09 Dec 50/50 PARTNERSHIPS: GOOD UNTIL THEY’RE NOT
I’m often called on to participate in corporate mediations involving 50/50 business partnerships which are no longer profitable or viable. A lot of the companies I provide Executive Leadership Services for are 50/50 partnerships. What’s ironic about this business model is that almost all 50/50 partnerships begin with the absolute best intentions and highest regard from each partner. After all, if you started a business with a colleague or friend of yours, you’d want to share equally in the profitability and ultimate equity of that business. It seems to make the best sense and propels many friends and colleagues to organize their business around this equity arrangement.
What happens in reality though is that over time, many of these partner relationships become problematic for a list of reasons too long to even attempt to mention in this blog. Suffice it to say that whatever the underlying dynamics, once a 50/50 partnership has deteriorated to the point where the partners are no longer working well together, sharing the same vision for their company, extricating the owners from this business structure can become a long, complex and expensive proposition.
Many times value and equity are sacrificed at the altar of mediation or litigation, with the result being that both partners forfeit much of the intellectual property and capital value they’ve invested and accrued in their business.
Fortunately there is a solution to this business dilemma. There are many structural business tools available to help equal founding partners prepare for a day when their relationship at a business or personal level may no longer be sustainable. Utilizing these tools on the front end of a business organization can limit the amount of emotional turmoil, business profitability and equity loss if the time arrives when the partners are no longer functioning at a best practices level. I’ll be describing some of these tools and methodologies in my next blog.