Conscious Uncoupling

Gwyneth Paltrow coined this delightful euphemism for divorce. Sounds painless!

Conscious uncoupling rates in New Zealand continue to decline, from 13 per 1000 marriages in 1998 to 9 per 1000 in 2013.

Businesses however are nine times less enduring – 85 per 1000 died in 2013. If we assume that start-up businesses are 75% multiple ownership, then 32,000 partnership entities are born and die each year. Only 27% of these survive till their 10th year. (Stats NZ). So, a partnership is really just a joint venture, with a limited life expectancy.

Altiora Associates regularly advises on resolving partnership disputes and departnering –about two every year. I will discuss the avoidable traps going in and during the life of the partnership, and some guidelines for partners as their partnership breaks down – and up.

Hindsight wisdom for start-up:

  • Be sure you need a partner –more prudent to share expenses, not profit.
  • Know why you are entering a partnership.
  • Don’t partner because you cannot afford to pay the person. This particularly applies to the General Manager – use quasi-equity.
  • If partnering with a friend, don’t expect the friendship to survive the partnership breakup.
  • Debt money is far cheaper than equity in the long run.
  • Agree your business purpose, plan and funding.
  • Agree control and leadership. Don’t have a 50/50.
  • Know partners’ strengths and competencies – yours and theirs. Agree expected contribution and gainshare.
  • Insist on a pre-nup – a written and signed partnership agreement, drawn up by an experienced lawyer.
    • Use the limited liability benefit of a company.
    • Write down the exit strategy and mechanism, and disputes resolution process.

Hindsight wisdom for operating and co-operating:

  • Periodically review business purpose, SWOT and strategies.
  • Regularly review roles, responsibilities and contributions for best outcome and work satisfaction.
  • Focus on the business or systems issue, not the person.
  • Try to show EQ in all partner interaction, keeping open and trusting dialogue which aims at solutions.
  • Don’t let a grievance (e.g. about unequal contribution) fester – talk it through and resolve it.
    • Equally, when making significant money for the partnership, ensure your partner knows.
  • Consider an advisory board for perspective and for pushing partners above the operational trap.
  • Partnership danger rises in losses or in big profits.

Managing partner disputes:

  • Get the right professional help, who brings experience, judgement, calmness and caring, plus courtesy / respect for the Other Party.
  • Check your rights and obligations.
  • Anticipate wealth destruction if the business is neglected through a protracted dispute, especially if it escalates into litigation.
  • Manage your emotions, accepting that most partnerships terminate.
  • Define early your objective – fix or split.
  • Behave honourably throughout. Feels better and plays better if the dispute ever reaches court.

To my several former and present partners, thanks for the dreams, the experience and the fun.