Business Partnership Advisor
Together, we can fix your business and partnership problems
Chris Reich, Business Luminary
How to Fix Problems with Your Business Partnership
If you have problems in your business partnership that you would like to fix, always start by getting independent advice.
Start by Getting an Outside Perspective If You Want to Fix Your Partnership Problems
When it comes to problems in a partnership, you want to start by talking with an independent party with the experience to help you. You don’t start with lawyers. Start with someone who can help with perspective.
I heard from a partner in business recently who was very stressed about the future of her firm and her relationship with her partner. In her words, the business was in trouble financially, and her partner was continually taking money out of the business without consulting with her. Sounds pretty bad. You might be thinking that it’s time to call an attorney, right?!
It was a good thing she found me. We talked for about an hour at no cost to her. Here’s what came out of the discussion. First, the business is about a year old. Both partners borrowed heavily to start the business, and neither had been in business before. The partner who called me is the keeper of the books. She was very, very stressed about all the debt.
As we talked, I found out that the business is making positive cash flow. The partners take only small monthly draws of $400 each. How much did the other partner take out? $200.
Can you see the problem? The partner who called isn’t used to being $300,000 in debt. For her partner to take $200 before paying off that big debt is just too scary. Turns out, the other partner, a single mom, had depleted her savings and couldn’t cover her rent.
While it’s a good policy to discuss money before taking any out of the business for personal use, it can be embarrassing to talk about the need with your business partner. It usually comes out in a statement like, “I shouldn’t need permission to take $200 out of my own business. I work hard.” That’s true. What was need in this case was a little outside perspective. I told the calling partner:
- Your business is doing well
- Carrying debt is normal for a new business
- Your partner isn’t unreasonable
- You should make an agreement about taking money when needed within certain limits
- We should implement other policies that will help the relationship and the business
We worked out some policies and all is well.
Sometimes It Goes in a Different Direction
I’ve had other calls that were nearly the same situation except that the other partner was taking small amounts daily and letting her partner know that, “there is nothing you can do about it.”
That’s an entirely different problem. Again, there needs to be an adjustment in perspective. When a partner is that nasty, the problem needs to be addressed immediately.
Get an Outside Perspective if There Are Problems in Your Business Partnership
Business Partnership Advice by Chris Reich, TeachU
There Are a Million Stories in the Business Partnership Universe
I could give you hundreds of examples where we were able to repair a business partnership by simply getting things into perspective. Too often, business columns like this recommend that you start by talking with your partner. If your perspective is out of balance, that conversation isn’t going to go well.
Too often problems are made worse by talking because accusations are bound to pop out. By getting things in proper perspective before talking, tensions between business partners can often be resolved quickly before the stress gets out of hand.
What About Your Partnership Agreements?
I always recommend reviewing those documents but most of the time when there is trouble in a partnership there are no documents to govern the dispute. Certainly, you’ll want help getting that done but once the tension starts it’s not a good time to start a process like that. Get the emotional temperature down first, then go to work together on creating your agreements.
That’s the difference in negotiating an agreement versus reaching a settlement.
Chris Reich, TeachU (530) 467-5690
“If there are problems in your business partnership, get an outside perspective BEFORE you sit down with your partner.”
There are many things to cover in a solid Partnership Agreement. In this video, I’ll explain the items that need to be covered. You may have other items to include as well. Keep in mind that there are many ways to address each clause. My job is to offer you options and to help partners agree on how they want to address every line item.
Your Partnership Agreement protects your interests. Ideally you would go to a qualified business attorney and have the proper legal document drafted. But if you are putting it off because of the expense, you can get the key items on paper to protect you and your business.
There are times when you legally can and should lock your partner out of the business. But, those are rare circumstances. Locking your partner out, even if your partner is showing bad behavior, open you to potential liability.
I pay close attention to what is expressed during my private interviews before we start a mediation process. There are 3 signs a partnership will fail.