Business Partnership Advisor
Together, we can fix your business and partnership problems
Chris Reich, Business Luminary
Problems with Your Business Partner? Talk!
Email of the week:
Chris, I have a problem with my business partner and the way he handles the money. He refuses to talk about it. What can I do?
Talk Is Cheap
You better believe talk is cheap. It’s a lot cheaper than paying a lawyer or having your partnership fall apart. Often, a little tension in a partnership becomes severe tension fast.
Problems almost always break out over money. Makes sense because the purpose of the partnership is to make money. Partnership disputes most often arise when one partner feels that the other partner is getting more than their fair share from the business. Sometimes that’s true. You can tell when one partner is taking advantage of the partnership or the business when he refuses to talk about the problem.
Nothing to Hide? Then…
If a partner has nothing to hide, why not talk through the situation with the other partners? Misunderstandings are easy to clear up. Want to spot a cheat? Easy. Look for that tone of righteous indignation. Whenever I hear, “I’m so insulted that you would bring that up that I refuse to talk about it!”; I know I’ve got a cheat on my hands. I’ve seen partners who steal inventory, partners who steal cash, and partners who steal customers because they are secretly involved in another business. They have all hopped up and down with the red face proclaiming innocence.
Partners with nothing to hide want to sit down and explain the details and clear the air. It just works that way.
You have an ethical, maybe even legal obligation to talk with your partner if your partner raises an issue. If your partner thinks it’s important, it’s important.
“If you have trouble talking with your business partner, I can moderate a couple of discussions. It helps having an outside person keep things cool.” Chris Reich
What to Do if Your Business Partner Refuses to Talk
If you have a business partner who refuses to talk, call a mediator. If you read and understood what I wrote above, you know you are dealing with a problem that is real. Your partner probably is a cheat. That means you have to get very serious about getting things in order—FAST.
Here’s the curveball. True, partners who refuse to talk are almost always cheating the partnership, but partners who make the accusation are right only about half of the time. Often, when someone calls me about a cheating partner, I’ll discover that the other partner WANTS to talk with someone about getting things back on track. They’ll tell me that every time they try to explain something like the use of petty cash for small purchases, the complaining partner will start yelling and the conversation ends with a bang. Don’t be that partner.
Calling a mediator will help you get through these problems. If partners are willing to talk with a mediator present (I use video conferencing to save you money), the problems can always be worked out. Always.
But again, if your partner refuses to talk with you and refuses to speak with a mediator, you need to consider leaving the partnership. Sorry, but that’s a reality.
“If you have problems with your business partner, schedule time to talk. If you can no longer talk without getting into an argument, get someone neutral to moderate a couple of meetings.”
Locking a partner out is a risky move. The locked-out partner has rights that if violated could entitle him to reinstatement and damages.
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.