There should be a warning label on business handbooks that reads "Beware of
business partners." When I started my internet company, I wanted someone to
share the load. I ended up with someone whose business philosophies were
diametrically opposed to mine, which led to constant power struggles that
drained my entrepreneurial spirit. And many other entrepreneurs who've chosen to
partner up have had similar problems.
Stacey Krizan, 40, CEO of The WOW
Factory, an events planning company in Atlanta, started her business with
two partners. Krizan was the creative, Dave Carr did production, and the
third--we'll call him "X"--handled sales. Together, they brought in more than $1
million in annual sales in 2003.
The problem? "X had an anger problem and a filthy mouth," says Krizan. "He
called women 'bitches' and used the 'C' word as well. And when we didn't get
business from prospective clients, he chose to communicate this way with them,
effectively burning all possible bridges."
While X's sales techniques worked wonders in 2000, after 9/11, he refused to
modify his approach. He blamed co-workers for lackluster sales. Many employees
jumped ship because they feared him.
"At first, it's natural to be in denial, since you put your trust in someone
so much to name them a partner in your business," says Krizan. "Enough warning
signs told us we needed to take action."
When Krizan and Carr severed ties with X, they received vicious e-mails.
Overall, however, employees were relieved and motivated. Despite losing a "sales
engine," the company grew to 10 employees and more than $3 million in revenue
last year.
For Sharon Alt, the thirtysomething president of
Alt Benefits Consultants, a third-party
administrator of health benefits in Fort Worth, Texas, the biggest mistake she
made in her business was signing over 50 percent of her corporation to a
business partner.
Explains Alt, "When a partnership is 50/50, no one person has ultimate
control. I also had no exit plan. It is naive to believe everything would work
out perfectly."
Not wanting to start a company alone, she agreed to the 50/50 split proposed
by her soon-to-be partner and friend. It took a year before both realized their
fundamental differences. Alt was on a fast track for growth; her business
partner was satisfied with a small business.
Alt emphasizes that her business partner was not a bad person. "I think the
biggest difference was in the fact that she had more of an employee mentality,
and I had the owner mentality," says Alt.
After a number of tense years, Alt has spent the past year and a half paying
attorneys to hash out a buyout deal. "I'm happy to have ownership so I can now
make decisions that I believe will grow our company to the next level," she
says. "I'm also extremely saddened for what we both lost over the past few
years--a true friendship. I'm also sad for what we put our staff and clients
through while going through this difficult time."
"The danger in any partnership lies in unspoken and unclear expectations,"
explains Kerry Patterson, co-author of
Crucial Conversations: Tools for Talking When Stakes are High. "When
entering a business partnership, the most important thing to do is clarify any
and all expectations up front."
Patterson outlines three key topics to discuss before partnering:
- Assets. Meet with lawyers to work out every detail of your
business from ownership to accounting to worst-case scenarios.
- The relationship. Move beyond distribution of resources to how
you'll treat each other.
- Performance. Make sure you work out a system for confronting the
other person if concerns about performance arise.
Overall, conduct appropriate due diligence, have a plan and remember the
bottom line: It's business.