Having a business partner brings with it a commitment to work together through highs and lows. Over time, you’ve probably developed a close relationship, a strong and consistent collaboration, and a deep level of trust with your business partner. Because of this, it poses a difficult challenge when you have to let your business partner know of your intention to exit your business.
Exiting your own business is tough work, and having a business partner adds a unique twist to the process. No matter what your reason is for deciding to exit your business, your business partner should be one of the first few people who should know about your intention.
There are many things to consider and outline for your conversation with your business partner, and we’ll share with you some tips to communicate your intention in the best way possible.
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Tips for your initial conversation
Planning and preparing for your business transition with your business partner takes a lot of effective communication skills. After all, 70% of business partnerships fail because of poor communication and low trust. If you’ve already decided to exit the business, we will try to help you effectively communicate for you and your business partner’s well-being, as well as for the good of the business.
It’s normal to feel nervous before difficult conversations like this. After all, you’ve been through many different accomplishments and obstacles together. It is also nerve-wracking because whatever transpires in this initial conversation will pave the way for the future of your business and will impact your relationship.
You may also want to think about having an advisor with you to provide objectivity. It’s normal to feel emotional during this time, so having another person there may help keep your discussion focused.
Planning ahead will help you cover all your bases. Ask the tough questions and prepare solid answers for each. Try to think of the most appropriate time and place to have a talk. Thinking of the different possible reactions and outcomes in advance of the initial conversation with your partner can help you discuss things objectively and not be driven by emotions.
It is important to share openly and communicate. Your business partner has every right to be in the loop concerning your intentions and decisions. Just like every other important business decision you’ve made together, exiting your business also requires both of you to move toward a plan of action together. There is no better way to do that than to be open with what’s going through your mind during this time. Who knows? Your business partner may help you deal with your thoughts and emotions and help you come up with effective solutions or plans for your concerns.
Now that you’ve shared what’s on your mind, it’s also important for you to focus your attention on what your partner has to say. Your decision to exit the business will surely affect him or her significantly, so it’s important to show respect by actively listening. During this time, it’s critical to provide support to your business partner. Acknowledge what your business partner thinks and try to understand his or her emotions and thoughts throughout this time. Your empathy will help the process move forward as you come up with a game plan together.
This is where your tried-and-tested partnership comes in. Now that both of you have been open with one another, it’s time to work together toward the good of the business. It’s important to set boundaries for each other and discuss expectations so you know where you can compromise and respect each other’s non-negotiables. Come up with a mutual agreement and a plan of action moving forward. Try to envision different outcomes to arrive at the best one for both of you and your business. Consider different suggestions and put your ideas together.
If it doesn’t get finalized in one sitting, don’t worry! Agree on a schedule that both of you can commit to. After all, plans like this often require a lot of time and effort.
Having a buyout agreement
Having a buyout agreement with your business partner can help you both prepare for almost any circumstance. Ideally, this agreement should be created during a time when both you and your business partner are objective and experiencing the “best days” of your business. This agreement will be your guide when significant transitions or changes take place and impact your business.
Details of a buyout agreement
This document outlines common triggering events that will affect your business significantly, and they range from the retirement of a business partner to the incapacity to run a business. It also includes information on the business’s value or how to compute it. Knowing your business valuation will help you make informed decisions that will benefit all parties financially.
Your buyout agreement can also include other documents that will help during different events. For example, if you or your business partner has a disability and wants to continue running the business, there should be a clear insurance policy on it.
Options moving forward
Selling the business
Selling the business to your business partner, or to a third party, is one option you can discuss. This option depends on the ability of the business and your partner to continue what both of you started without you.
You may also look into liquidating your business, especially if there is a high demand for the products or services your business provides. This may be a mutually agreeable option when both you and your partner decide to exit the business.
Just like with every decision you’ve made together throughout the life of your business, exiting the business is another decision that both of you need to discuss and agree upon.
Having a business partner is a benefit at this point, as long as you communicate effectively with one another throughout the exiting process. Discussing ideas and plans that are best for your business can only be done effectively when you and your business partner are open and trusting. At the end of the day, having another trusted perspective helps in planning for your business transition.