"Till Death Do Us Part" Is No Way to Start a Business
Begin a partnership with the end in mind and a contract in hand
Pledging to stay together forever is an appropriate vow of commitment
to a spouse, but it is a shortsighted and risky way to approach a business
partnership. Although it may seem distasteful at first blush, beginning a partnership with the end in mind -- and with a formal agreement -- is the only way to prevent heartache.
The reasons for a partnership agreement can be summed up in the four
1. PREVENT an inadvisable partnership. Some partnerships are disasters
waiting to happen. Sheila and Linda, both U.S. therapists in private practice,
wanted to launch a counseling center in Israel. When they consulted a lawyer
to form a nonprofit corporation, he advised them to draft a partnership
agreement, as well. The process made it clear they were incompatible. Sheila
rejected Linda's requirements as completely unacceptable. Linda was adamant.
Tension escalated. After two months of negotiations and mounting legal
fees, Sheila stormed out of the lawyer's office during a heated discussion.
She and Linda never spoke again. Mercifully, this partnership dissolved
before it moved beyond the planning stage.
2. PLAN your business with the same goals in mind. Partners with
identical short-term goals, such as "let's bring this product to market,"
may have conflicting long-term objectives. Kevin and Scott worked well
together as 50-50 partners in the lean, startup years. The business succeeded
beyond their expectations. But the more profitable they became, the more
they resented each other.
As Kevin saw it: "Scott got greedy and lost sight of our original commitment
to serving a loyal customer base with a quality product. All he cared
about was being the president of a large company and making millions of
dollars." Kevin, father of four children, was unwilling to work 16
hours a day, even for a seven-figure income. For Scott, on the other hand,
who was divorced with grown kids, work was his life. His view: "Kevin is
holding this company back. We could be set for life, but he's not willing
to do what it takes to grow the business."
If Kevin and Scott began with the end in mind, their different ambitions
would have come into the open. They could have planned to let Scott buy
out Kevin or to bring in a third partner once sales exceeded a certain
amount. Or, Scott could have become a 60% owner to compensate him for his
3. PRODUCE as effectively as possible. Once a business is up and running,
fighting about issues that a partnership agreement could have resolved
takes away precious time from the business. Jane, a floral designer in
the Midwest, recalls how her partner, Charles, came to her a year
after their shop opened and demanded a change in his compensation. In
the absence of a partnership agreement, they became embroiled in heated
and distracting discussions that hurt the business.
4. PROTECT your interests. Most of us know bitter war stories
about people whose partners are unethical, impossibly eccentric, incompetent,
or domineering. The fact is, people you once trusted can change. Consider what happened to Mike, a business consultant: "My business partner
sold out on me, pulled the rug right out from underneath me. We built our
company from nothing to sales of $60 million a year, working together night
and day for eight years. There was nothing I wouldn't have done for the
guy. But behind my back, since he owned 60% of the firm, he found a buyer.
He forced me to sell out. I couldn't afford to buy him out. Everyone thought
I was so lucky, getting this big pot of money. But I didn't care
about the money. I lost my best friend and my favorite job in the
whole world. The betrayal was so shocking. I'm still getting over it."
Beginning with the end in mind is not a pessimistic approach to a partnership.
Instead, it is a realistic strategy that addresses the unpredictability
of life and human relationships.
Have a question on how to handle the pressures of running a business and the impact on your personal life, marriage, and family? Contact Azriela Jaffe at AZ@azriela.com. Please put "BW Online question" in the subject field. Your real name will be kept confidential if you request, but please give an E-mail address, phone number, and your hometown so she can contact you for more information. Because of heavy volume, Azriela cannot guarantee that she will answer every query.