By: Patrick Ungashick

“Unlike a marriage, business partnerships are supposed to end.” Attorney William Piercy offers this insight in the opening chapter of his book Life’s Too Short for a Bad Business Partner. Piercy, with the law firm Berman Fink Van Horn in Atlanta, Georgia, is a specialist in resolving and dissolving unwanted business partnerships—an area sometimes called “corporate divorce.” Many business owners have unspoken expectations that their relationship with their business partner(s) will last forever when, in reality, those affiliations are not intended to be perpetual. All business partnerships should one day end, hopefully with a successful exit featuring the “partners departing as friends with full bank accounts” as Piercy observes. In the real world, this does not always occur. Many business partnerships fail, some quickly and others after an otherwise long and successful collaboration.

In his book, Piercy identifies ten reasons partnerships can fail. Knowing these can help you avoid a breakdown in your business relationship, or perhaps recognize that it may be time for your partnerectomy. Listed below are Piercy’s ten reasons, along with some of our experiences that corroborate the author’s observations.

One: Lack of Communication

“When dialogue breaks down, bad things happen,” Piercy writes. Communication breakdowns among business partners are, unfortunately common. One contributing factor is that many co-owners do not consistently allocate time to meet and address ownership issues—shareholder-only meetings are held sporadically or never at all. This bad habit inevitably leads to communication breakdowns.

Two: Lack of Transparency

In healthy business partnerships, there must be a division of labor, which usually means that some partners have a more regular need than other partners to interact with data like, financial records and reports. This may be necessary for day-to-day operations, but all owners must have consistent and unrestricted access to important company operational and financial performance data. When this is not the case, that is when partnerships can get into trouble as accountability, communication, and trust erode.

Three: No Shared Vision

If the business partners are not all rowing the boat in the same direction, Piercy forecasts, “rough seas are ahead.” After many years of close alignment, different business partners may develop diverging plans and aspirations for where to take the company. Exacerbating this, many companies operate with only loosely defined, unwritten strategic business plans. Without a shared, formal business plan with clearly defined goals and tactics, each owner is free to row the boat in whatever direction he or she feels best.

Four: No Clear/Defined Roles

Piercy notes that in a “startup culture…founders roll up their sleeves and do whatever needs to be done”. However, with time and company growth, owners need to divide and specialize their roles in the organization. Sometimes this occurs smoothly, but within some teams, it leads to overlap or gaps. When partners allow themselves to work in the company without written job descriptions governing their roles and responsibilities, this issue is more likely to occur.

Five: Failure to Stay in Your Lane

Even if each partner’s roles have been defined, sometimes a partner strays and engages in behavior that disrupts other people or processes in the company. When this occurs, typically the offending owner is acting with good intentions, but the disruptive behavior often goes unchecked because it’s hard for any organization to tell one of its owners to “stay in your lane.” Regardless, if this continues the partnership and business can suffer.

Six: Disparity in Contribution

When one partner is contributing (or perceived to be contributing) less to the organization: less time, effort, money, results, etc., the seeds are planted for dissent within the relationship. This awareness can be a natural progression within many partnerships. If one partner is significantly older than other(s), his or her energy and engagement may wane earlier than the other’s. If this situation deepens and the partners fail to address it, a complete breakdown may occur.

Seven: The Business Outgrows Its Founders

Piercy points out that starting a business and leading a business demand a different set of skills. Many founders struggle with recognizing the transition and making it. If one co-founder is not effective at leading a maturing organization, it can stress the relationship and the company. Small to mid-sized organizations that emphasize an inclusive culture can struggle with how to handle employees who were once effective but have failed to keep up with the company’s growth; the issue is even more challenging when the no-longer-qualified person is not just an employee but also an owner.

Eight: Failure to Hire Professional Help

“Without outside help,” Piercy writes, “entrepreneurs find themselves dealing with issues well outside their skill sets. Balls get dropped. Fingers are pointed. Relationships fray.” Some owners never fully recognize the need to hire professional management and engage expert advisors. Other owners see this need but then struggle with finding, hiring, and leading those people. Failing to field a competent team not only hinders sustained business growth, but it also endangers the partnership.

Nine: The Kids Don’t Want to Work in the Business

Within family-owned and led companies, lack of interest, engagement, or alignment can undermine business partnerships regardless of how strong the family bonds may be.

In addition to Piercy’s valid point, we, in exit planning, see additional reasons family issues can undermine business partner relations. For example, if one partner has family who works in the company, but another partner does not, the partners may find themselves advocating different exit strategies. The partner with children in the company wants the company to go to his or her kids, whereas the partner without children in the company wants to sell to an outside buyer. These seemingly incompatible exit goals can erode partner relations without a plan on how to accommodate everybody’s desired goals.

Ten: One Partner Has Baggage

“If your partner has more issues than National Geographic, it may be time to cancel the subscription,” writes Piercy. The experienced lawyer also notes that while it is noble to support a partner who is experiencing serious personal matters, everybody must protect the company and not let personal baggage bring down the partnership or the entire organization.

