No one ever enters into a business partnership thinking “this isn’t going to work!” (OK, almost never.) Of course, all parties beginning a partnership believe in sunshine, daisies, and a beautiful waterfall of profits flowing in at just the best timing. What could possibly go wrong?

Savvy investors know only too well there is an endless list of grim possibilities that destroy harmonious relationships, problems no one believes will happen– but sometimes they do. Disagreements over the terms, or over project decisions, or even a clash of personalities may finally come to a head.

In addition, sometimes only one partner is involved in their own unrelated issues that end up affecting the business and their partners – personal problems from financial to marital.

What should you do when a partnership is on the rocks?

Before I launch into my podium-pounding lecture on the need for well-written contracts … contracts aside, your first steps should be:

• consider what the other party really wants (not just what they say they want, or even what the contract says;)
• determine if you can satisfy that need;
• do your almighty best to work this out– with or without an intact partnership – by
  • keeping the partner as whole financially as you can,
  • satisfying as many of their needs as you can,
  • with the least amount of conflict and animosity possible.

For the purposes of negotiating a resolution, you should not:

• get angry (no matter how justified 😉
• assign blame (no matter how well deserved 😉
• become overly concerned with who is “right” and who is “wrong” (so long as you aren’t breaking laws or bending contracts too far)

If this reads as if I’m putting the burden to resolve things all on YOU – I am. Regardless of the details, take on that role – because that’s the power position. It makes you the leader, during and after the resolution.

When you are ready to offer a solution, sell it as positively as you sold the initial partnership project. Point out how the other party benefits; highlight your own concessions in their best interests. Stay upbeat and sympathetic, regardless of your private opinions.

If this is the end of the partnership, make every effort to send them away with the least amount of ill-will possible. Don’t expect them to take any blame, but let them report that you were more than fair in the final solution when they tattle to their other business contacts.

As a cracker-barrel philosopher once said, “You can be right or you can be happy.”  Settle it and move on.  If you can.

Third-party mediation is a fallback option if you and your partner(s) are unable to work out a solution among yourselves.  This can be an informal mediation by a knowledgeable friend agreed by both parties.  Or, it can be a legal mediation process through the court system with a mandated final decision.  Mediation may be an option specified in the contract to govern what happens in the event of a breakdown of good relations.

Lawsuits, also known as one of the worst ways to work out problems, should be avoided in most cases. In addition to the expense, stress, and time demands they inflict on the lives of all parties, lawsuits create gossip and speculation in the business community, a fallout you can’t control.  Even the threat of a lawsuit tends to be a bridge-burner, inflicting lasting hurt on reputations and relationships that may never be repaired.  The final decision is up to a judge who has no interest in the principals or the project. The judge’s decision is not always what someone expected it would be.

Write a good contract to begin with, with exit clauses in case someone wants out.  Question:  Why does our partnership contract need an exit clause to allow a partner to quit? We are all in this 100%, and besides, it’s a short project!  Answer:  Life happens, unexpectedly.  Bankruptcy.  Divorce.  Death. Overwhelming stress. Disagreements. Some life events occurring to any one partner can end up involuntarily dissolving the entire legal agreement, and leaving the other partners out in the cold financially. And, there is no predicting future human behavior, no matter how well you think you know someone. Your partnership needs the best-crafted contract to protect everyone involved from the unexpected.

No one wants a bad ending to a good project, but sometimes in spite of the most sincere best efforts, one or more parties feels this partnership just isn’t working out.  Do your best to find concessions that keep everyone as whole as possible, and move on with your life. The smartest and safest method of dealing with conflict or outside disruption from personal events is to write a contract that gives the parties outs, while protecting those that remain in the project.  Perhaps third-party mediation can put the partners back together, or determine an equitable separation. Sometimes it comes down to a lawsuit, but this is a risky step for every partner, can irreparably burn bridges, and leaves the final decision in the hands of a judge.  From the partnership’s beginning, think ahead and be as prepared as you can be to resolve future conflicts with the least damage to all parties.

Do you know of some harsh partnership dissolutions that could have been avoided with more foresight?

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