How to Handle a Business Breakup

Business partnersBeing in business with a partner is truly like a marriage, especially if you decide to dissolve the partnership. Similar to a divorce, assets have to be divided up, and more than likely there may be some breakup drama.

One way to try to forgo any business breakup drama is to plan ahead. Sort of like a prenup, you should develop an exit plan when you start the business together.

?Exit strategies should be a part of any business plan and founders should create agreements about what will happen in this case before getting too far into doing business together,? explains Crystal Stranger, president of 1st Tax and author of The Small Business Tax Guide. ?Sit down as early as possible to divide up assets and clients, or come to an agreement for financial compensation for the partner who will leave. Generally, the longer this process takes, the more unpleasant this is. If handled quickly, then usually a beneficial arrangement for all can be found.?

One exit strategy is a buy-sell agreement. ?Have a buy-sell agreement in place before the business gets underway. This allows the owners to have a say in what should and will happen when one of the issues comes up later. It also removes some of the emotion from the situation, since the buy-sell agreement was entered into long before problems emerged,? explains Stephen Hoffman, managing attorney at Hoffman Law Office, P.C.

Having a breakup plan will help, but there are other things you can also do to make the transition easier. ??Avoid making it personal. Small businesses are often made up of a close-knit group of owners, many of whom have built years of friendship and trust and expect to have few to no problems arise. When they suddenly find themselves opposing each other on major corporate issues, it bleeds into their personal relationships,? Hoffman points out. ?Losing a business colleague and co-owner is regrettable but can be dealt with; losing a dear and trusted friend, on the other hand, is much more difficult.?

And if you have gone into business with a close friend, try to always separate business from personal. Doing this should allow for you to maintain your friendship even if you part ways business wise. ?Compartmentalize, if possible. If you have a deep and personal relationship with your co-owners, try to separate on-the-clock ?business? time from ?personal? time,? offers Hoffman. ?By doing this, it allows you to salvage the friendship even as the corporate ship is sinking. While it’s not easy to do, it may help the owners keep their sanity long enough to let them end the business relationship amicably.?

But no matter how smoothly a breakup is handled, it can still affect clients and customers. You will need to reassure them.

?It is a good idea to contact clients and tell them that changes to the business structure will be coming soon, but stay positive and don’t say anything bad about your partner,? advises Stranger. ?This is important because I have seen too many times where one partner decides to backstab the other by contacting all clients and trying to get them to leave with that partner. Notifying them first puts you in a good light and they are likely to let you know if the other partner starts stirring up drama. In the long run, the partner who keeps their cool and acts professionally always ends up ahead. From experience, around 70 percent of the clients that leave with the aggravating partner have come back to the stable business partner after a period of several months.?

Most of all, don?t let the business breakup take you out of the arena. ?Remember, you built one company; you can do it again. Sometimes the best thing to do is walk away and start a new venture,? concludes Stranger.