“The aim of argument, or of discussion, should not be victory, but progress.” – Joseph Joubert
I often talk about the “Five D’s” as five major events that can create severe disorder in a business. These are:
- Disagreement
- Distress
- Divorce
- Disability
- Death
While none are pleasant to think about, it is imperative that owners have a contingency plan for each to give the business a fighting chance of survival should one or more occur. The good news is there are definite steps within our control that we can use to minimize the negative impact.
The first D, “Disagreement,” can occur with a customer, an employee, a supplier, a vendor, or many others; yet often takes place at the ownership level. Business partnerships are like marriages, and the relationship, even among former friends with the best of intentions, can disintegrate under unrelenting pressures, particularly when money, egos and negative emotions are involved. These kinds of rifts can filter through the entire organization, causing employees to take sides, and can even result in costly lawsuits that cause the company to fail. Don’t say it can’t happen to you. I’ve seen business partnerships reach critical meltdown more than once.
No matter how rosy things my appear now, spelling out intentions, agreements, policies and procedures early, before there’s an issue, is essential in working through potential disagreements over decisions such as reinvesting for growth or taking dividends; how to structure benefits or taxes; when to sell or bring in another investor; and which exit option to pursue.
Depending on your business structure, you will need an operating agreement, partnership agreement or shareholders’ agreement to set expectations and provide procedures to be able to address and resolve these issues effectively. Upon reviewing what you are trying to achieve, using a good business attorney to assist in the process is something I highly recommend so the many dynamics can be articulated properly without later misunderstandings.