In Marvin Storm’s Business Exit Strategies Podcast Episode titled: “50/50 Is Not Always Nifty – Partnerships That Don’t Work, Champ and Loyd Rawls share 4 different stories illustrating the potential, possible and probable issues impacting the ongoing success of the business. Highlights include:
The CONTROL Rod:
A family operation with three kids never had a disagreement while mom, the matriarch of the family, was around. However, when she unexpectedly passed away, the kids spent the next 10 yrs. and $5M in legal fees trying to sort out their differences.
When the control rod, Mom, in this instance, is around; everyone “behaves,” because otherwise, she will set everyone straight. However; when mom, dad, or whoever acts as the generational control rod is no longer around; that is when family and managers can begin to jockey for position. The good news is, there is was a way to avoid conflict and millions of dollars in legal fees. We are fond of saying “Agreements Preclude Disagreements. When there is family harmony, team synergy, and the feeling that nothing could ever get “between us” discuss the possible, probable, and potential issues that may arise. This is when you can hash out, how you want them handled; which will save you time, money, and emotional headache in the future!
A riches, to rags and back to riches saga where a family business was devasted during the Great Recession of 2007-2009, and the US Gov’t facilitated the confiscation of their business. This story focused on the power of a group of people, in this case, a family, banding together to keep family finances afloat and save the business. After 3 years of legal battle, the family won back their business. So, where do they go from there? engaging in strategic planning and actively working the plan; they have now grown to one of the biggest and most successful businesses in their industry.
Unless the family or management group is willing to address “difficult personalities,” sometimes succession planning is just not possible. Often there are protected people in the family or management team because they appear to yield a lot of power, are difficult to work with and no one wants to poke the bear. Upside, there is m0mentary peace, downside; this one person can hold both the business and family hostage to their whims and can create a literal wall to getting any succession planning done.
Partnerships are curious creatures. Born out of many different scenarios, partnerships are created from a start-up idea, buying a business, or a family business transition. Whatever the reason, partnerships are made from the best intentions. “Let’s leverage our strengths to build something great, or let’s split it 50/50,” And then everyone lives happily ever after.
In a handful of circumstances, that fairy tale does happen. The operative word is “handful.” In most cases, human nature takes over, and all hell breaks loose. Nasty arguments, harsh accusations, greed, and broken friendships or family relationships are far more common. As mentioned above; AGREEMENTS preclude DISAGREEMENTS and in the event of a 50/50 partnership; a provision to facilitate decision making and avoid deadlock is critical to business growth, success, and sustainability.