Boss Lady

How to avoid the common pitfalls of business partnerships


Until last week I had never cried at work. But last Wednesday, after a particularly fraught and unpleasant board meeting, I was forced to retreat to the toilet – where I sat silently with a lump in my throat, trying to ensure that I’d be able to leave the building with my eye makeup still intact.

I had just finished facilitating a board meeting that had culminated in one of the founding directors resigning – and the other two literally crying with relief.

It wasn’t the outcome that I’d been hoping for. After seven years in business together, I was baffled by the fact that one of these middle-aged men didn’t have the self-awareness to put the business before his own personal goals. His blinkered, stagnant world. His obstinate ego.

And I’d arrived too late to help him. The relationship between the directors was so toxic that they hadn’t spoken to each other in months.

Insurmountable conflicts

This isn’t unusual. Sadly, the majority of my work is facilitating deep conversations between company directors that are hard, prickly and exhausting. For them and for me.

What was different this time was that, after two days of in-depth analysis, questioning, and extensive documentation on flipcharts and whiteboards, the values conflict between the three men was insurmountable. Clearly one of them would have to go, and it came down to a vote. In less than a minute a decision was made – and one of the company’s founders was gone.

At least once a month, I get a call from a starry-eyed start-up founder with a plan of giving away equity in return for a bigger, brighter future. And every time I suggest there may be better ways. Hey, but I’ve been one of those start-up founders myself – and I know that you’re really not into hearing ‘other options’ when you’ve decided who you’re going to marry! I’ve had several failed start-up opportunities purely because of a values conflict. It’s an impossible hurdle to jump.

So how do we prevent it from happening?

Three common mistakes

After working with hundreds of businesses, I’ve come to the conclusion that there is a way to mitigate the risks. The thing is, it takes time and thoughtful planning. The things we often don’t have time for when we have the big idea that’s going to change the world.

Here are the three mistakes that I’ve seen in my 20 years – and some suggestions for reducing risks along the way:

1. Rushing in

You haven’t slept in weeks, you’re burning money fast, you feel very alone – and yet you have a burning desire that drives you day and night to get your product out into the world. In order to get there quickly, it seems obvious to share the excitement with someone who already has a reputation in this space – and a little equity too.

Action – You will be spending more time with this person than you do your loved ones. So get really clear about a process that leads into an equity opportunity. Rather than a shareholder’s agreement, write up an ‘executive prenup’ stating what you expect of each other in a trial period – including values, behaviours and how these align with the vision of your business together. This can include an agreement on business valuation, profit share and salary.

2. Lack of clarity

So your co-founder starts, and they get to work. For the first few months, it’s fantastic and then the shine seems to wear off and undesirable behaviours kick in. They have equity, so much is left unsaid. Years go by.

Action – Get really clear about what you expect of each other from the get-go. Agree on a business plan. Talk about how you’re going to measure success, how you’re going to have the hard conversations when the going gets tough. There is never a better or more important time to make things clear.

3. Values conflict

Values are a tricky thing. We can talk about values and yet they are nebulous until we have a conflict, because they’re based on beliefs not facts. So, how do you determine whether or not your values are aligned? Spend time together. Too hard? It’s not nearly as hard or as costly as unravelling the business, equity and assets when you agree to part ways!

Action – Go away for at least a day with your prospective business partner and focus on four critical areas:

  1. What you’re working towards and why: talk about the difference that the business is going to make in the world and how you’re going to get there – individually and collectively;
  2. Talk about your individual goals and objectives, why they’re important and how you’re going to support each other at an individual level;
  3. Talk about the potential conflicts between 1 & 2 and how you’re going to manage these conflicts if they occur;
  4. Agree on your commitments to the business and each other in writing and agree on a regular communication strategy to keep your commitments alive.

Values matter but, really, it’s about the behaviours that bring your values to life. It’s worth discussing this, openly and often.

And it’s as simple (and as hard) as that. Three mistakes – all of them with ingredients to undermine the success of any business relationship.

Healthy solutions

Getting back to my tough day last week. It got me thinking about how long those three business partners had been unhappy. And how many business partners suffer in silence for years without considering the impact on their culture, their profits, and their own health and happiness.

A few years back, ASIC released a report on corporate insolvencies, which found that 44% of insolvent businesses suffer from poor strategic management. If they dug a little deeper, I’m sure it would have boiled down to members of their executive teams putting their egos before the success of their business.

Thank you to the company director who couldn’t find a way through and inspired me to write this article. I know that the business, your co-founders, and your staff are all better off as a result. I also know that, over time, you’ll be healthier and happier too. As business owners, our working days are far too long to be constantly pissed off!

And to all of the company directors and executives out there who may not be having the ‘hard conversations’ that your businesses require – just do it.

Put your business first.

About Soozey Johnstone

Soozey Johnstone is a writer, thought leader and advisor to senior executive teams. She is the author of I Am The Problem, outlining nine key obstacles that lead to business success – and why some businesses grow and prosper while others fall by the wayside. #IAmTheProblem @soozeyJ

Recommended for you

What Do You Think?

Your email address will not be published. Required fields are marked *