Partners on the Edge
It took an imminent catastrophe to get the cofounders of CPR to treat their partnership the way experts say you should--like a marriage
Here's how bad a partnership can get: Tom brought aboard Kevin (not their real names) as his 40% partner when his business needed more capital. It was a mistake: Kevin proved a duplicitous sort, and soon began an affair with a female employee. Tom, worried about exposure to a sexual-discrimination suit, brought in a labor lawyer to read his partner the riot act. Kevin took umbrage. Friction ensued.
At a city-council meeting several months later, Tom was tapped on the shoulder and led into the office of the chief of police. As the chief spoke Tom's jaw dropped: Kevin, he was told, had hired a hit man--not to kill Tom but to fake an attempt on his own life and frame Tom for attempted murder (only the "hit man" Kevin had hired was an undercover state trooper). As part of his act, or maybe as part of a more lethal backup plan, Kevin had started carrying a gun and telling acquaintances, "Tom's trying to kill me."
While Tom packed his kids off to his parents' house and then fled town himself, the police arrived at the company's premises, handcuffed Kevin, and stuffed him into a police cruiser as astonished employees looked on. "I was sorry I had made him a partner," says Tom.
By comparison, the business partnership of Brett Cosor and Jeff Studley would seem all champagne and roses. The two first cousins are co-owners of CPR MultiMedia Solutions, a Gaithersburg, Md., company that puts together War Games-like command centers and big-screen projections for public events. Neither wears a firearm to the office. Nor, to this reporter's knowledge, has either taken out a death contract on the other.
But just because there aren't any cartoonishly evil characters here doesn't mean there isn't conflict. The fact is, Cosor and Studley--two decent, intelligent, hardworking individuals--came to hate each other. Intensely.
Their story is a reminder that even the most functional personalities can create a most dysfunctional partnership. What's oddest about their case, though, is how Cosor and Studley chose to handle their difficulties. A business partnership is like a marriage, all the experts say; Cosor and Studley decided to push that clichÉd metaphor to its logical extreme. They took a step that's usually reserved for feuding husbands and wives. They went to see a marriage counselor.
It was the "little murders," not any big ones, that drove the two men to that recourse. The episode at the Canadian Embassy was one of them.
Cosor had stayed up two nights straight to put together a presentation there, emerging an unshowered, baggy-eyed wretch. When it was over, he told Studley that he'd like an objective "postmortem." He was lying. What Cosor really wanted, but wouldn't admit he wanted, was a pat on the back.
Studley didn't mince words. The equipment, he said, had required last-minute tweaking. There had been catering for 600 when the turnout was only 200. In sum, he said, the presentation had suffered from poor planning.
Cosor reacted as if he'd been stabbed. A colleague, Garrett Moore, would say later that Studley's criticisms were valid but that the timing "was just wrong. Brett was at a point where he didn't want to hear any of it. It was like, 'Where were you last night at midnight?" Studley defends how he handled himself in the exchange: "I don't in retrospect think I could have done things very much differently." Cosor left the meeting in a huff.
That was in October 1995, but it's a scene that's been played out a thousand times during the cousins' decade in business together.
Cosor, a pudgy 45-year-old, is the self-styled "visionary," which is to say he's crummy with details. (At a recent meeting he was wearing two mismatched socks.) He averages five hours of sleep a night and six cups of coffee a morning, and talks in such hyperactive torrents that he doesn't leave much space for the voices of others. That volubility can verge on impulsiveness: while serving as a local spokesperson for Ross Perot's 1992 presidential campaign, Cosor answered a reporter's question with the memorable sound bite "Bush and Clinton are boneheads."
Studley, by contrast, wears a measured, phlegmatic exterior. He's the "manager," known for leaving employees tiny Post-It notes with minutely lettered instructions. At a breakfast buffet, he methodically lifts the lid of every tray to inspect his food options before selecting. Tall and grave, one month Cosor's junior, he bears his partner's windy rantings with a glassy-eyed impassiveness. Pushed too far, however, that inscrutable quiet can erupt into volcanic fury, as it did the time he inquired of an employee--at the top of his lungs-- "How fucking stupid can you be?" Admits Studley: "I am explosive. I am unrelenting. I am unforgiving about mistakes."
