Barry Moltz describes partnerships as “marriage without the sex.” Partnerships in business can be one of the most difficult issues that entrepreneurs have to face, and yet very little is written about them, we usually just knowingly roll our eyes when we teach about them, and most entrepreneurs only worry about them when they have already become a complete disaster. I think that who is in or out of partnerships should have as much consideration in a business deals as what markets to enter into. Partnerships gone bad are a major source of business failure. They suck energy and time from doing business. They lead to the break-up of perfectly good businesses.
Rule One. Examine business partnerships (I am using the term loosely here as these can be common shareholders in any closely held business such as an S-Corp or LLC) like you would a marriage. I hesitate to use this analogy in today?s world of quicky marriages and quicky divorces. I mean a marriage that you really want to last a LONG time! Think it through very carefully. Talk with the potential partners about everything related and even unrelated to the business. Know their hopes and dreams, endearing characteristics and annoying habits, ethics and values, etc., etc., etc. You will spend more time with these folks that anyone else in your life and it will be a relationship that the law will make even more complicated to get out of than a marriage. So get it right in the first place! Entering into a business partnership on impulse or too casually is about as smart as entering into a marriage the same way. And it has about the same chances of success. No matter what, work with your attorney to create a shareholder agreement before you officially incorporate. Just as marriages can fall apart on the honeymoon, business partnerships can fall apart before the first sale is ever made.
Rule Two. If you are already in a partnership and it has problems, try to work it out openly and honestly. Do so with as little venom as possible. This requires that you remember three words: communication, communication, communication. And once you?ve got those three right, the next three words to remember are compromise, compromise, compromise. This is not a battle of the wills; it is your business and personal futures on the line. Check all egos at the door when dealing with troubled partnerships.
Rule Three. If the partnership is beyond hope of repair, get out as quickly as possible. The longer it takes, the more expensive it gets. And no matter what, it will be expensive. Shareholder agreements and essential and can create a potential path out of the morass, but it will still be a painful and expensive process. Count on that. As this article from Inc.com underscores, this is a tricky process even with a shareholder agreement.
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