When Partnerships Go Bad
When partnerships go bad. Plus: Do you really need a publicist?
Published April 2004
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BUY A REPRINT Two years ago, I started a business with two partners. Most, if not all, of our growth has come on the backs of just two of us; the third partner doesn't do much and we would prefer to get rid of him. Can we simply vote him out of the company?
Name withheld
Seattle
If only business partnerships were like Survivor. That way, if someone wasn't catching any fish, you'd simply vote him off the island. Alas, a better source of reality-show guidance is Court TV, because that's where you'll end up if you mishandle your legal relationships. Nor is a lawsuit all you risk. New Jersey entrepreneur Sandra Salter recalls six grueling months of fights with a partner who wasn't hitting her sales goals. Their battles took a toll on employee morale, and revenue fell 40%. "If I could have afforded it, I would have bought her out at a high price," Salter says. Instead, she dissolved the company. She's since started a new one--without a partner.
Extricating yourself from a bad partnership is like defusing a bomb. Sudden moves (plotting a coup or storming into his office flanked by lawyers) can set the whole thing off. Compromise should be the goal, and negotiation the means. Try talking to your partner: He may be unhappy and looking for a graceful exit. If he wants to stay, consider restructuring the partnership to address your unequal contributions. You might adopt a salary structure that pays greater rewards to rainmakers, suggests Larry Weiner, a CPA in Tarrytown, N.Y. As for buyouts, they often end in heartache. They can be murder on your cash flow. And departing partners can walk away with valuable assets--such as real estate or equipment--leaving you to pay their corporate credit card and other debts. What's more, if you don't have a buy-sell agreement in place, a disgruntled partner can demand that a judge set the price; or the judge could even order partners to stay together. Under those conditions, it just might be you who wants to get off the island.
Three years ago, my wife and I bought a 30-year-old motorcycle accessory business. The business has struggled but survived on its name recognition as we've rebuilt its infrastructure. Now, it's time to focus on marketing. Is hiring a PR firm the best course of action?
Bill Nichols
MC Enterprises, Oxnard, Calif.
Ever heard of Ken Schmidt? He's a PR guy who helped turn around another struggling motorcycle company: Harley-Davidson. Among other things, Schmidt taught Harley's leadership the importance of communicating the uniqueness of its product to consumers. Without him, today's hog might be the ride of hoods rather than CEOs. We understand that you're not Harley-Davidson. But Harley has made considerable hay out of its colorful history. And with three decades behind it, your company probably has a rich tale to tell. A smart, experienced professional can help you shape that story, create deeper brand awareness, and identify markets you may not have considered.