Studley sums up the two personality types succinctly: "Brett is a goal-oriented guy; I'm a task-oriented guy."
It was those very differences, ironically but typically, that drew the partners together in the first place. In 1988, when Cosor quit his job at the Emco Group, a now-defunct high-tech government contractor, and formulated the business plan for CPR, he figured he needed an operational yin to his "visionary" yang. His first cousin Jeff, a graduate of Cornell's School of Hotel Administration, fit the bill. The pair went to work in Cosor's two-car garage, Studley leaving behind a restaurant-consulting gig in New York City to live in Cosor's spare bedroom. Like many upstarts, they struggled to foster the illusion of size and experience, which once prompted Studley to give Cosor a rubber Pinocchio nose. (Though Cosor protests, "We didn't actually lie. We just, you know, let people draw their own conclusions.")
If their noses grew rapidly, so did their business: payroll would climb to 47 people and sales to nearly $10 million by 1998. In the process the company had splintered into two very distinct halves: the rentals division, which stages onetime public events, and the systems division, which builds permanent facilities for such customers as Motorola, TRW, and the Nuclear Regulatory Commission. Studley took over rentals, Cosor systems.
Then, sometime in 1995, things started getting sticky. Swamped by the double-digit growth of their respective divisions, the partners communicated ever more sporadically. "We stopped pulling in the same direction in the same harness," says Studley. "All of a sudden there were two moons pushing tides in different directions, and that creates a lot of turbulence."
To wit: when Cosor, working in overdrive to finish a system for a customer, absconded with three key pieces of equipment--equipment that Studley needed for a rental job just a few hours later--Studley took it as a personal affront. "I had a huge problem with that," he says. "Don't my customers matter?"
Cosor, in turn, felt terrorized by Studley's hot-and-cold act: "Jeff would say nothing and nothing and nothing until he would explode in outrage. I couldn't correlate it to what had just happened." (And it was all the more galling, he adds, because "CPR was my idea.") Once friendly outside the office, the two didn't set foot in each other's homes for more than a year. Increasingly, they used their junior partner, Nancy Eller, as a go-between.
Employees sensed the discord. "Watercooler conversations were tense," says Studley's wife, Elaine, who is a consultant to CPR. "I had people ask me, 'Are they going to break up? Is the company going to survive?"
Then, in March 1997, the simmering hostilities exploded. One of the company's freelance contractors had failed to perform his job, and the partners agreed not to extend his contract. But the freelancer made a poignant appeal to Cosor, who relented and agreed to give him another month--and another $6,000. That unilateral decision, undertaken without consulting Studley, "was enough to send Jeff through the ceiling," says Cosor. No way, Studley decreed, was the company coughing up that six grand.
Teeth clenched, sweat pouring down his face, Cosor roared back, "I'll pay him personally, dammit, but this is the end of our partnership."
"Fine," responded Studley.
At this juncture in the story, most partnership disputes follow an all-too-familiar pattern. Partner A leaves to start his own business and steals the company's customers. Partner B sues. Partner A calls in an air strike on Partner B's home.
This particular story may well have taken that route, too. The difference was Elaine Studley.
Jeff's wife of 14 years was a manager and then an independent contractor at Philip Morris until 1994, when she left to raise the couple's first child and set up CPR's information systems as a contractor. She has penetrating blue eyes, an intellect to match, and an air of corporate professionalism that's lacking in certain people around her. Her husband describes her as "maddeningly objective." Concurs Cosor, "She could tell us both we were buttheads."
In late 1995, tired of her husband's nightly fulminations about Cosor and having witnessed the destructiveness of internecine warfare at Philip Morris, Elaine began to search for consultant types who might help Studley and Cosor get along. After months of research, up came the name Peter Wylie.
