How To Deal With A Bad Business Breakup

Breaking up is hard to do, especially in business. Even though you think it'll never happen to you, protect yourself from whatever may happen.
November 01, 2013

Plans change, and breakups happen. Your business partner could get an amazing job offer, fall sick or decide to change business paths. When you're jumping into a new venture, it's tough to imagine an impending dissolution—but you never know what can happen.

"I'm frequently consulted by people after their business partnerships implode," explains Joy R. Butler, a Washington, DC-based attorney who represents businesses in a variety of industries such as software, communications, entertainment and professional services. "I've seen a variety of causes for ruined business relationships, including honest disagreements over an unanticipated circumstance, a partner's sabotage of the project, and a lack of clarity as to who owns the project."

The best way to prepare for a business breakup is to make plans before you and your partner ever join forces. Understand the law, negotiate a departure clause, and protect yourself by embracing the following tips.

Discuss What You Don't Want To

Business partners should form business deals with more than just a sense of business strategy—it's important to keep an open mind and heart.

"An ounce of prevention really is worth a pound of cure," Butler explains. "Make an honest assessment of what you want from the working relationship."

Talking about it is only the first step. Whatever you conclude, make sure to put it in writing. "If you find yourself in the midst of a hostile business breakup and you have no written business agreement, you are at the mercy of your partner's willingness to be reasonable, the laws of your state and, as a worst case scenario, the court system," Butler says.

It's easier to solve a problem when you and your partner are on good terms. "If you talk about how to end the business upfront when everyone is friends and on speaking terms," says Pamela Belyn, attorney at Boodell & Domanskis, "it's much easier to manage the process [than] when partners can't be in the same room together."

Don't Do It Yourself

Breakups can get heated. Tempers can cause a financial meltdown and significant damage to both parties. When matters spiral out of control, entrust the help of a third-party. "Find an unbiased moderator to facilitate the discussion to keep it focused and respectful," recommends Angie Segal, a business coach who specializes in cutting ties.

A moderator can help keep the conversation focused to ensure that both parties achieve the best possible outcome. "Have a goal of being win-win-win-win," Segal says. "Partner 1 can win, Partner 2 can win, employees can win, and customers win."

Keep The Peace

The golden rule in business is that you never know when you and your partner will cross paths again. Bad blood just isn't worth it, no matter the loss. "Try to make any business breakup a [winning] situation for both partners," says Ian Aronovich, co-founder and CEO at Government Auctions. "Do your best to remain friendly with each other."

That means making sure both partners are equally on the hook, and split responsibilities equally. "If the breakup results in a loss," Aronovich advises, "make sure the burden is shared equally."

Ritika specializes in business, marketing, entrepreneurship, and tech. She writes for Forbes, Investopedia, Business Insider, CMO and the SAP Innovation Blog.

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