Communicating Beyond Your Partnership AgreementBy Nina Kaufman, Esq.
Years ago, my business partner and I started our firm together with the happiest and best of intentions: visions of profits, freedom from the tyranny of others’ corporate cultures, and fun in an often dour profession (law). We signed a partnership agreement. For a while, it worked. At least the freedom and fun part, which made the lack of significant profits bearable. Twelve years later though, we’ve parted ways and not exactly on the best of terms (for information on my solo practice, visit www.AskTheBusinessLawyer.com!). Right now, we’re like the quintessential newly-divorced couple – not yet totally disentangled financially, and not enough time has passed to heal the wounds, and each looking at the other as the “guilty party.” From early idyll to evil eye — where did things go wrong? And why can’t our partnership agreement help?
Only hindsight and reflection can reveal the lessons to be learned. Some center around money issues; others center on how we communicated with each other. In the end, perhaps it wasn’t so much what we did, but what we didn’t do, that led to our demise, both business-wise and personally. Here are just a few tidbits that I gleaned from the experience:
- We stopped working on the partnership relationship. We were so busy working on the business and trying to make it successful that we stopped taking the time to reflect on the vision for where we wanted the business to go. We stopped having joint conversations about the over-the-dashboard perspective that a business needs. We stopped thinking of ourselves as partners and started acting more like independent departments trying to meet the business’s needs. What I’ll do differently next time: Set aside time at least twice a month to talk about where the business is going and whether that dovetails with our plans – both professional and personal.
- We didn’t look carefully at the numbers. In retrospect, we should have paid much closer attention to running regular income (P&L) statements and balance sheets. Not looking at the numbers was our way of sticking our fingers in our ears and singing “la-la-la” as loudly as possible to avoid having to face whether the way we were working made sound financial sense. What I’ll do differently next time: Know exactly what I need to earn each month from the business to be sure that it’s the right investment of my time and energy. Discuss these numbers with my business partner. Not let my ego get in the way of acknowledging when a business venture is not meeting my financial expectations.
- We didn’t set limits on capital infusion. We also fell prey to the tempting response that many entrepreneurs have of throwing money at the problem. When times were tight (and believe me, there were some v-e-r-y lean years), our solution was to draw upon our capital resources, rather than take a good, hard look at whether our business model was a sustainable one. Positive cash flow can be deceptive on paper. It’s not positive if the reason you have made the numbers work is that you’ve drawn on your credit lines. What I’ll do differently next time: Reign in spending during lean times.
- We didn’t agree on the value of each other’s contributions. At first, working together was fun and fulfilling. We seemed to equally respect the different talents and skills that each brought to the relationship. But over time, there emerged an Orwellian (Animal Farm, that is) attitude of “some pigs are more equal than others.” We grew to have greatly divergent attitudes about how to run our law practice and how to handle the financial management of the firm. In retrospect, I didn’t look out for my own interests nearly enough. What I’ll do differently next time: Honor my talents and efforts. Set up systems (such as better budgeting) and gatekeepers (such as a bookkeeper) to prevent the partners from dipping into the company funds.
- We didn’t communicate our personal goals as they changed and grew. Over the years, my desires, needs, and interests took a new path. I had significant lifestyle changes. Getting married and trying to have a child places a totally new perspective on work, the time you can spend, and the money you need and want to generate. What I’ll do differently next time: Voice my needs more actively. Take more time to gain clarity on what those needs are.
How could our partnership agreement have helped? Actually, it was a very well-written partnership agreement. But in the end, a partnership agreement is only as strong as the partners who are willing to abide by its terms. When communication falters, the bonds of accountability, integrity, and trust between partners substantially weaken. Keep your partnership agreements strong by making your partnership relationship stronger. Open the lines of communication. Don’t shy away from the difficult issues or allow the distraction of busy-ness to interfere with the vigor of your business.