You and your business partner started this business venture in the cannabis industry with excitement, a desire to succeed, and a business plan built on common ground. But just like other relationships some stick and some don’t. The best thing you can do when entering a business relationship is to have an exit strategy- hopefully, you don’t need it but if you do then you are prepared. Redbud Advisors brings you tips for breaking up with a business partner.
At Redbud Advisors we have seen the good, the bad, and the ugly in the cannabis industry with business partners. And we can tell you when it is good it is really good but when it turns bad it can turn ugly really quickly.
A little insight: The average business startup breakup rate can be 20-30% higher than divorce rates! The average divorce rate in the US is currently 44.2%. The rate business startups break up doesn’t look appealing at all. If failure starts to creep in, knowing how to end your business relationship can be valuable.
Because of our experience, we cannot drill it into you anymore- BE PREPARED. And when we say “be prepared” we mean before you look to break up with your business partner.
It is worth mentioning, things don’t have to be bad for business partnerships to end. It could be a matter of moving in different directions, retirement, or various other reasons. Not all business partnerships end badly. However, when relationships tend to end it isn’t always pretty and can even be public.
Before we get into how to handle breaking up with your business partner we need to identify some red flags you should be looking for to end your relationship with your business partner.
Trust Your Gut
If you feel something isn’t right with your business partner or the relationship there is probably a reason for it. This means it is time to sit down and address the elephant in the room.
This conversation will hopefully ease any tension and give you all a chance to work through any issues at hand. But if not then this will be a good sign to start talking about dissolving your partnership.
Lack of Interest in the Business
The business is what started your business partnership if someone is losing interest or drive this can lead to a strain. This type of strain doesn’t only affect the owners but the employees as well.
A reverse effect is when one business partner starts calling all the shots and doesn’t allow room for their counterpart to weigh in on decisions.
Drama Drama Drama
There is a long list of situations we can list under this topic but we will keep it to just a few.
When your business partner is dishonest or starts hiding information from you- This is a huge red flag. This can cause a plethora of issues but we won’t go down that rabbit hole today.
Issues with your business partner and other employees. This will directly impact your business and your relationship with your employees, which can bleed into your customers.
Another issue is salary, if the salaries do not match or align with the original structure of the business this can cause animosity between partners. The workload can also cause animosity between partners especially if the salary doesn’t reflect the workload of each partner.
Those are just a few of the red flags someone might see in a business partnership but there are many more reasons someone might be looking to break up with their business partner.
At Redbud Advisors we are not attorneys (but can refer you to a good one if you need it!), with that said, there is a right and wrong way to go about breaking up with a business partner. Our best advice is to keep it professional, these are our best tips on how to do just that.
Communication
As with any relationship, effective communication is key. If you are at the point of ending your business relationship, communication is just as important as it was when you were still running a business together.
We advise you to communicate when you feel calm. Negotiate, make business decisions, and otherwise interact with the company when you can separate emotion from operational choices.
This will set you up for the most success during your breakup process.
Priorities
Determine your priorities. By now you should have a pretty good idea of what these are if you are wanting to dissolve your relationship with your business partner.
It is crucial to identify what business matters are most important to you. You should start by evaluating the financial and operating consequences of a buyout, business classification shift, or any other solutions on the table.
Exploring tax implications, your personal financial situation, and future goals before deciding on any terms will help you make an educated decision as to what is best for you and the business.
Seek Professional Guidance
Get professional help! It doesn’t matter if your business partner is communicating and on good terms with you or not. The professional help we encourage you to seek will assist with other aspects that maybe you didn’t anticipate when ending your relationship with your business partner.
Attorneys and financial advisors can provide advice on how to approach a shift, what terms to ask for, and when to finalize decisions. You will most likely need to revisit the operating agreement and gain a full understanding of the business’s financials to protect your interests before acting on an exit strategy.
Working with an attorney or a full-service cannabis accounting firm or both during the separation process is like using a compass to guide you in the best direction personally and financially.
The Conclusion
A business partnership is only as good as it feels. Stay while it’s good and get out if it gets bad. There will be pros and cons to all options you are weighing when breaking up with a business partner. This is why we advocate for you to get professional help with dissolving a partnership. Doing this will ensure you have all the information when making your final decision.
Our hope is the Redbud Advisors team has helped identify any red flags as to why it is time to end a business partnership as well as given you resources on how to handle the breakup. Business partnerships can be difficult but if handled correctly they can be a good thing.
If you have any questions or need assistance we are happy to help. Don’t hesitate to send us an email at hi@redbudadvisors.com or give us a call at 866-830-5144.
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