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LEGAL ISSUES

The Walking Time Bomb

How to defuse an abusive business partner; making the decision to buy rather than rent.
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We have a senior partner who has lost the respect of the staff because of his inconsistency, hostility, and emotional outbursts. The partner is key but not irreplaceable. What steps should the other partners take to deal with this situation?
Name withheld

Bad bosses drive blood pressure up and morale down: They are the doorstep on which many business woes can be laid. In other words, you've got a bad situation.

Whether it's salvageable is debatable. Your leopard may be able to change his least-desirable spots, says Dr. Jonathan Kramer, president of Business Psychology Consulting in San Diego, "but if he's already lost the respect of the office, it would make no difference." To assess the extent of the staff's alienation, chat up his subordinates and gauge their feelings subtly. If they use words like "annoying and problematic" rather than "loathsome and vile," hope lingers. In that case sit your partner down and candidly explain how his behavior hurts the company. Give him a quarter to shape up--perhaps with counseling.

Or ship him out now, says Dr. Debra Condren. The founder of New York City-based Business Psychology Solutions explains that people exhibit two kinds of behaviors. "State" behaviors are uncharacteristic and often stem from personal problems. They'll pass when the divorce is final or Junior stops mooching and gets a job. But "trait" behaviors are ingrained. Does your partner dismiss complaints with "That's just the way I am"? Dead giveaway.

Barbara Corcoran, chairwoman of the Corcoran Group, a New York City real estate brokerage, has her share of SOB stories. She says giving the lout a sympathetic ear and a chance to vent could lead to a solution--as she found with one disruptive partner who confessed he'd prefer a part-time arrangement. But if the marriage can't be saved, shift responsibilities to make the partner want to leave. "The smartest thing you can do is let people feel like they quit," she says, "because they'll do less damage on the way out."

I'm in the early stages of building a team to develop a new product in the Altoids arena. A couple of people I've talked to say not to worry about signing nondisclosures. Are they right?
John Pressley
Greenville, S.C.

Intellectual property has grown all too fluid, leaking everywhere even as lawyers stick their fingers in electronic dikes. In this environment, asking if you need an NDA suggests a faith in people that's refreshing. But it's also naive, says Dr. Jeffrey Gilbard, inventor of TheraTears and CEO of Advanced Vision Research. "You are in very dangerous waters," warns Gilbard. "The business world is more diabolical than young entrepreneurs realize."

Gilbard knows: He claims an early version of his artificial-tears product was copied after he made the idea public in a speech. Business relationships matter, but intellectual property matters more: You can always find another marketing expert but you'll only concoct the formula for Coca-Cola once. So yes, you need an NDA. Gilbard also suggests visiting a lawyer at once to file a provisional patent application. The fee is $80, and you'll be able to rest easy while you develop that prototype.

The picture changes when money enters it. "Financial backers are rarely willing to sign NDAs," says Barry Merkin, professor of entrepreneurship at the Kellogg School of Management. But while they dislike signing them, they do love people who've secured intellectual property.

My company has three locations. We have been renting for fear of not surviving the tough years, but now we feel we're going to make it. Is there a formula for deciding if it makes sense to buy rather than lease our offices?
Scott Earnest, CEO
Computer Engineering Organization Inc.
Boca Raton, Fla.

No single formula can tell you it's time to ditch your landlord for a mortgage banker. Of course, you'll need to run the numbers to see how your rent check stacks up against mortgage payments and other costs, but other factors can tip the scales. For starters, tax and other incentives for ownership differ wildly by location. In some places they're hefty; in others the tax man doesn't smile on owners more than on renters. Returns vary, too; property values may zoom up in some places (amen, Phoenix); but fall from the sky in others (Silicon Valley, RIP).

Steven Elbaum, a partner in the real estate group at law firm Robinson & Cole in Stamford, Conn., suggests proceeding with caution: "If businesses aren't mature enough to understand their own growth patterns, they can wind up with too much space, which they can be forced to sell, or spend more time and money on the property than on core areas of the business." Repair costs and keeping a building up to code can run a CEO ragged. So be sure you'll have energy to deal with all that, and more important, says Elbaum, have a CFO or CPA review numbers for the next five years--including moving costs and constraints on debt and cash flow--before you jump into property ownership.

LOOKING FOR ANSWERS? Stumped by a thorny business problem? Let Inc. help. Send your questions to AskInc@inc.com. We'll consult with experienced entrepreneurs and savvy advisers, folks who've been where you are and figured out what works and what doesn't. If you don't like what we have to say--well, you can tell us that, too.




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