Going into business with a loved one always sounds like a good idea to start with. However, like every relationship, the partnership can evolve and you no longer want to be in business with them. Business partnerships break up as frequently as marriages. People change and sometimes partners realise they aren’t suited to work together.
Other reasons why business partnerships break up include:
- Voluntary resignation
- Removed by court order
- Being absent without notification for extended periods
- Dissolving part of the business
- Operational differences
When your business partner is just that, it may be easier to maintain a cordial professional relationship. However, when it’s a friend, it can be tricky to retain the friendship after the collapse of the business partnership. Telling a friend that they’re underperforming can be painfully awkward and even perceived as hurtful.
The stress of ending a business partnership with a friend can lead to the end of the personal bonds. There are ways to approach ending a business partnership without damaging the friendship.
Common Reasons Why Family Businesses Fail And How To Prevent It
1. Review the business partnership agreement together
When it’s time for the partnership to end, review the agreement and ensure that all parties are clear on the rights and responsibilities of each. Most partnership agreements should have a section determining what should happen upon the dissolution of the business or removal of a partner. This should show a framework of how to end the partnership with as few negative financial fallouts as possible.
The agreement shows how profits should be shared, salary, severance pay, or how debts should be paid, etc. Ensuring all partners follow the agreement reduces the risk of disputes. If your business partnership didn’t outline what happens in the event of a dissolution, try establishing a mutually beneficial agreement on how to end the partnership.
Going Into Business With Friends or Family? Here Are Things You Should Have In A Business Contract
2. Use a neutral third party
Sometimes the best way to end a business partnership between friends is best done with an impartial third party. This ensures the friendship continues even after it ends because it removes the risk of resentment. While it doesn’t fully prevent any ill feelings towards the partnership ending, it can at least ensure fairness for both parties.
A third party should be someone you and your business partner both trust. It should also be someone who will not try to favour one partner over another. A qualified business mediator like a lawyer, accountant, or consultant can ensure each partner is treated fairly. Don’t retain a lawyer for your personal gain during the end of the partnership. This can make your partner think that you want to end everything.
6 Reasons You Should Hire A Financial Manager (Accountant) For Your Small Business
3. Compromise
This is especially important if the friendship is to survive the end of the business partnership. Being willing to compromise can ensure that the personal bond remains strong even though one part of the relationship is ending. Because of the intimacy within the relationship, you will have more insight into what your partner needs as they are being removed.
For example, if a partner is being removed for absence because they are overwhelmed with their personal life, you can demote them from partner to another role with fewer responsibilities. In addition, if the partnership is ending because you have completely different visions, you can remove no-compete clauses to allow them to establish their own businesses. Talking with each other honestly can help you both end the partnership and move on with the friendship intact. Having a scorched earth dissolution can break the friendship and create bitterness.
Entrepreneurship: Tips For Running A Business With A Friend
4. Remain in touch
The end of the business partnership isn’t a friendship divorce. You and your partner can have a philosophy to keep your friendship outside of work. If your partner is having a social event after you’ve presented them with a dissolution notice, continue showing up for them.
If your partner is frustrated and resentful, you can also give them space but keep the option open for them to contact you. Be clear about what your needs are from the break-up process. This prevents any miscommunication. If you want to remain friends after, make that absolutely clear. Your affection for your friend shouldn’t feel ambiguous.
5. End the partnership sooner than later
This depends on the reason for the dissolution. If your partnership is ending because your friend hasn’t been pulling their weight, approach ending the partnership sooner. Small signs that show your friend isn’t good at their role can build up and blow up over time, jeopardising the business and the friendship.
In addition, be mindful of your partner. If they were good at their job but suddenly started missing deadlines and not showing up, and they haven’t communicated, something else could be amiss. Approach them to get the full story before immediately reaching for a notice of termination. You can feel frustrated because your friend is leaving you with all the work. But they could be going through a personal crisis. Perhaps a solution can be to bring in a third partner rather than ending it. But if it’s best for both of you to end the partnership, end it to find a way forward instead of letting the frustration build.
If you’re both constantly arguing about the direction of the business, it may be a sign that you’re not compatible as a business partner. You both may need to have an honest meeting to decide whether it’s better to preserve the business as it is and have one person continue managing it. Alternatively, you can dissolve the business and each pursue separate enterprises. A lack of a unified vision can be difficult to reconcile. If you’re the founding partner, you can offer to buy out your friend. Through all this, ensure you make it clear that you don’t want the friendship to suffer.
Check out:
Going Into Business With Friends or Family? Here Are Things You Should Have In A Business Contract
Four Ways To Ensure Your Business Partnership Survives The Test Of Time
Business: Why Every Company Big Or Small Needs A Board Of Directors
Tips On Running A Successful Family Business
Steps You Can Take To Protect Your Business Name
Business Expenses To Table Until You’re Making Money
