Do you have an exit strategy for your business partnership? What do you do if your business partnership isn’t working? This is necessary for all business partnerships, no matter what. Here is why you need an exit strategy in your business partnership, and how to go about creating one.
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Listen: Exit Strategy
Watch: Exit Strategy
Hey there, I’m Angela Brown, and this is Ask a House Cleaner. This is a show where you get to ask a house cleaning question, and I get to help you find an answer. You can find this and 400 other answered questions in this series on our YouTube channel.
Does Your Business Partnership Have an Exit Strategy?
Does your business partnership have an exit strategy? If you’re going to have a business partner, there are rules and regulations you must follow.
Otherwise, your business will get halfway down the road and it will implode because you missed a whole bunch of steps and now you have someone else that either has the motivation to take over your business or torpedo your business. So we have to play from the same page from day one and have everything in writing and all of the agreements in place.
Today we’re going to talk for a second about agreements. Now, when you start a business, you’re all gung ho and you’re super excited and it keeps you up at night, and you wake up in the middle of the night, just can’t wait to start the day and learn some new stuff that you’re going to apply and implement.
There’s a Honeymoon Phase in Business
All right, so when you take a business partner, that honeymoon phase is still going on. There’s this thrill, there’s this excitement, there’s this wonder of possibility.
And then after a while, the enthusiasm kind of dies down. Stuff starts getting hard. Stuff starts getting expensive. And then there are money issues, there are employee troubles, there are customer issues, there are co-business partner issues. Then stuff starts falling apart, and one person says, well, I wish I had time to be focusing on this, that, and the other.
Whoa, guilt trips. And then someone else says, well, I wish I had time to go home and spend time with my family. I need to take off and cut out early. Well, I’m here doing all the work, right? And there’s this uneven workload and all this stuff.
Why A Lot of Business Partnerships Fall Apart
So a lot of business partnerships fall apart because all that stuff isn’t worked out. So my suggestion to you is, when you break down the different roles of the business, it’s important to have those agreements in writing.
The reason agreements are so important is this, when we get married to someone, in a marriage, we either sign a prenuptial that say, if things go south, here’s how we break up all of our assets, and here’s what is expected from the marriage. And we say things like, we expect fidelity, we’re going to take care of each other, we’re going to love each other.
These are vows that you make to the other person, and then you sign them. So there’s an agreement in place. Both people getting married have a pretty good idea of what’s expected in the marriage. And marriages blow up all the time, right?
You Have to Have Those Agreements in Place
There’s no measurability in there, there’s no accountability and stuff falls through the cracks and stuff slips and then people get divorced and they go their separate ways.
If you’re going to run a business, it is mandatory that you have those agreements in place. That way when you have an exit strategy, all the agreements that you have in place are already decided upon. It’s like having a prenuptial.
Have Your Exit Strategy in Writing
Here’s where it gets really important. What happens if we go into business together and one of us gets dementia. Whoa, that’s not part of our exit strategy, but it should be, right? What happens if one of us gets hit by a bus and we are not here tomorrow? What happens to the other half of the company?
Does that go to your family or does that divert back to me? That needs to be in writing. That’s part of your exit strategy. What happens if we get 10 years down the road, and we decide, well, we’ve got this multi-million dollar business, we’re going to sell it.
What happens then? Do we both split it up? Does that go to our families? Does that go into a trust? How do we split that up? What is the exit strategy?
Plan Your Exit While You’re Still in Love
The reason this is important and the reason it’s important to do it right upfront when you’re in love. And I say in love, meaning being in that new phase of the business, if you do it when you are in love, everybody has the best interest of the company and the other person in mind.
There’s this phase where we’re willing to work together. So, while we’re willing, while we’re being kind to each other, while we’re on our best behavior, while we both want to make this work, that’s the time to figure out the exit strategy.
Don’t Wait Until Things Aren’t Going Well
Because if you wait until down the road, and this is the divorce phase when things are not going well. You do not have the best interest of the company and you’re in mind at that point, you do not have each other’s best interests in mind.
And so it’s like, what can I get from you? What can I take from you? Oh, I’m going to make your life miserable. I am going to make you pay. So there’s a whole different attitude of approach if you wait to have the agreements down the road. You want to do that upfront in the beginning, and then you can remove all of the emotion from those decisions.
So that is the reason that we make agreements in business, and it is crucial to have them in writing. It is crucial to do it when you get the business partner from the very beginning, again, when you are in that honeymoon phase and everyone is willing to work together.
Resources
Business Partnership Essentials: A Step-by-Step Action Plan for Succeeding in Business With a Partner – https://amzn.to/3g7iP2A
When Your Business Partner is Your Spouse: How to Have a Successful Business AND a Happy Marriage – https://amzn.to/3itpaH4
Forming a Successful Business Partnership: The 9 Things You MUST Consider When Starting a Small Business with a Partner and Creating a Business Partnership Agreement – https://amzn.to/3cNYNZ5
Strategic Business Partner: Aligning People Strategies with Business Goals – https://amzn.to/3x6g7A7
Built to Sell: Creating a Business That Can Thrive Without You – https://amzn.to/3pBmSHs
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