5 Ways to Take Command of a Bad Partnership

Business partnerships can be a very convenient way for two or more friends to start a business together. But not all of them prove to be successful business partnerships. Sometimes, the business idea just doesn’t work out. But in some toxic partnerships, one partner might just give up and stop contributing, leaving the other partners high and dry.

No business owner wants to find themselves stuck in that situation. Thankfully, there are ways for an owner who’s still invested in their partnership to take charge and get themselves back on track towards business success. This guide walks through ways to know it’s time to move on and five different steps partners can take when they’ve made the tough call to part ways.

How to Spot the Red Flags That It’s Time to Get Out of a Bad Business Partnership

Every business is going to run into trouble now and again; it’s part of life. Conflict happens. So naturally, business partners shouldn’t just jump ship the first time trouble arises.

But sometimes, partners realize that things just aren’t working anymore, and maybe they haven’t been for a while. Maybe they haven’t been able to positively resolve conflicts for months or years, or the partners no longer agree on what direction to take the company.

It can be hard to know exactly when it’s time to part ways, but here are a few litmus tests that partners can use to evaluate whether they should stick with it or move on:

One partner feels like they’re carrying more than their share of the work.
One partner seems to have lost interest in the business.
The partners find more and more to disagree about.
There have been changes in one partner’s life that are interfering with their ability to function in the business.
The partners want to take the business in different directions.

If a business owner finds that any of those statements resonate, it might be time to move on from the business relationship.

Leaving a Business Partner: A Case Study

Susan (that’s a nickname for a real-world business owner) had a business that was struggling financially and operationally. She was totally disgusted because her partner of 10 years was no longer carrying his weight and didn’t seem to understand the gravity of the situation. She was so stressed that she was seriously considering liquidating the business if things couldn’t be changed for the better in a very short time.

What to do? Her first commitment had to be to herself and her own mental health. Susan realized that it was up to her to take command of this situation. She got some advice from a coach and created some measurable goals with timeframes. She decided she wanted to give the business and her partner one last chance. Susan knew she must bring her partner, and eventually her staff, into the picture in order to get their buy-in.

She created job roles for herself, her partner, and each member of her staff (office manager, buyer, and two salesmen). Then she made a savvy choice to bring in a third party (a consultant) to help her mediate the situation since she felt a lot of anxiety about confronting her partner. As an added bonus, the consultant brought a different perspective to the problem and provided additional insights.

The consultant met with the partner, who was cordial and listened politely, as had been expected. But, of course, he didn’t really get it that things had to change. Susan gave it time, though: three months. Ultimately, when things didn’t change, she had to make the tough call to liquidate the business.

5 Steps to Taking Charge of a Partnership Gone Wrong

Unfortunately, there’s no one right way to get out of a business partnership (yes, there are some common steps that need to happen, but there’s no owner’s manual or cheat sheet to make the process easier). But here are five things a partner should do to make it a little easier to make the split.

1. Review the partnership agreement.

Business partners usually structure their companies as general partnerships (or limited partnerships or limited liability partnerships, depending on their priorities). Some even structure their business as a privately held corporation. Either way, the business has a legal document that binds the partners and governs how they should operate together. In a partnership, that’s the partnership agreement. In a corporation, it’s the company’s bylaws.

In a healthy partnership, all the partners abide by the terms of the agreement. But if one party realizes that the other isn’t upholding those terms, the agreement might give them a starting point for dispute resolution.

If that doesn’t work, the concerned partner would be wise to have an attorney review their partnership agreement to get legal counsel about what options they have for ending it or resolving the conflict.

2. Decide and document exactly what needs to change personally and professionally.

For many business owners, being dissatisfied is a spur that prompts them to take action. But it’s tough to enter into a conflict-resolution stage (or give a partner constructive criticism) if the dissatisfied partner can’t verbalize what they want.

Many partners find it helpful to write down what they want to achieve in both their professional and personal lives. With that information, they can consider the possible outcomes for different scenarios, which can help them formulate a plan to change.

3. Create and write a plan to accomplish those goals.

The most positive thing a business partner can do is create a plan for themself and the business. Then, they can prepare to present that plan to their partner. For example, if they’re planning to dissolve the business, they’ll want to be prepared with the reasons they want to leave and their future plans.

4. Schedule a time to “talk business” with the business partner.

It’s time to “talk shop,” so to speak. A business partner needs to dedicate a specific time to discuss the plan to dissolve or change the partnership. This needs to be an open communication. It might even be helpful to take the meeting away from the office; maybe sitting down over lunch or coffee could be a good place to start. Then, they can present their concerns and their plan to their partner.

Conversations like this can go several different ways. Some partners might be thankful that the concerns were voiced; some might even have come to a similar realization. Other partners might be downright hostile and create friction (it’s essential to avoid starting a blaming match here). Most will need some time to digest the ramifications of the proposal to change or close down the business.

And that’s understandable; most people are resistant to change (at least at first) unless they know with certainty that not making that change would harm them. Criticism can be hard to swallow, too, even if it’s presented well. So, when faced with the potential of closing down their business, some partners might be resistant at first.

It’s up to the departing partner to stick to their commitments to making business decisions that match their goals for positive change. Perhaps this conversation could lead to compromises, but those should only be agreed to if both partners agree with the terms and have the same vision for the company’s future.

If there’s a lot of friction in this conversation and a resolution can’t be reached (especially common in businesses where there’s a lot of financial strain), it may be helpful to enlist the help of an attorney or other business consultant to help mediate. In some cases, it might be necessary to take legal action, but it’s preferable to reach a peaceful resolution.

5. Be willing to walk away if the business partnership can’t be fixed

Some partners will be able to reach a resolution that allows them to keep the business running. Or maybe the partners agree to make changes, but then one doesn’t uphold their end of the compromise.

In either case, it’s pretty clear that it’s time for the partners to go their separate ways. The partners might agree to close the business down, or maybe they’ll sell it outright. Some partners even decide to buy out the other partner (or sell their own interest to them). For the partner who started the ordeal, it’s prudent for them to commit to any option that will let them move forward with their plan. That way, they can move on, whether that means finding a new job, starting a new small business, committing to a new passion project, or something else.

Walking away from a business partnership can be emotional; after all, the partners invested many long hours and lots of effort into building that business. But for some business owners, closing one partnership door can open an exciting new one. At the very least, making the courageous call to end things can free up all the partners to focus on new goals and opportunities.

Disclaimer: The content on this page is for information purposes only and does not constitute legal, tax, or accounting advice. For specific questions about any of these topics, seek the counsel of a licensed professional.