WHEN BUSINESS PARTNERSHIPS GO BAD
Business partnerships can and should be extraordinary sources of strength and success. You have complementary skills, you provide each other with crucial support, you may nurture ideas and projects together in a way that you would never do alone. We can think of countless partnerships that just work, and have done for years. Like any long relationship, like a marriage, they can have their ups and downs, but if it works well even a little conflict can be positive – a source of crucial challenge and reflection as a business moves forward. There are those hugely well-known partnerships which act as a source of inspiration: the giants Ben & Jerry, Yotam Ottolenghi and Sami Tamimi of Ottolenghi fame, the wonderful Itamar and Sarit of Honey & Co; and there are those smaller operations which we come across every day; the friends’ companies which go from strength to strength, the beloved husband-and-wife cafe down the road.
But here at Countertalk we also hear cautionary tales. Stories of fall-outs, resentments and intellectual and physical property being contested. We want every partnership to be one of positivity and productivity – and when it stops looking like that, we want you to be able to get out positively too, with your relationship and your assets intact. A couple of weeks ago we sent you a legal breakdown from our friends at Leathes Prior, detailing the things you need to be talking to your prospective business partner about before you go into business, and cautioning you to give proper consideration to the proportion of the split. This week we’re continuing this focus with two heartbreaking testimonies from two high-profile business owners – or former business owners. These are the stories we don’t usually hear – or, if we do, they’re often second-hand, full of gossip and hearsay rather than detailing the true reasons that things don’t work out. We’re telling you these stories to show you what can happen if you don’t start out with open eyes, a proper discussion about what the future might look like for various eventualities – and, crucially, a business agreement that works.
Watch this space, because we’ll be sending you a toolkit to help you set up your own business partnership in the right way – legally, professionally and personally. In the meantime we hope that these stories will give pause for thought.
THE BUSINESS OWNER WHO CAN’T GET OUT
We are split 51/49 in my favour, a decision my first accountant took on my behalf and I’m so glad he did because I would definitely have just gone 50/50 without thinking about it – it was kind of an accident and the savviness of the accountant that led us to split it that way. My partner and I were in a relationship when I set up the business and I wouldn’t have wanted to have that conversation even if I’d had the wherewithal.
I’m glad I hold the majority but I suppose my greatest frustration is the fact that I’m not able to use it to my advantage, despite having been miserable in the partnership for over a decade. Although I have been told by multiple people, including other business owners and actual corporate lawyers that if I wanted to sack my partner I could, I have never felt like I had any of the power in the relationship and so I’ve just stayed in it.
My partner and I broke up as a couple over 10 years ago and in that time they have shown themselves to be a bully with narcissistic tendencies. They have belittled me often, dismissed my opinions and ideas, even “shushed” me when I’ve been speaking, both in private and in front of team members. They have demanded that I list all of my recent actions, achievements, successes every time I have broached the subject of being paid more, especially during a period when they were receiving more than me (which is the case currently). But they have also been largely responsible for the growth and success of the business, so I’m stuck in a guilt/fear trap. While the structure of the business hasn’t changed, I have allowed them to convince me that I have little say and not much power in my own business. So I may be the majority shareholder but I don’t feel like the boss.
I wish I had had the confidence and wits about me to insist upon a much larger percentage right at the beginning, since it was me doing almost all of the work at the time and it was my concept, development and products and mostly me getting them to customers, albeit with a decent amount of help from my partner. I wish we had a shareholders agreement. We didn’t even have a gentleman’s agreement! We just didn’t think that far ahead. And even when I wanted to end our relationship, I was too scared of what would happen to the business if I asked them to get out of it. So I just let them stay and get more entwined, and let them chip away at my confidence and my spirit to the point where now I can’t even have a conversation about wanting to get out.
I have spent a large portion of the last decade feeling totally ill equipped to run my business; my partner has chipped away at my confidence for so long that I am only now beginning to see my value. That has meant that I have retreated, been reluctant to get involved, reluctant to have contact with this person and so, avoidant of my business. In an ideal world I would hire a senior leadership team to take over the day to day running of the business, the driving towards growth and the financial decisions. But whenever I have suggested that to my partner they have taken it personally, like I have insulted their abilities in those departments. Or been ungrateful. All I want is for my business to thrive and grow and for me (and my partner) not to have to be so involved. But they are preventing all of that and I feel totally stuck.
My biggest piece of advice for anyone else is – don’t assume everything will be fine and work out with a partner. Especially if it’s with a romantic partner or spouse. Shit happens, people change. Have open, honest conversations about how you, as partners, will deal with things that might come up, like you falling out or breaking up. Know your worth. A difficult conversation at the beginning of a partnership could save you from having years of heartache, or really make things clear if things go tits up.
THE CO-OWNER WHO LOST EVERYTHING
My partnership was with an industry friend, we started a food business together that went really well. However, because a lot of the ownership and talk about money was casually assumed nothing formal was put in writing. I thought that an equal split of profits meant more than ownership – but it doesn’t! It all came to a head when the balance of work input was questioned, it resulted in my business partner stealing from the company we created and holding it ransom until I closed the business and signed an NDA to never talk about what they did publicly.
So after a lengthy legal process, I’m no longer in the partnership and it’s one of the best lessons I’ve learnt, however painful it may have been. I experienced a severed working relationship with my partner who was also a close friend, it has made me be a lot more savvy about who I choose to work with and making sure I am clear with my communication and boundaries before entering into anything.
At the time my biggest frustration was with our communication. I felt that I had really let myself down by not being more forthright with my own thoughts a lot earlier. I think this could have saved what turned out to be a nightmare. It was also in the blurring of a friendship and a business relationship, thinking that I was exempt from the rule that you should never mix business and friendship. I wish I had just had the guts to have an uncomfortable conversation early on and put things down on paper. I didn’t know where to go for information about formalising business relationships.
If I were to do this again, I would tell myself to STOP and THINK. Take a minute to put everything down in writing before you start – you could be on the brink of the next big thing which means you’ll save yourself a lot of headache by getting the uncomfortable conversations out of the way first. Be transparent, go through scenarios with each other and answer truthfully. These things are difficult but it’s so important. If it’s your IP be honest about that and how much value it has, what are each of you bringing to the table and where’s the value in each? You could even put clauses in place that allow you to readdress anything in the future and safeguard yourself if anything changes.
And of course if your biz partner is unwilling to have these conversations or reacts badly – then it’s not the right partnership for you.