the steps I suggest you take if you’re seriously considering making changes to your partnership arrangement:

1. Review your Partnership Agreement.

Your partnership may exist in the form of a Partnership or a Corporation. Either way, you have a legal entity that binds the two of you.

Have your attorney review your documents and tell you exactly where you stand from a legal perspective. This is important so you will know your limitations as you begin to plan.

If you have a written agreement about Roles and Responsibilities for each of you, assess whether it is still appropriate or needs to be updated.

2. Decide and document exactly what you want for your business and yourself.

Being in a state of dissatisfaction is the spur that will get you to take action. But you don’t want to take action until you’ve thought through exactly what you’re trying to achieve. Consider probable and possible outcomes for different scenarios to help you finalize a plan.

3. Create and write a plan to accomplish your goals.

The most positive thing you can do is create a plan for yourself and the business as you see it and be prepared to present that to your partner. If dissolving the business is in your plan, be prepared with both the reasons you want to leave…and what you plan to do in the future. You’re not just leaving the business; you’re going into something else.

4. Schedule a time to “talk business” with your partner.

A change of venue from your typical meeting might be helpful. Sitting down over lunch or coffee could be a good place to start.

Be prepared for whatever response comes back to you. It can be anywhere from thankful to downright hostile. It will likely require some time for your partner to think through the ramifications of your proposal. Be forewarned; it’s very difficult for people to make changes unless not making changes will jeopardize something of value to them. The bottom line is you don’t want to back down from what you want. Compromise only if you’re still OK with the terms.

If your partner is looking for an excuse to blame you for the ills of the business, you may hear about it when you bring up the subject. I know it’s tempting, but be careful not to get into a blaming match. The objective is to present what you want for the business and yourself, and your plan to make it happen. Outlining how you see their role in the business is totally appropriate. Then it’s up to them to agree or respond with another suitable option.

5. Be willing to walk away.

If you cannot come to terms, or if you do and the partner does not keep his agreement, you must be prepared for a change in business status. You may decide to close the doors, sell the business, sell your share to the partner, buy him out or any other option that will allow you to move forward with YOUR plan.

We all know it’s not easy to give up on something you’ve worked so long and hard to achieve. It’s a lot like a marriage that’s gone bad. At some point, however, you have to make the decision not to be the victim of circumstances any longer and make your move to position yourself for a better future.

On a final note: have a thorough assets search (personally and professionally) conducted. Linda found out that her now former partner had actually not followed through on many business aspects she’d thought performed and had also converted important assets to himself.

Good luck with your decisions and the outcome.

BNI Operatives: Street smart; info savvy.

As always, stay safe.

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