Wylie, a spindly 54-year-old with a white mustache and an uncommonly mellow demeanor, is a Columbia Universitytrained psychologist. In the early 1980s he and his then collaborator, a marriage counselor named Mardy Grothe, began offering their services to troubled business partners. At first there weren't many takers. "When we cracked into this business," says Wylie, "the World World II generation was still running the show. The whole notion of sitting down to talk about touchy, sensitive topics, especially if you're a guy--the whole notion of a therapist--wasn't well accepted." But then came the feel-my-pain era, and with it a flourishing practice.
Wylie describes his job as bringing partners to a "fork in the road": either repairing the relationship or, if its continuation no longer makes sense, ending it amicably. It's a fork partners have difficulty navigating on their own, claims Grothe: "They reach out for help, but they reach out to people who aren't well suited to providing it--the company attorney or a banker. The problem is, partners are looking for someone to side with them. A marriage counselor knows how to handle situations like that."
Intrigued, Elaine Studley pitched the idea to her husband. "I'd go in a minute, honey," Jeff replied, "but I don't think Brett would." So for six months, Jeff never broached the subject. It was only when the partnership's dissolution looked imminent--when, several days after the blowup over the $6,000, Cosor asked CPR's lawyer and accountant about chainsawing the company in two--that Studley broke down and told Cosor about his wife's discovery.
"You knew about this guy all this time and didn't tell me?" Cosor sputtered. "What the hell's the matter with you?"
In April 1997, in their junior partner's living room, the two partners sat down with Peter Wylie for the first time. The tension was palpable. "My role," says Wylie, "was to make sure they played by the rules of good talking and good listening." Among those rules: Each would have to "read back" what the other said by paraphrasing what he'd just heard. Also, no emotionally loaded statements, no eyeball rolling, no arm crossing. If those tenets weren't adhered to, says Cosor, Wylie "would, like, rip your arms apart and smack you." Well, that's a bit of an exaggeration, but Wylie did physically intercede until both partners were listening correctly: leaning forward, receptive expressions on their faces. "It seemed a little ridiculous," says Cosor, who nevertheless admits, "We were not really hearing what the other person was saying. We were hearing just enough to know which one of our bullets to put in the gun to shoot."
Next, Wylie introduced a measurement system he calls TRAC. It's a meter (an imaginary one) with four parameters: Trust, Respect, Affection, and Confidence. "If any of those four start to weaken, then you don't have a partnership," explains Cosor. "We were flatlining."
By way of boosting those readings, Wylie then asked each partner to look at the other and say what he admired about him. Silence. At length, Cosor said, "I'm not in a position to believe what Jeff says, anyway." As it happened, he didn't have to: Studley declined to say anything complimentary about him.
It was a sad moment for two first cousins who had considered each other "surrogate brothers" as kids. Who as 16-year-olds had spent a summer together working as bellhops in the Catskill Mountains. Who had gone into business with the dream and expectation of fun and good fellowship--of, as Cosor puts it, "establishing a business bond in concert with a family bond." Says Studley of that long silence: "It was sort of a shock to both of us. It was like, 'Wow, this is how far apart we've gotten."
Perhaps, Wylie began to think, this partnership could not be saved at all.
What distinguished Cosor and Studley from the vast majority of partners, though, was their determination, as Wylie puts it, "to keep whacking away" at their problems. At first, that took the form of sheer venting. But as the litany of offenses poured forth a story emerged as well.
Looming large in the story was the brick wall that partitions CPR's offices like an iron curtain, lending literal form to a commercial reality: that CPR was, in fact, two businesses. All the company's employees, with the exception of a few accounting people, were wholly engaged in either Studley's rental division or Cosor's systems division. Says colleague Garrett Moore, "If you'd locked a couple of doors and changed a couple of signs, you'd have two companies"--two companies, he might have added, with very different business models and operating philosophies. Rentals was all about logistics and execution: making sure the projection screens at a corporate event didn't suddenly go dark. Systems was about innovation and long-range vision: creating breakthrough products that would secure a competitive advantage down the line. The latter embraced risk; the former eschewed it.
