How to break up business partnerships

Among some sectors of the entrepreneurial community, taking on a business partner is to be avoided like the plague. In my own experience, I’ve seen many successful and not-so-successful partnerships over the years. The ones that flourished were amazing and the others left much to be desired, especially in terms of the emotional aftermath and bitterness that sometimes remained after they dissolved.

Why do people seek partnership in the first place? If it’s so terrible, why do it?

Several reasons come to mind, ranging from increasing the amount of capital and credit latitude to start the business; unique background that could enhance the reach and services of the company; the possibility of gaining minority status for contract bids; or just daily support, having a comrade to share the duties and weather the storms of entrepreneurship with you.

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It’s a fundamental human need to want to team up, share ideas, and feel supported. However, if the situation is not clearly analyzed in the beginning or handled carefully through its implementation, it can end in disaster.

Not just about dollars and cents

Partnerships are not just about dollars and cents. They are, in my opinion, much more about the emotional aspect of doing business with likeminded individuals, sometimes more than we realize. The “new relationship economy” that is developing is moving us from archaic practices such as doing business with people simply because we meet them at an event, we are mesmerized by their advertising, or we don’t take a moment to consider doing things differently.

The new ideas around building business, both internally with a partner and externally with clients, stem from doing business with people you like. The trust, camaraderie, personality alignment and similarities in style, work philosophy and goals all map to who you are as a person, not just your “work self.” Along with coexisting well as people, you also must be effective, and unfortunately, most partnerships fall into one category or the other, not both.

Choosing a partner strategically is critical in terms of achieving long-term results while minimizing risk to your relationships and your company’s reputation. When you look for a partner, you must go outside of your inner circle and clearly consider the best fit for the organization, your clientele and your aspirations. Liking the person is important, but this added ingredient of logic and data-driven selection is the other component.

The partnership that I dissolved recently stemmed from hiring a person who was very likeminded, who quickly displayed not only similar style, but business acumen that I didn’t possess in certain areas. Together, we worked very closely and effectively to team up on projects, presentations and launching a new company together. Our friendship developed as a secondary result of our initial work engagement. This seems to work better in the long run than choosing your best friend to be your partner simply because it’s easier than searching for the ideal person.

As with any relationship, partnerships run the risk of ending, whether as the result of infighting, disagreement around goals or money, death, divorce, relocation, or other extenuating circumstances. I would venture to say that most end because the partners no longer see eye-to-eye on the direction of the organization and cannot get along well enough to guide the company through tough times.

Resilience key in breaking up

Most people immediately think of how much money they have saved up or how much credit is available when they think how resilient they can be in times of adversity. When it comes to entrepreneurship, this isn’t necessarily all there is to the equation.

Your intrinsic self – the one you cannot change no matter what – is where authentic entrepreneurship comes from. It dictates how you view work, authority, money, drive, self-motivation, personal responsibility and ambition. If you are bitten by the entrepreneurial bug, guess what? There’s no cure for you. If you pick a partner to work with you, make sure he or she has the same affliction if you want things to go smoothly.

When you forge ahead during rough times, make sure your partner is well-equipped to do the same. If your partner brings money to the table, great. If he or she can also be positive, supportive and driven during these periods, even better. Now you’ve built a partnership that is doubly powerful.

When it’s time to dissolve a partnership, it is advisable to seek counsel, especially if there are potential disagreements pending around finances, property, or royalties. A business attorney can help with the critical discussion around liabilities and, if one partner leaves the other, determining how long the departing individual is responsible for them.

To smooth the transition:

n Look through contracts and any agreements such as leases and loans; these are best discussed with an attorney to ensure that you don’t miss any clauses or statements about penalties.

n Attorneys are also essential if there are tax issues to work through such as property that has appreciated or has other tax obligations assigned to it.

n Send notices to people you do business with, preferably 90 days before the partnership dissolves, indicating your situation and who will remain responsible for the business. This is usually done by the person leaving the business and should also include any information about a new entity forming, contact information, and any changes in business offerings.

If you are considering a partnership, do it right from the beginning by spending time discussing your personal ambitions, styles and goals. Meet with an attorney to develop paperwork that is in the best interest of each partner, especially for when the partnership dissolves. Making this quick and easy is the key to moving forward with your next endeavor.

Dawn Duncan is CEO of Broadreach Recruiting & Consulting, a Fort Collins-based firm. Contact her at 970-221-3511 or www.broadreachrecruiting.com.