When Business Partnerships Go Wrong

Business gurus often claim that team or partner startups are more likely to succeed. But as Michelle Mone will attest, if your partnership goes wrong it is one of the toughest challenges your business will face. For many, it’s a business killer.

While Michelle Mone has always been the public face of the Ultimo brand, she started the business and co-owned it with her husband. Their business partnership fell apart earlier this year after their marriage crumbled. Michelle bought her husband out for £24 million.

There are lots of merits to starting with partners. You’ll benefit from wider experience and contacts and the sheer energy a motivated group creates. But it’s wise to coolly think through the worst-case scenarios from day one and put in place agreements to deal with them.

If the partnership goes bad

A partnership that falls apart can feel like a divorce. Not only do you lose the people you’ve built plans and dreams with, but you risk losing your livelihood too. It is vital that you find ways of stripping the emotion out of the situation. Make sure that the break-up leaves you, if at all possible, with the means to either grow this business or start a new venture or career. Consider the following steps:

Find a trusted facilitator. Start by getting a mutually respected mentor to facilitate communications. It will save time and money if you can come to a fair agreement or at least make a start before you involve lawyers.

Review all your key company documents. It’s more important than ever that you follow the formal procedures outlined in those documents.

Intellectual property. Be clear about who owns what in the company, including things that are often overlooked like the website domain.

Tighten-up financial authorisations. If relationships have gone sour don’t underestimate the damage a resentful partner can do to company finances. Explore and tighten up any scope there is for partners to take on debt or other obligations on behalf of the company.

Accurate accounts. Depending on how complex your accounts are you may wish to commission an audit to ensure that any financial settlements are based on accurate figures. If relationships have broken down then a forensic accounting service may be necessary.

“Although the forensic in the title might conjure images of intrigue and excitement, all it really means is that it is suitable for use in a court of law. So the reports or data collated by a forensic accountant have to be put together on the understanding that they will be used in court and scrutinised appropriately in legal disputes,” according to forensic accountants Baker Tilly.

Keep up appearances. Negative stories about the business or the individuals concerned can scare off customers and partners. That’s not just a problem for those holding on to the business. It can also hold back your plans to set-up fresh or work in a similar area in future. Stay professional and keep all discussions confidential. Don’t let your partner hear about your plans to split from anyone other than you. Even if others are behaving badly, as Janis Joplin put it:

“Don’t compromise yourself, you’re all you’ve got.”

Of course, if your ex-partner finds a way of setting up in direct competition with you, as Michelle Mone’s husband has, it may then be time for the gloves to come off. But it will be far better, and less costly and contentious if you can find a way of ending the partnership while holding on to some goodwill.

Stay calm, bring objective light to the situation and keep your integrity intact. If you manage that, this business bruising is likely to remain a small blip on your road to business success.

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