Nowhere had that clash been more apparent than in Cosor's four-year-long struggle to create a new product line--a dauntingly complex multimedia system that he hoped would allow CPR to leapfrog past its competitors. The project seemed to exacerbate the partners' existing differences. Not only had Cosor repeatedly missed the deadlines he'd set for himself ("A lot of my estimates were full of crap," he admits), but his singular focus on the goal meant his day-to-day management had grown even more desultory than usual.
And Studley's carping about Cosor's managerial deficiencies had grown even more caustic. He'd excoriated Cosor, for instance, for failing to reward his star salesperson with an enclosed office. "Jeff would come storming in and accuse me, without enough knowledge to know if I had done it or not," says Cosor. "It was 'I gotcha."
Messy as it was, all that "whacking away" at least helped the partners better articulate the feelings and motivations behind their actions.
Studley, it became clear, was frightened by what he saw as Cosor's runaway enthusiasm for a project of uncertain outcome. "Over time, I began to interpret every single thing Brett did as more sales than analysis," he says. "I came to the conclusion that Brett had lost his objectivity, and I viewed everything he did or said through that filter."
Cosor, for his part, had come to a conclusion of his own: that Studley was a "pinhead" who didn't appreciate the blood and sweat he was spilling, who couldn't understand that a creative undertaking couldn't be reduced to one of Studley's managerial routines.
Their analyses of each other's defects completed, both Cosor and Studley then engaged in a classic pastime of warring partners: gathering evidence.
For instance, there had been that employee in Cosor's division who had to be fired. On the day the ax was to fall, Cosor had been suddenly absent with an appointment--further proof, in Studley's eyes, that Cosor was shirking his managerial responsibilities. Not only had Studley been stuck with the unsavory role of executioner, but Cosor had returned just in time to give the departing worker a big hug in the parking lot. "I got to can him, Brett got to console him," says Studley. "It rankled me."
Of course, if Studley had bothered to confront Cosor about the incident, he would have learned why Cosor was (unavoidably) late. But the lines of communication had long since gone down. "It was much easier to manufacture the conversation in my head, declare him a jerk, and go on," explains Studley. "I'd rather keep convicting Brett of being Brett." Thus, the episode became yet another brick in what Studley calls his "edifice of evidence."
Now that wall stood so high it seemed impregnable, both to Wylie and to the two partners. Says Studley, "We realized we needed some trauma medicine, not just long-term chronic care."
Their "trauma medicine" of choice was a workshop Elaine Studley had been sent to during her Philip Morris days: the Landmark Forum, "where being profoundly related leads to cooperation, harmony, appreciation, and mutual understanding among people"--or so says Landmark's literature. Maligned by some as being too cultish, the three-day workshop focuses on the stories that people tell themselves--the stories they've constructed to explain their unhappiness, as in "My overly strict father ruined my life" or "My overly critical partner is ruining my business." In one Landmark program exercise, participants are asked to tell their story and then repeat it. And repeat it again. And again, until at last the story takes on a canned, comical ring. Some people giggle. "They don't allow you to hide inside your interpretations," says Cosor.
It was there, in the summer of 1997, that he and Studley were finally forced to examine the bricks in their walls of evidence. What they found surprised them. "The bricks were supposed to be events and things that had happened," says Cosor, "but they weren't what happened. They were interpretations."
On the Forum's second day, Cosor stood up before the room of 150 people to make a public avowal. "I came in here with my cousin and business partner, and we were ready to break the company in half," he began. "What I've seen is that the problem has very little to do with him and a lot to do with me. I'm ready to be his partner."
The effect was electric. Studley reciprocated with a similar statement, and that evening he called Wylie, saying, "We're willing to make a go of this."
Wylie calls the moment "pivotal." In the sessions that followed, Studley and Cosor dredged up incidents in the long-buried past--what Mardy Grothe calls "little murders"--for rescrutinizing, beginning with moments like the parking-lot hug. ("Brett was surprised that it had pissed me off so much," says Studley.) Cosor confessed, for instance, that during his system-invention project "there were days when it was so dark, I needed Jeff to say, 'Wow, what a cool idea. I'm so excited."
