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PERSONAL BUSINESS

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Our Marriage Can't Be Saved — Can Our Partnership?
Few husband-wife businesses survive a divorce. Here's what it takes

In 1980, Pete Koerbel left his job as a camera-store employee in Cincinnati to start his own business. His wife, Linda, was his right hand, handling the administration, finances, and advertising. They positioned Pete's PhotoWorld Inc. as the store with "New York prices and Cincinnati service." It prospered by taking a 20% to 25% average markup instead of the 40% other local stores took. In time, Pete's became a chain of seven stores with $7.5 million in annual sales. Unfortunately, while the business thrived, the marriage floundered. In late 1997, Pete and Linda divorced after 33 years together.

Usually, when married business partners split up, it heralds the end of the company -- at least in its present form -- and a bitter dispute over assets. A typical result is the acrid spirit that took over Patty and Michael Zacks, who ran Camera Werks, a camera store in Providence for 13 years. When they broke up, he started a rival store, Zacks Camera Repair, across the street.

And small wonder, given how intensely intertwined most entrepreneurs' financial and personal lives are. The Koerbels, however, were convinced they could beat the odds and maintain comity at work. They remained partners in Pete's PhotoWorld -- working together from 10 a.m. to 6 p.m. "For us, business communication was the part of our marriage that was working -- and working well," says Linda, 56, who took back her maiden name, Rubel. They used the same divorce lawyer to keep the negotiations from becoming adversarial, and they sit down once a month with a psychologist who specializes in family business to talk through difficulties. "We had to get used to different roles and responsibilities and feelings. And after that, it wasn't any problem whatsoever," insists Koerbel, 58. It seems to be working. Since the divorce, they've acquired a commercial photo lab and developed a Web site that generated $100,000 in Christmas business last year.

LONGER HOURS. Koerbel and Rubel are exceptional. Fewer than 10% of couples who own joint ventures continue working together after the divorce, family business consultants estimate. Running a business partnership can severely strain a marriage: 22% of 3,860 family enterprises surveyed by Arthur Andersen in 1995 had been hit by divorce in the previous five years. Judith Marschak, a Vancouver (Wash.) psychologist and author of Entrepreneurial Couples, found that, on average, married business owners are on the job longer than dual-career couples who work separately. Husbands work 60 hours per week and wives 49 at their joint company. In contrast, they work 47 and 45 hours, respectively, in separate places. "By the time they come to me for help, they are so angry with each other because they've postponed and postponed and postponed taking care of themselves with all this excessive work," Marschak says.

What distinguishes divorced couples that can keep working together is trust in each other as businesspeople. Says Everett Moitoza, a family business consultant in Portsmouth, N.H.: "They may no longer love each other or trust each other in love. But they know the other is a pro and gives 100% in the field, no matter what." They somehow manage to put the business ahead of their emotions, and -- most important -- they can communicate well with each other. Also helping the odds: a mature, successful business; complementary -- not competitive -- functions; and the company's dependence on each partner.

What can separating couples do to successfully work together? First, divide the labor. She can take the front office, he the back; she can handle wholesale, he retail, and so on. In a landscaping business, for instance, the husband might oversee the commercial accounts and the wife the residential ones. Or they may be partners in a narrow sense -- such as jointly owning a backhoe -- while operating separate shops. "There's lots of options for how a divorcing couple can continue to be active in business together -- sometimes without being partners in daily contact," says Lee Borden, a lawyer and divorce mediator in Birmingham, Ala.

Of course, the best of intentions can easily collapse in the emotional quicksand of a divorce. That's why it's crucial you also draft legal agreements that redefine stock ownership, buyout and sale terms, and set a valuation for the company. And the ground rules shouldn't be limited to the divorcing spouses. Children in the business may take sides, so there needs to be a way to prevent them from inflaming tensions.

Almost half of family businesses do not have buy-sell agreements, according to Arthur Andersen. That's a serious flaw when pillow talk no longer doubles as a board meeting. "Get all financial, contractual, and operational aspects of the relationship in writing -- with professional legal or other advisory help -- and play everything in the business relationship by the book," advises James Lea, a family business consultant, speaker, and columnist in Chapel Hill, N.C. "Even in the most amicable divorce, no business dealings should rest on assumptions or fond memories of old times."

CONTINGENCIES. A family strategic plan should also set up criteria for hiring children and other relatives. What's more, it's helpful for the couple -- and the family -- to meet monthly with a mediator to talk tough issues through. There should also be a contingency plan for splitting up the business. Paradoxically, it can make a postdivorce partnership work better by easing the pressure to succeed.

No amount of planning can entirely cushion the impact of the split on the couple's business relationships. "Employees, vendors, suppliers, customers will all be shocked and will need information and reassurance," says Moitoza. Employees may feel anxious about the future or play one partner against the other. Experts advocate meeting early on with the staff to explain.

The biggest land mine may come a year or two down the line when one ex-spouse or the other meets someone new. "The one who's not in the relationship can start playing games -- demanding more business time of the other, questioning how much money they're taking out," says Kay Wakefield, a Portland (Ore.) family business lawyer. One forward-looking solution: a provision in the divorce settlement or buy-sell agreement that gives the business the first right of refusal before stock is offered to a future spouse.

Is hanging together worth it? For most couples anxious to exit from each other's lives, obviously not. Still, Koerbel and Rubel say they regained their freedom, without losing a burgeoning business, their prosperous lifestyles, and an investment for their son. Says Rubel: "I consider us very lucky that we're able to pull this one off."

By Meg Lundstrom in New York

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