We once worked with a $100 million company where one of the owners had a severe alcohol problem. For years his partners bent over backward to support this person, including covering for their partner during extended absences during periods of treatment, and relapse. However, their tolerance reached its end when the partner drunkenly confronted a client. After this, the other partners regretfully knew they had to pursue a corporate divorce.

How to Avoid a Corporate Divorce, or What to Do If You Need One

While Life is Too Short for a Bad Business Partner is essential reading for the business co-owner who recognizes that he or she must get a corporate divorce, all business partners should read this concise book. It will not only guide an owner through the operational, legal, and financial steps of a partnership dissolution, but Piercy’s book too can help all partners implement sound business practices and take corrective action within a struggling partnership before it is too late.

Click here to register for an upcoming webinar interviewing Bill Piercy about this topic.

To secure your copy of his book, visit Amazon.

If you have a quick question coming out of this article or, if you want to discuss your situation in more detail, we can set up a confidential and complimentary phone consultation at your convenience contact Tim 772-221-4499.

Webster’s Dictionary defines a “partnerectomy” as “the procedure to remove a diseased or failing business co-owner.” Well, OK, that’s not true — it is a word that we made up.

But sometimes partnerectomies are required, regardless of the fact that the word itself is not officially recognized. Here are the symptoms to watch for to determine if you have a business partner who needs to go.

According to our proprietary research, about seven out of 10 U.S. companies have more than one owner. These partnerships feature two or more leaders coming together with the shared goal of growing the company.

Their combined effort and often complementary skills fuel the company’s growth and success. That’s the positive version of the story — and it is often true, especially in the beginning.

When Business Partners Aren’t on the Same Page

However, sometimes business partners realize they may not be exactly on the same page on multiple issues. Sometimes it’s possible to reconcile their differences and resume a productive relationship. Other times, the necessary and perhaps only course of action is to remove the partner in question. In other words, the company needs a partnerectomy.

Some partnerectomies are more difficult than others. Some are painful, angry, risky, expensive, and cause lasting scar tissue. Others are more controlled, safer, less emotional, and leave the organization much stronger than it was before the procedure.

Either way, before resorting to this invasive and irrevocable course of action, business co-owners should exhaust every effort and resource to find another resolution to their core differences.

Here are the symptoms that indicate your organization may need a partnerectomy, any of which suggest that it’s time to take action. You may need a partnerectomy if:

• You and your partner(s) disagree about where to take the company and how to get there.
• One or more partner(s) want to take all of the company profits home while one or more partner(s) want to reinvest all of the profits back into the company for growth.
• You believe that there are important topics that you cannot discuss with your partner(s) for fear of damaging the relationship.
• Deep down, you are not sure that can trust your business partner(s).
• Deep down, if you could turn back the clock you would not enter into a partnership with that person(s) again.
• Deep down, you believe that if that partner(s) were to leave the company, then employees, customers, suppliers, or other third parties would be relieved.
• You and your partner(s) have very different timelines for when each wants to exit from the company.
• You and your partner(s) have very different opinions about your company’s value.
• You and your partner(s) have not signed a buy-sell agreement. Ask us more about this.
• Your employees clearly prefer or are aligned with one partner or another, such that divisive factions exist in your organization.
• Members of your leadership team are unclear what a particular partner actually does inside the company.
• You believe that if that partner(s) departed from the company tomorrow, the company would not experience any setback or difficulties.
• You find yourself frequently having to do any of the following for another partner(s): “cover for” him or her, do “damage control,” or “take precautionary steps” to ensure that the other partner does not cause the company problems, intentionally or not.
• Your partner(s) has ongoing personal habits or issues that create serious risk for the business.
• You and your partner(s) do not have current, written, mutually agreed-upon job descriptions.
• You and your partner(s) are working at different commitment and energy levels but take home the same pay.
• You and your partner(s) are doing different jobs inside the company but take home the same pay. Ask us more about this.

What to Do If You’re Experiencing These Symptoms

It is worth noting that some of these symptoms set off obvious and immediate alarm bells (such as #4 – you might not trust your partner) whereas others seem trivial or harmless (#15 – you do not have written job descriptions). Yet, as the word symptom implies, each of these items may be a surface manifestation of a deeper root issue that, if left unaddressed, can lead to real catastrophe.

If you are experiencing any of these symptoms, just like any true medical issue it is advisable to discuss your situation with a knowledgeable advisor, and if necessary, do “more tests.” It is possible that further analysis of the symptom will turn up nothing or might reveal a minor and readily treatable condition. It is also possible that further analysis reveals an issue serious enough to cause real harm to the company, in the present and/or in the future, if left unchecked.

A partnership can be a company’s greatest strength or its most crippling weakness. If you are experiencing any of these symptoms, act sooner rather than later. To learn more, consider this article or contact us to confidentially discuss your situation.

To learn more about the steps necessary for a successful exit, contact Tim for a complimentary consultation: 772-221-4499 or email.