Says Studley of that admission: "I hadn't realized he needed so much affirmation. Brett as a salesman exudes such confidence. And I'm in general pretty thick-skinned....That was a big 'aha' for us: how different we actually were." Armed with that insight, Studley pledged to work on his diplomacy. "I have a tendency to say things very directly and bluntly, and sometimes very hurtfully," he says now. "I meant to be instructive, but whatever I said came out as nothing but criticism: 'I think you're a jerk."
A final breakthrough would come, once again, from Elaine Studley. In November 1997, Wylie asked her into one of the counseling sessions to present her analysis of the partners' roles. A graduate of Pace University's M.B.A. program, she made her presentation in the form of a business-school case study, sweating through the whole thing for fear she'd be perceived as a stooge for her husband's agenda. "You haven't really separated, yet you're not really together," she nervously told her audience. "I think it's all linked to a changing growth phase."
In other words, it was CPR's success that had nearly caused the partnership to fail. In the early days in Cosor's garage, she argued, the partners' close physical proximity had forced their personalities into an ongoing, low-level negotiation. Once the company expanded and that artificial pressure was removed, the negotiation stopped. (Indeed, says Wylie, the one thing that makes problems between partners more difficult than marital problems is that "it's easier for them to avoid each other than it is for husbands and wives," allowing frustrations to build up.)
Because the company's growth had outpaced its internal controls, moreover, there was never much hard information to settle battles of interpretation; the partners didn't even know whose division was making more money. "If you don't have objective measurement, then everyone's free to decide what the truth is," says Cosor. "It would be opinion against opinion. We had to feel about problems rather than to know about them."
Finally, the miscommunication had been compounded by the pair's tendency to use Nancy Eller as a conduit of information, as in a game of telephone. "I'd be trying to get information out of Nancy," Cosor recounts. "She'd tell me how Jeff felt. I'd blow up. She'd go back to Jeff and tell him I'd blown up." And all the while, Cosor felt that Eller was in league with Studley, combining the weight of her 10% ownership stake with Studley's 45% stake to gang up on him.
As Elaine sweated through her analysis, Cosor suddenly announced, "Damn, that woman is brilliant."
"As soon as he said that," says Elaine, "I started to breathe." And in a way, so did the two partners. Recalls Jeff, "It gave us both a handle to say, 'Aha, that's what started the problem."
That was a year ago. Now Brett Cosor sits at the head of an enormous oblong table, flanked by two giant projection screens: he's in the U.S. Coast Guard's Commandant's Situation Room, a command center from which terrorist threats and Exxon Valdez-scale oil spills are handled. "The number one problem with any system is wires," Cosor is saying. "It's not the gear. It's the way the gear is put together."
He's talking about the room's high-tech audiovisual system, which CPR workers are here today to fix, but he could just as well be speaking of his partnership with Studley. The "gear"--in this case, the personages of Cosor and Studley--is fundamentally sound. They are good people.
The trick is in the wiring--in the way they're put together.
That wiring isn't perfect yet. On a recent morning, Studley and Cosor gathered in a Washington restaurant with Peter Wylie. The session was spiced with plenty of recidivist verbal skirmishes--the abiding remnants of the partners' divergent interpretations of their history together.
"I've never been cavalier about screwing people over," Cosor protested at one point.
"I didn't say that," responded Studley.
Cosor: "Well, but you did."
Pausing, Cosor looked over and said apologetically, "We're still in repair mode." As if he needed to point it out. Nowadays, Studley will get on the all-company loudspeaker and say, somewhat artlessly, "Hey, great job. Really, really good job." Says Elaine with a laugh: "You can tell he's practicing--we joke about Jeffrey's sensitivity training. But it really is appreciated."
Indeed, it's little gestures such as those--not sea changes in anyone's personality--that have brought tensions back down to antebellum levels. Notes Mardy Grothe, "Often profound changes can be made in a relationship with a very small behavior change."
