Trouble Ahead: 6 Warning Signs of an Impending Business Divorce
Whether in our personal lives or our professional ones, relationships rarely end suddenly and without warning. Instead, they tend to deteriorate bit by bit over time, with the writing on the wall becoming more apparent with each passing day. Months or years of simmering conflicts, tensions, and differences of opinion eventually boil over, or suspicion and a loss of trust become too much for the relationship to bear.
For business partners, seeing the signs of an impending business divorce before conflict reaches critical mass can be the key to resolving issues or navigating the end of the relationship in a way that best protects their own interests as well as those of the enterprise they worked so hard to build together. That is why, in addition to focusing on the bottom line and day-to-day operations, business owners must pay careful attention to the interpersonal dynamics between themselves and their co-owners.
Here are six signs that a business divorce may be lurking around the corner:
- Personality Conflicts
The best and most enduring relationships involve people with complementary personalities. One partner may be prone to catastrophizing, while the other may approach things much more calmly and rationally. One partner may be detail-oriented, while the other may be more of a big-picture type. Ideally, each person’s weakness should be the other person’s strength. But when personalities do not mesh, when partners are equally headstrong, want to play the same roles, or don’t respect differences among their co-owners, such personality conflicts can doom the partners’ ability to work together effectively on behalf of the business. This type of dysfunction can paralyze a business.
- Incompatible Management Styles
Divergent management styles can derail a business otherwise well-positioned for success. It can cause confusion among employees and contradictions among owners and managers. The key to addressing different management styles is to bring clarity to management roles. A well-crafted operating agreement or partnership agreement should clearly define the duties and responsibilities of each partner/owner as to the company’s operations and personnel, so everyone stays in their agreed-upon lanes.
- Conflicting Goals and Changing Expectations
Professional relationships and partnerships are not static; neither are priorities, expectations, and goals. Co-owners who once shared a vision for building and growing their company and where to focus their energies may change their points of view in response to new circumstances or issues in the marketplace or in their personal lives. One owner may wish to pursue an aggressive expansion, while the other believes it may be more prudent to retrench and hold on to profits for capital improvements. Sometimes, these differences are simply growing pains that the parties can work through together. Other times, divergent opinions are so fundamental to the company’s future that disassociation, dissolution, or another form of parting ways represents the only viable option.
- Being in the Red
Profitability and success can cure much of what may ail a business relationship. Conversely, when a business starts to lose money or is otherwise struggling, it can exacerbate any underlying tensions as stress increases and people start pointing fingers over a deteriorating situation. An experienced business attorney, sometimes in conjunction with a forensic accountant, can examine the business records and determine the cause of the partnership’s financial woes.
- Outside Factors
Even a strong business relationship can undergo strain when one party faces challenges or stressors in their life outside the company. Divorce, death of a loved one, disability, or illness can distract an owner from their business responsibilities, which in turn can create a ripple effect as others take on more responsibility. Resentment can build when left unresolved for too long.
- Deterioration of Trust
Trust is the foundation of any successful and enduring relationship. When partners lose trust or doubt the other’s honesty, integrity, or competence, things can quickly move from suspicion to accusation to denial to litigation. Open and regular communication can prevent misunderstandings from metastasizing into irreconcilable differences.
If you have questions or concerns about the state of your relationship with business partners or co-owners, please contact Michael Hamblin at Maddin Hauser.