The SOP: Ending a Relationship With a Business Partner

Stephane Grabina, president of Excluservice in North Bethesda, Maryland, has been through the process of splitting up with a business partner—and his experience is proof it doesn’t have to be messy.

In a conversation with Ratchet+Wrench, he broke down the steps he took to satisfy both parties and how to move forward after it’s over.

Knowing When it’s Time

My partner was a silent one, meaning he never had to be in the office. He had recouped his investment and then some by year seven, which is when COVID hit. Afterwards, he became skittish about investing and contributing any more money. His first reaction was to shut the business down, and I said, “Wait a minute.”

At that time, I had heard about the loans that the federal government was going to put out that would pay for labor. So, I said, “I think we'll be all right. We'll get these loans, they'll get forgiven, and we'll move on.” He saw money in the bank, since we had all those loans—but he didn't really understand the business aspect of it. I probably should have done a better job of having more meetings and communicating with him, “Yes, we have all this money; but it's not ours. This is going to pay for payroll for this amount of time, and we have to pay this loan back.” 

Between his paycheck and my paycheck, we were bleeding money, and so we had to make a decision. I said, “Hey, I'd like to buy you out; or you buy me out. But either way, we can't both stay on payroll and survive.” His initial reaction was a little aggressive—but when he called our accountants and they confirmed what I was saying, then he understood.

Tailor a Deal That Works for Both

The most important thing is to figure out what's important to the other person. And sometimes it's difficult to figure that out. A lot of folks would reply with “money.” But what do you want to do with it? And some people aren’t always open about that. Maybe they want a boat. So, what if I financed the boat for them, or bought it outright? You have to figure out what they want and then solve that problem. I learned that from reading “Never Split the Difference” by Chris Voss.

In the case of me and my partner, he said he didn't want to return to public health insurance. So, I asked him to come up with a figure, and I would pay for his health insurance up to that dollar amount. And that's what we did: I had lawyers drop another contract stating that Excluservice would buy the shares back from him, and in return, he would be paid in health insurance premiums up to the amount of $60,000.

My situation may be different from others. Some business partners may be stubborn and not understand the valuation of the business, or what all goes into running it. As the person who's running the business, you will have that leverage. I wasn't thinking of that at the time, but if you're in a situation where you have a business partner who isn't involved in the business, you do have that leverage. Because if you walk out, they’ve got a big pile of nothing that they can't do anything with.

Don’t Walk Away Without Reflecting

Nobody ever wants to acknowledge that they did anything wrong. It's always the other guy's fault. But when ending a relationship with a business partner, you have to figure out what went wrong—if anything did—and how you acted on that problem.

What I did wrong was that I did a poor job of communicating regular updates on how the business was doing. Part of me was ashamed that we had gotten to a point where our overhead was that much. I waited until it just got to be too much, and at that point, it was too late. You can't do that. You have to stay on top of it all the time. 

Set up a regularly scheduled meeting and talk about every aspect of what's going on. Sometimes your business partner may have information about something that you don't have, or they may just be good at asking questions that will make you question your finances. 

So try to communicate on a regular basis—whatever that means to you. For me, it should have been once a month. We should have had a meeting after the bookkeeper was done with the PNL at the end of each month to talk about the status of where we were, what we were doing to make things better, and then hold each other accountable to that.