Whether the peace will prove to be a lasting one, of course, is anybody's guess. "I think we've got the skill set, but are we implementing it?" asks Nancy Eller. "There might be more trust, but it's still two separate businesses, really." One ominous sign: just a few weeks ago, Studley sprayed Cosor with a can of mace.
All right, all right, so that was actually an accident. But vigilance is the watchword. To make sure the same old conflicts don't resurface under a different guise, Cosor is cobbling together a board of advisers. He and Studley are finally building some internal controls, such as push-button financial reports, and they've institutionalized off-site retreats so they can leave behind what's urgent to discuss what's truly important over a steak and a scotch. They continue to meet with Wylie. And most recently, they've been trying to extricate themselves from their respective divisions. "I think the biggest challenge," explains Studley, "is to build middle management enough so that we can actually manage the business together--again."
"The reality is that a partnership really is like a marriage," says Cosor. It's in many ways as complicated and as vulnerable to the corrosive effects of unspoken fears and needs--emotions that partners too often dismiss as irrelevant to a "business" relationship. A partnership is also--dare we say it?--hard work. That fact eluded Cosor and Studley for years. Now they get it. Now they work to forestall the dangerous misinterpretations of each other's actions and motives that so wounded their partnership in the first place.
"The truth is," Studley says about their pre-marriage-counseling days, "we still thought highly of each other's goals, intellect, and values. We still had this core love for each other. It hadn't been thrown out, just overlaid with things."
"It's like a car that builds up a crust of salt and dust," Cosor adds. "Underneath, it may still be a beautiful car." Underneath, in other words, it may still be summers in the Catskills, happy bonds of brotherlike affection, shared breakthroughs in a start-up garage.
"I'm so grateful to be in a good relationship with him now," says Cosor.
"It's as easy as a light switch," says Studley. "It's just really hard to find."
Jerry Useem is a senior writer at Inc.
The art (not science) of picking the right partner
Leigh Griffith, a lawyer at Waller Lansden Dortch & Davis, in Nashville, remembers the time two men came into his office and announced that they wanted to form a partnership. One was going to be the CEO. The other was to put up the money. "They had a concept," recalls Griffith, "and they were both going to make a million dollars on it."
So Griffith walked them through some rudimentary questions. "Who's going to have control?" he asked. The would-be CEO spoke up first: "I'm running it, so me." But the money man quickly contradicted him: "Well, it's my money." The two finally agreed that a third party would break any impasse.
Griffith moved on to question number two. "If this guy puts up more money," he asked, pointing at the financier, "does he get more control?" Another hot disagreement ensued, during which the money man began gesticulating violently in his swivel chair. The chair broke, sending him tumbling. The partnership fell apart, too. "They had come in expecting a bridal suite," says Griffith, "and 30 minutes later they left with pieces of chair on the ground."
Such is the half-baked thinking behind many a partnership. Says Mardy Grothe, a Bedford, Mass., psychologist who counsels partners, "It's amazing to me that people don't sit down and talk about it." They don't subject their choices to even a modicum of scrutiny, although it's likely they'll spend more time with their partners than with their spouses.
So how does one find the right fit? "Do a little dating," suggests Peter Wylie, a Washington, D.C., psychologist. "Take on a challenge together, like meeting a deadline." Dennis Jaffe, a San Francisco-based consultant, suggests drawing up "a statement of expectations--a charter, a constitution that can be referred to." And not with any lawyers around: "Draw it up yourself, in your own words."
Or simply talk. "Let's sit down and talk about the reservations that are being dimly experienced deep in our gut," Grothe counsels, "that we're almost pushing out of the way because we want to go into this thing with fervor."
He also recommends asking a prospect for permission to talk to someone he or she has partnered with in the past: "If someone says, 'No way,' that would be a bit of a red flag."
But perhaps the most important due diligence to be done, says Grothe, involves yourself. "Get your spouse or your friends to tell you whether you're good partner material," he says--that is, examine your own potential strengths and weaknesses.
