How do I deal with a 50% business partner who can't hold up his promises?
Right now I own 50% of a technology startup aimed at real estate agents. I am responsible for developing and maintaining the upkeep of all the software associated with our business. The other partner is in charge of selling the product, however, he gets way too distracted with other life things such as his real estate work. Although he makes promises and tries to motivate me to keep working on our business because he will "sell the crap out of it", I still don't feel a solid effort on his part. Should I try to find a way to kick him out or continue to engage him to sell our product? Thanks.
Tough position to be in, but try not to resort to drastic actions **yet**.
It sounds to me like you're in a classic first-timer dilemma. You two had great idea and great intentions, but forgot to document expectations and formalize commitments. I see it all the time.
Step 1: Hold an emergency board meeting (which is presumably just the two of you) to discuss targets and goals for the business for the next two quarters. Document it in the formal minutes, including the some light (non-hostile) verbiage on accountability for those goals.
Step 2: Agree to give each other one week to come up with a short list of high-level commitments (3-5 items per person) that you are going to achieve over for the current and next quarter (each quarter gets it's own list, no duplicates). The intent is that each of your quarterly objectives help to move the company towards the goals you both agree to in the board meeting.
Step 3: Have another (less formal) meeting to review each other's OKRs (objectives & key results) [this is what we call those quarterly lists] to make sure you're both still on the page. It's important not to impose your ideas on the other person's OKRs. You can challenge if they are taking on too much or too littler, but never let yourself add items to their list (or vise-versa). The highest form of accountability comes when people set their own agendas.
Step 3.5: In that same follow-up meeting, discuss KPIs (key performance indicators) that you'll use to measure the progress in all those OKR items. Then schedule the next meeting before you end this one for the end of this quarter.
Step 4: In your quarterly review, take a look at the OKRs for both of you. Quantify (leave emotions at the door) how you did through your KPIs. Don't expect 100% of objectives to be met, but 60-80% is a good number. Closeness counts in OKR reviews (it's not all-or-nothing). Now is the time to start asking about commitment realism and if you and your partner are on the same page.
Step 4.5: Review and revise the OKRs you've already made for the next quarter (don't plan for the following quarter). Taking into account what you learned from this quarter, reset goals and objectives and set another review meeting for the end of that quarter.
From this point, that's what you keep doing. If your partner continues to fail to hit his/her objectives for two quarters in a row, it'll enable you to have a frank (and hopefully non-hostile) discussion about how realistic they are with their commitments. Then you can either redraw terms (redistribute ownership to reflect a more realistic contribution) or part ways.
Keep in mind minutes and notes should be maintained for all these meetings, since they may come up if your relationship with your partner goes bad. If litigation becomes an issue, you'll have OKRs (that he/she made for him/herself) and meeting minutes to outline a clear case for yourself.
I KNOW IT CAN BE FRUSTRATING to be in your situation, but the worse thing you can do right now is make things personal and make knee-jerk reactions to the situation. Slow down, be methodical, and give him/her a chance. My experience has taught me that in your situation, it's rarely an intentional agenda on the other person's part -they just really aren't good at estimating time & commitments.
You have 2 choices - Buy him out and find a salesperson or deal with the situation. I suggest that you cut ties and keep moving ahead.
Many thoughts here:
1) I assume this is trendingagents.com? I just tried to access the site and got a 500 server error. Is product sufficiently reliable and functional to support sales?
2) if you want to make the partnership work, set up agreed upon performance objectives for each stage in the sales funnel.
3) Presumably dissolution will be "messy" as to residual ownership. Do you have an operating agreement in place?
4) I see you are out west in WY. You might be able to get some local www.score.org support to facilitate a resolution.
Read: "Crucial Conversations" (there are even some free summaries floating around.)
The concepts in this book have been turned into an organizational training program - very good stuff!
Any business relationship and/or agreement should be covered by a contract as to who is responsible for doing what, and also the consequences in the contract for not performing as agreed to in the contract. In reality there is no such thing as a 50/50 partnership in business or in marriage. Without a written contract you have nothing but a bunch of words that have no value.
Engage with your partner now. Sit down and speak to him frankly. if there is going to be a long term problem the sooner you both face it head on the better.
