When running a startup with a co-founder, sometimes unforeseen circumstances lead to you to a situation where it is the best interests of everyone involved to terminate your agreement with them. Since founding my latest company Hostt helping provide free hosting to everyone in the World I've had to make so big changes in who is my cofounder.
It is not fun. It sucks and it is an awkward and uncomfortable situation to be in. But it can be made less awkward if you're prepared and know what to do in advance. This should be done on both sides to protect the company.
In this post I'll help prepare you to handle the unenviable task of firing a co-founder.
Two Words: Separation Agreement
The first thing you need to know about firing a co-founder is you have to make it official. When things go south with a co-founder it's not as easy as just firing them and getting on with your day. You have to get it on paper in the form of a separation agreement or you may run into some legal troubles down the road.
In a separation agreement, the terminated party receives a little more than that they may be entitled to upon being fired, like a few months' pay. In return, you get their promise not to sue you. Having that agreement in place helps everyone involved feel more comfortable.
Be Upfront With Your Co-Founder
The worst thing you can do is spring this kind of discussion on your co-founder. Why? It is a matter of both respect and a way to avoid unnecessary confrontations.
Remember, as some point you got along--you may even have been friends. Don't surprise them--instead, set a time to meet. Plan a time to have this discussion, but don't explain what the meeting is about until the time comes.
When it comes time for the meeting, get straight to the point. Don't waste each other's time with small talk, let them know from the start that you intend to fire them.
Note: Investors want to know that you're serious about your business and you can lead a company. Making hard decision are part of that.
That leads me to my next point.
Have A Specific Reason For Firing Your Co-Founder
When you're having the discussion with your co-founder about letting him or her go, you can't give a vague explanation like "You just haven't been pulling your weight." or "It doesn't feel like this partnership is working out." Give a specific reason for why they're being fired.
Think of it like any other business decision. If you're going to make a major change to your company, you need a compelling case for why that's a good idea. The same applies here.
Your explanation should sound more like "We both agreed that we would accomplish X goal by X date. I held up my end of the agreement, but your performance hasn't been up to par."
Keep it short and sweet, state your case, and be firm with your decision.
Conclusion--Final Pieces Of Advice
This is a sensitive situation, so even though you have to be authoritative in your decision, be empathetic of your co-founder's feelings. Following the advice above will help to avoid burning bridges.
With a separation agreement in place you're removing any concerns about future lawsuits. By planning the meeting in advance you won't be catching your co-founder off guard. And, by having a legitimate explanation for wanting to terminate your co-founder, you're being professional and showing compassion.
If you have any other questions about how to handle the situation of firing a co-founder, let me know in the comments section or shoot me a personal message on my site.