September 01, 2010

Having worked with women in business over the last 15 years, I have seen some strange things happen when partnerships between friends arise. At the outset, it sounds like a great idea, you like each other, you have common goals and a common passion for the business. What often happens is that the partners do not formally agree in paper on an arrangement that lays out how a dispute will be resolved, how one partner can leave the relationship and how you will protect your interests if you do need to leave or the other side decides to. Here is an interview with a colleague I have a great respect for but who preferred to not discuss the situation in her personal name.

Can you provide a brief history of the business you started with your friend (i.e. when you started it, the inspiration behind it, and the roles each of you played in the start up)?

In late 2005 I was approached by someone I knew to determine if I would be interested in joining her and another person in the development and launch of an online business. I had been in business before with partners so I had a keen sense of what the potential politics and power balance would be with 3 partners at the table. I suggested, based on the skills of the parties involved, that we consider bringing in a fourth person. This person was a friend but more importantly someone whom I felt had much to offer the business.

We collectively gave a lot of thought to roles and responsibilities and created a structure that we felt best supported the business. We divided the work amongst the four partners: Administrative/Corporate, Operations, Marketing & Communications and Technology. We appointed a President, based less on skills and experience and more on the fact that the original seed of the business idea came from this one partner.
 
We developed the business throughout 2006 and launched in early 2007.

When did you start to experience problems? Why did these problems arise?

The developments of the business plans and the technical online components were executed fairly smoothly. This was essentially a development project and each partner did her best to deliver on her area of responsibility. We worked well as a team during this stage of the business.

Shortly after the launch, two of the partners chose to leave the business. I personally believe their decision had mostly to do with the realization that the leadership of the company was not effectively in their hands. Not to mention, there were some fundamental disagreements regarding the necessary direction the business needed to take.

Seeing as I did not have a deep friendship with either of these partners, I was able to take the dissolution of these partnerships in stride. These personal relationships were based on some common interests but mainly on the business. Their departure was a highly contested issue at the time, what with determining the valuation of the company in its infancy, but we were able to successfully resolve the issue of their premature departure. When I say successfully, I speak from the perspective of the company. I cannot speak for my ex-partners but I gather it was a considerable personal loss for them and I sensed that they harbored hurt feelings and much displeasure with their arduous choice to walk away. 

My remaining partner and I were quite excited to move forward. We were great friends and felt we had a bright future in front of us, unfettered from our previous partners. We had some successes and some disappointments along our short journey together. But after not even a year, my partner shared her family’s plan to move out of province.

Determining how this partner’s departure was to be managed, within the context of the business, was a much more difficult exercise. The division of the business was then the subject of a negotiation. In principle we had an agreement of how we would deal with the matter but in the end, unfortunately, my partner choose to sever the personal relationship and simply walk away from the business.

Did you have an agreement in place? Formal or informal?

Yes, we had a Unanimous Shareholders Agreement. After having learned from past experiences, I was quite determined from the start to ensure we had formal documentation in place to protect our respective interests. 

This agreement did provide the guidelines to resolve the issue of a departing partner. But even having a structure to work within, it did not protect us from the distress of the situation.

What would you have done differently or what would you do differently next time?

I think I would maintain a wide distance between my personal and business relationships; being sure not to have them intermingle too much. Having strong opinions in business is a positive thing – this elicits confidence in leadership and provides decisiveness when necessary. In personal relationships, depending on the personalities at the table, it can create barriers.

What was the resulting damage?

The dissolution of my friendship with my third partner took a large personal toll on me and, by extension, my family. I suffered from a clinical depression as a result of her abrupt departure and my inability to cope with the emotional aftermath. It did however give me the opportunity to re-evaluate so much more other than just the dissolution of the partnership. The good from all of it was that I was motivated to learn and grow from the experience.

What is the relationship like now?

I do not have a relationship with my former partners. 

What advice or tips would you give to other individuals thinking of starting a business with a friend?

I certainly would advise that she/he reconsider. When one enters a partnership, he/she can only really know what their personal goals and motivations are. Understanding and knowledge of others’ is solely based on what they are willing to communicate. You can’t get into anyone’s head to ensure your vision and goals are aligned. There needs to be implicit trust in the partner.

