Successful startups may run into many growing pains and hurdles during their first several years of existence, including partnership breakups. If you take the statistics commonly used today at face value, the odds are not in a partnership’s favor. The average startup breakup rate can be 20-30% higher than marriage divorce rates. If the pairing at the heart of a joint venture starts to fail, knowing how to end the relationship can save the business from a PR nightmare.
Here’s how to do it professionally, and some of the warning signs to watch out for.
Prepare now for an unexpected future.
Right now, you may see a long, fruitful, or even permanent future with your business partner. You may even be sharing an apartment because things are clicking so well right now. This will most likely not last forever.
Facebook founders Eduardo Saverin and Mark Zuckerberg legendarily split, the Apple CEO in the 1980s ousted Steve Jobs for several years, and countless musical groups have broken up personally and professionally over the decades. In other words, a split can happen to anyone.
People and businesses change over time, and planning for the unexpected is smart. As you and your partner work on a partnership agreement, dedicate time to crafting a dissolution strategy. In the event of a death, catastrophic injury, or personal differences, how will the business move forward? If you know how to handle the dissolution today, a future partnership split may not seem so dramatic.
Warning signs of an imminent split.
As with other warning signs, an isolated event rarely indicates the likelihood of a split. When issues build over time and the problems interfere with business and/or personal health, common problems turn into potential deal breakers. Some of the most common signs of a partnership break include:
1. Somebody isn't carrying their weight: An unbalanced share of responsibilities leaves one partner with more of the stress. Business partners, much like parents, friends, and roommates, often need to feel a sense of balance in the relationship to avoid conflict. When it seems as though one partner is handling the majority of operations and the other is enjoying more of the benefits, relationship strains can arise.
Maintaining balance means you must keep open lines of communication because the term balance can have many definitions in business. One founder may feel as though they are unfairly burdened by running day-to-day business operations. While the other, who may consistently bring in big clients on the sales front, feels as though they’re not getting enough credit. The underlying idea here is, when partners feel they can’t express themselves, the imbalance can create irreparable relationship problems. Stay in communication.
2. Partners vehemently disagree on fundamental business decisions: Disagreements are part of every working relationship. To move past fundamental differences in business philosophies and decision making, business partners must learn how to effectively collaborate. When compromise is difficult to attain, disagreements can lead to unresolved operational issues. Disagreements on personnel, finances, and customer service can deepen any rift between partners.
3. Different working styles cause daily strains: In personal and professional partnerships, different personality types often come together, united in a sense of excitement about an idea or product. But, that unity can be eroded by an incompatible mishmash of working styles. Some people see business operations as a routine and value consistency. Others prefer to do things when they feel like it instead of using a schedule. Are your working styles a match? During tough times, opposing working styles exacerbate other underlying issues.
Make a clean split.
As tensions rise, business partners can choose to take the high road or turn a business split into a personal vendetta. Since business arrangements often impact personal financial security, separating personal feelings from decision-making is key. If you reach the point of no return, use these tips to keep your business split professional:
Communicate when you feel calm: Give yourself time to feel frustrated, hurt, and/or betrayed, but avoid communicating with anyone in the business at the time. Negotiate, make business decisions, and otherwise interact with the company when you can separate emotion from operational choices.
Determine your priorities: Identify the business matters that are most important to you. Evaluate the financial and operating consequences of a buyout, business classification shift, or another solution. What outcome will make you happiest five years from now? Explore tax liabilities, your personal financial situation, and your future professional goals before deciding on any terms not previously agreed to in a dissolution plan.
Accept professional help: Attorneys and financial representatives can provide expert advice on how to approach a split, what terms to ask for, and when to finalize decisions. You may need to revisit the partnership agreement and gain a full understanding of the business’s financials to protect your interests before you act on any exit strategy.
Breakups of any kind can be hard, and business partners sometimes go through romantic and professional splits at the same time. Regardless of your business arrangement, separate emotion from reason to avoid unnecessary conflict and quickly move forward with your life.