How to Exit Your Business with an Uncooperative Partner

Maybe your business started as a tiny idea, turned into a careful strategic plan, and decades later it’s grown into a flourishing enterprise you never even imagined. 

But if you’re like most business owners, what got you to this point was a series of unexpected pivots, creative problem-solving, and doing the impossible because that is what was required. 

This is particularly true when it comes to business partnerships.

I think it’s fair to say that if you’ve found business success, it’s likely that your business has evolved into something beyond your imagination in scope and complexity. In fact, your business might look nothing like you expected. You are probably a different person than you were when you started it. And your partners and employees certainly are too. 

Two businessmen look to the future, Photo Credit TungArt7 on Pixabay

This can make things complicated. 

In an ideal world, everyone grows and changes in the same direction as the business evolves. But in reality, people can grow apart, encounter different life circumstances, take different paths, and embrace different philosophies. So even with the best of intentions on all sides, you may find yourself in a business partnership that just doesn’t work anymore. 

This is particularly true because very often business partners join up by necessity. For example, we have a former client where the partners joined up because their former owner was on the verge of shutting the company down. They decided to attempt to rescue the company to keep their jobs. In another example, key employees were offered stock ownership as a retention incentive. Sometimes timing, fate, or family bonds throw people into a partnership that doesn’t seem like a choice but simply a necessity.

Whatever circumstance led to your business partnership, it’s possible that down the road it became clear that you’re not a great match. Maybe it’s stagnant, or exhausting, or you’re just pulling in different directions. In more difficult cases, it can be contentious or even threaten the future of the company. 

Were your partner your employee this would be as simple as following your disciplinary process and ultimately letting them go. But since they are your business partner, it is far more complicated.

How do you handle this? Are you stuck in business purgatory? Or is there a way through to the other side where you know you’ll both be better off?

In my experience, it’s always better (for both of you AND the business) to push through the discomfort to the other side. Here are some ways to make that happen.

Buy-Sell Agreement

The most important and often overlooked step that anyone entering a business partnership can take is to have a buy-sell provision as part of your corporate governance documents. This can be a stand-alone document or embedded into the company’s operating agreement. This provision explains the triggers for how the partnership can break up.

The reason this step is overlooked is that many business partnerships are formed with limited resources and time pressure. Why spend on an attorney when you can just register your business online and buy some legal documents off the internet? Who has the time to think about an unpleasant future prospect when you need to get things going right now? Perhaps you negotiated your first work order already and you need to get a bank account set up quickly in order to deposit a check.

The problem with ignoring this important step of determining how you’ll break up is that now – before you’ve officially gotten started– is the perfect time to figure this out. Everyone is optimistic about the future and there hasn’t been enough time for bad blood to creep in. With the assistance of an attorney, you could easily come up with a reasonable buy-sell provision and determine how it would practically work in the future. By having this conversation at the beginning, you will be able to point back to this written agreement if you ever find it best to go your separate ways. This is one of the most important things we advise people to set up with every new enterprise. 

The Sooner the Better

Whether you have a Buy-Sell or not, what I’ve learned from my own career and in observing dysfunctional partnerships over the years, is “the sooner the better”. When a partnership isn’t working out, the following strategies are NOT going to work:

• Ignoring the situation and hoping it will improve

• Using passive-aggressive tactics to try to get your partner to change

• Making excuses for the obvious shortcomings of your partner

On the other hand, what can work is having very direct and tactful conversations about what needs to change. Sometimes people are simply unaware. If you see a repeated pattern of behavior, the key is to proactively and quickly address your concerns. Do not let the problem fester into something bigger.

If after directly and tactfully working to address the issue you still do not see change, your gut can be pretty reliable for how to move forward. If there isn’t mutual respect and trust, it’s probably time to get out.

Image by Albrecht Fietz from Pixabay

Getting Out

The process of a business separation is something that may take time. And it can be messy. But it will be worth it.

In any business, managing partnerships can be as challenging as managing operations, finances, or employees. When a partnership becomes dysfunctional, it's crucial to address the issues directly instead of ignoring them or worse, hoping they will resolve themselves.

Recommended Read: The Obstacle is the Way

Of course, having a buy-sell agreement in place from the start can provide a clear path for separation, ensuring that both parties have a mutually agreed-upon process to follow. If such an agreement doesn't exist, all is not lost. The key is to engage in direct, honest conversations and make decisive actions when necessary.

Sometimes, a difficult but honest conversation can lead to a mutual parting of ways.
Sometimes, you’ll have to make a hard choice to end things even if your partner does not want to. 

In either case, this is a key moment to bring in expert advisors to help you manage the legal, financial, and human aspects of this in an ethical, win-win manner.

Such a big moment deserves to be handled correctly and is ultimately cheaper and easier than fixing costly and hurtful mistakes later. Clean and proactive is better than drawn-out and reactive. We at Doescher Group specialize in helping people handle these moments in ways that they later feel proud of.  

Ultimately, taking the necessary steps to resolve a disagreement in partnership can lead to better outcomes for both parties involved. Trust your instincts, take action, and prioritize the long-term health of your business. If you're facing partnership challenges, consider consulting with Doescher Group for guidance on navigating these complex situations.