If you do decide to start a business with a friend, clearly outline in a professional partnership agreement (go to www.lawdepot.com if you don’t want to go to a lawyer) how you will resolve a dispute, how a partner could leave the company and how you will deal with issues that arise. Consider situations like the need for more capital from one partner or more work from another – be it a renegotiation of shares, voting rights or simple compensation as a resolution. Doing the difficult work in the early days will make things much easier when disputes arise.

Labels/Tags: Kathryn Bechthold, Biz or Bust, Unanimous Shareholder Agreements, Partnership Agreements, working with friends, starting a business with a friend, resolving disputes,

Posted by KathrynB at 12:57:29 View Comments | Click Here to Comment

August 25, 2010

Being an entrepreneur is always challenging, add on family responsibilities, school commitments and child care fiascos, the life of a modern entrepreneurial mom is down right stressful. Being a leader during stressful times in business is key, understanding that concept and making it happen are two totally different things. I decided to interview Charmaine Hammond on how to be a great leader to achieve your goals as an entrepreneur. Charmaine is the owner of Hammond International Inc, a Canadian consulting and training company specializing in personal, business/professional, and organizational development.

You specialize in consulting to leaders on how to motivate their teams to overcome adversity. Any tips you can offer entrepreneurial women on managing their teams?

There are different types of teams in business. Many entrepreneurs are moving to teams that include VAs (virtual assistants), or contracted specific services. Regardless of the structure of the team, it is my belief that there are some essentials in leading teams through adversity.

Resilient teams are those that will Bounce Forward(TM) through change, challenge, conflict and crisis. Here are some tips that will help teams bounce forward:

• Engage the team (invite input and suggestions, let the team know how they can help)
• Anticipate challenges and be prepared

• Communicate, communicate and communicate some more- when communication is open and timely there is less opportunity for assumptions, rumours or misunderstandings

• See adversity as an opportunity to grow and learn- some entrepreneurs chose to view the economic down turn as an opportunity to be more creative and in doing so they had a more profitable and productive year than in past. 

• Have a plan to move beyond the adversity, and let your team in on it. Openness and transparency go a long way.

• Recognize the team- their gifts, talents and contributions. Often leaders and business owners can become so focused on the adversity that is being managed that accomplishments are not recognized.

You also specialize in consulting to leaders on how to solve problems and find solutions. Every entrepreneur faces challenges, many face enormous adversity. What would you recommend to someone planning on owning a business and possibly facing adversity and those embroiled in something that challenges them to their core?

It is true that entrepreneurs will face adversity, however, sometimes this can be sprinkled with the most valuable and profound learnings. Having a business coach or mentor to discuss adverse situations, especially those that are challenging their core (e.g. values issues) can be time and resources well spent. Have a support system, this is critical. I have a number of different supports that are of great benefit to me.

What would you recommend new entrepreneurs do in order to facilitate better communication with their teams, business partners and life partners/husbands?

Communication is an essential component of every relationship- business, personal and spousal. Entrepreneurs are often challenged in that their business and marriage often become meshed therefore straining relationships. Some tips to facilitate better communication include:

• Don't sweep issues under the rug- the rug just becomes bumpy (a hazard) and the issue still remains. Instead, address issues as they arise.

• Communicate with the person the issue is about- don't involve others unless they are directly part of the situation.

• Be honest, be accurate and be clear.

• Avoid making assumptions, and if you do, take time to check out the assumption and get accurate information.

• Avoid inflammatory words such as "YOU...", "should of..."

• Avoid generalizations such as "we all..." or "everyone thinks...." or "you always..." or "you never...."

• Apply Steven Covey's strategy- "seek first to understand, then to be understood" which means seek to understand the other person's perspective before your own

• Be clear (crystal clear) on the issue to be resolved

Understanding that your choice to become an entrepreneurial mom will face you with challenges you have never experienced before is half the battle, learning to remain calm and to use your tools at communication and problem resolution can make those challenges easier, quicker and cheaper to overcome.
 

Labels/Tags: Leadership, Charmaine Hammond, communication, stress, partner relations, partnership discussions, disputes, conflict

Posted by KathrynB at 11:37:46 View Comments | Click Here to Comment

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