Fortunately, almost every state now recognizes some form of limited-liability partnership, or LLP. Unlike a general partnership, under which partners have "joint and several liability" to one another ("If something goes wrong, everybody gets hung," says Griffith), an LLP separates personal assets from corporate assets. LLPs can make partnerships less risky financially, but they're no substitute for common sense.
Seven events in a partnership's life that are most likely to destroy it
Partnerships can sour at any time, for any reason. But certain events are common flash points, so don't let them surprise you. Among them:
- One of the partners divorces
- The company grows suddenly
- A partner brings a spouse or relative into the business
- Because of increased financial needs, a partner wants to take more money out of the business
- Partner A pinches Partner B's bottom, introducing a new complication to the relationship
- Partner B has a tragic motocross accident (or other medical misfortune)
- Then there's good old malfeasance, such as when Partner A begins doing business with customers on the side--"usurping corporate opportunities," lawyers call it--and thus violates his or her fiduciary obligation to Partner B
Why do you want a partner? No, really...
Mardy Grothe, a psychologist with a long track record of counseling partners, answers the question almost every would-be cofounder avoids: What's really driving you to seek a partner?
"Many people, sadly, want a partner for the wrong reasons. I see a lot of people who want a partner because going into business alone is too scary. It's a maxim in psychology that ambiguity leads to anxiety, and there's nothing more ambiguous than starting up a new company. It's filled mainly with a lot of fear about what will happen. What will happen if I fail? What will happen if I succeed? People want to share some of the anxiety.
"A lot of other people become partners because they're friends. There's a quotation from John D. Rockefeller: 'A friendship founded on business is better than a business founded on friendship.' Just being friends is not enough on its own to justify a business venture. It's nice, but you also need to do a very candid analysis with your prospective partner: 'What are you bringing to the table, and what am I? Do we make a more complete circle together?' People make the same mistake as young lovers: they assume that friendship, like love, will get you through. It doesn't. It's what causes you to form the union in the first place, but it's not what gets you through.
"Those aren't necessarily bad reasons to become partners. But I think they're bad if you aren't aware that they're the primary reasons you're doing it. Blaise Pascal, the French philosopher, once said, 'The heart has reasons that reason knows not of.' When we're driven by factors that we're not conscious of, we're more likely to run into problems down the road."
When it comes to a business marriage, it's best to start by working out the divorce
So you and your partner have tried everything. You've seen a marriage counselor. You've done primal-scream therapy. And still you hate each other's guts.
No problem. There's nothing wrong with breaking up--so long as you have a buy-sell agreement in place before you start considering it.
When constructing a partnership agreement, experts say, nothing, nothing, nothing is more important (or more frequently overlooked) than a mechanism for ending the partnership--a way to extricate your partner, or yourself, from your company at a fair price. "It's kind of like your roll bar," explains Fort Worth management consultant Sam Lane. "You hope you never have to use it, but you want it in there." Several commonly used techniques have evolved for the purpose of determining who stays, who goes, and how much money changes hands, each approach designed to prevent one partner from gouging or lowballing the other:
Put Up or Shut Up (also known as Shotgun). One partner names a valuation for the company as a whole, and the other must either buy or sell the company at that valuation. Tends to be an effective mechanism for keeping both parties honest, except when one partner is significantly wealthier than the other.
The Price Is Right. Used when it's clear who's the buyer and who's the seller and the sticking point is the price. Each partner hires an appraiser to value the business. Then a third, independent appraiser is hired. Whichever of the two appraisals is closest to the independent appraisal (as long as it's within 20%) becomes the selling price.
The Spinning Shotgun. One partner submits a bid. The other partner must sell at that price--or else submit a counteroffer that's at least 5% higher.
Determining the price isn't the only issue a good buy-sell agreement should address, says Jonathan Karp, a lawyer at Reish & Luftman, in Los Angeles. The terms of financing may be equally important. In some states, companies can be forced to pay departing partners "fair value" for their ownership stakes within 90 days--a potentially bank-breaking requirement for small businesses. Working out an installment plan can ensure that the death of a partnership doesn't mean the death of a business, too.