Identifying, Easing Partnership Disruption to Save the Company

Co-owners who are both a couple and business associates can reach the point of partnership desolation in both areas. The angst associated with such a breakup can severely affect the company unless the problems are not identified early and carefully addressed.

During this period of stress and change, the desired outcome of continued growth requires a willingness to compromise and an acceptance that only some things will end to everyone’s total satisfaction. All parties must agree that continuing the company’s growth is the primary goal. This process is always challenging and often ends with one partner or another leaving.  

When both parties become aware of the clues to pending disruption, they should start to process rectification. 

Ironically, according to research, most dissatisfaction occurs as the company is on an upward path to profit and growth. These are common omens to recognize before disharmony strangles growth or leads to company failure.

1. One party needs to provide full information, particularly financial details.
2. Money is moving out of the company without proper documentation.
3. One partner takes more out of the company for personal expenses than the other co-owner.
4. There is an increase in closed-door meetings with staff.
5. Staffs display more loyalty to one partner than the other.
6. One partner needs to spend more time at the company.
7. Staff performance deteriorates.
8. Staff turnover increases, with some departures staffing a new competitor.
9. Communication between co-owners is increasingly through subordinates.

Francie Caccavo, creator and co-owner of Olivia’s Croutons, pointed out in a recent podcast that “it is difficult for couples to maintain a relationship when they are together, making important decisions, and facing fierce competition on a 24/7 basis.”

The following research agrees with this observation.

In the 20+ years, Small Business Digest has interviewed small business owners; there have been 143 businesses whose owners were romantically involved. Post-interview surveys conducted in the last two years indicate that 62% have had subsequent breakups. The major causes cited were infidelity, inability to separate personal and business interactions, and, most often, who is the final decision maker.

From the comments made in follow-up interviews, we offer the following strategies to help partners continue to grow their businesses.

Determine early the areas of leadership. No one can do every job; some partners are better equipped for certain functions. 

1. Decide over which functions each partner will be paramount and how to resolve disputed shared decision-making decisions if there is disagreement.
2. Make all financial information to both parties. No partner can have absolute signing authority, and the freedom to examine all documentation is always available.
3. There is a trusted outside counselor to settle any dispute. An external board of advisors or one or two retained trusted consultants can go a long way to easing any logjams to continuing as partners. These consultants should be separate from a marriage counselor employed to ease marital tensions.

Also, one partner or the other must accept that there is, in most cases, the need for one public face for the company. Over time, our feedback from interviewees is that the partner with the public face becomes the dominant decision maker. 

1. Numerous respondents cited this as the root cause of the eventual breakup.
2. The partnership should speak with one voice to staff and avoid the creation of staff silos, with each partner having a cadre of supporters. The destruction of the company is more certain should divorcing spouses begin recruiting allies inside the firm. So too, attention needs to be given to reassuring staff during the divorce process.

One couple could stay together by agreeing to sign a binding put-and-call settlement. Under this agreement, either party may purchase the other’s company share by offering a binding put-and-call offer. To explain, a put-and-call agreement allows one partner will purchase the other’s share at the stated price or can be bought out for the offered amount. This process gives either partner an equitable method of resolving what could be a poisonous situation.

Being a couple is hard enough. Being in business together adds to the strain. Understand the added stress, allow for your partner’s foibles, and bask in your mutual successes.