Aim to clarify one of the following outcomes:
1. A plan for him to sell the product, with measurable milestones that you both agree to. If he fails to meet those milestones he agrees to exit the business on whatever terms you are able to mutually agree.
2. He agrees to exit the business immediately and you make other arrangements to sell the product.
3. He won't agree to a measurable plan with consequences for failure and he won't agree to exit.
If options 1 or 2 you have a plan and you know where you stand. Even option 3 isn't a disaster, because you have crystallized a very big problem before the value of the enterprise gets any bigger.
Keep them. The old saying never do business with friends or family is regularly proven. I've found when your dealing with someone who you don't trust you will generally develop systems and processes to reduce or eliminate misunderstandings.
All large corporates have "policies" which are a direct result of people not keeping their promises, management,staff, customers and suppliers.
You would be naive in the extreme to not realise it will not only be your business partner but a large number of people you deal with who will let you down.
This is basic management.
I had my share of that. All the sales my ex business partner closed were a loss for our company. He left customer projects hanging without notification to the customer and left for a vacation abroad. Plus a million other things. So I had a short conversation with him with ALL the available financial figures what I had done and what he had done. According to the law he wasn't filling his duties. After the conversation I had the chance to buy him out for a sum that was satisfactory for both of us - but neither one of us got rich or poor...I suggest anyone who has these kind of problems have a shareholders' agreement well done prior to establishing a company - like we did. It was a huge help. If not, then you just have to be a good, strong negotiator.
Find a happy medium, i.e. suggest an incentive program for him to pour his efforts into so that he can be useful in a way you can see and appreciate. Chances are he's powerless without the right tools.
Dissolve the business partnership. Your question pretty much answers itself...
John time is money and time lost is opportunity lost these are very popular lines quoted by the management gurus. In my opinion you have to do following ;
1. Buy him out if you have the resources.
2. Look out for another partner who has need and passion for your line of business or look for an experienced professional who can take up the role, offer him salary and equity so that he is very much commited.
3. If resources do not permit then have a heart to heart talk with the present partner and tell him to employ you in his other real estate business and pay you a monthly pay check while you continue to develop your start up as advised by him. You have to get smart and put pressure on him so that he values your time and contribution made.
He must realise you have personal commitment to meet them you are putting your time. Many a times without pressure some people don't realise. You have to shake and wake him up to succeed. Good luck.
Read "Slicing the Pie". It is all about this situation. If you are formally locked in at 50-50 it is a bit more complicated but if you both are sincere about it, this will show you how to value the contributions and maybe spur each partner to contribute fairly.
You need a heart to heart conversation about expectations and open up the avenues of discussion...And no soft critiquing on either side, decide if there is a future here, go bottom line, set goals and review each others expectations...If he says he will and does not...then re-visit and leave or move out on your own and start over with you at 51% owner
I think your partner knows that there is a fundamental flaw in the software or the market for it which is why he's not that keen on selling. He may be the reason the software was developed so he's embarrassed to tell you the truth. Look over the product again and see if it needs any radical changes. Start by copying a competitor halfways, then innovate over it.
I have a free e-book for startups and idea generation: http://www.lulu.com/shop/c-k-yap/1-million-business-ideas/ebook/product-21920607.html
Hey guys! Thank you so much for your responses, we have created a legal document with terms of partnership and since I have made this questions things have seriously already picked up. Thank you thank you!
No easy but key is to make sure you have clear deliverables and these are judged by someone other than yourselves (i.e. a non executive member or trusted 3rd party). Be careful not to compare each other based on time spent or busyness as a sales person could spend 30 hours and bring you the biggest deal of your life and you could spend 2 years and only just get the software right.
First try to understand what the problem is. Sometime the problem are not people.
But if you are thinking not to continue with your partner. Assume the things with out him. Is it sounds good, then you can go on table and talk to by logical points.
If you have not done this already - take up the time to document a business plan with roles and responsibilities for each partners. The business plan should include some SMART goals for each partner (specific, measurable, achievable, relevant to your business, and timely/time-bound). Your business plan needs to include consequences (what happens when the SMART goals are not met or delivered).
Including SMART goals (milestones on when you both agree that the goals will be met) - you will have a better footing on whether he is making a solid effort. If/when those milestones or deadlines are not met - then you follow-through on your "consequences" --or next steps that you both agreed to upfront.
Taking the time upfront to map this out - saves you a lot of anxiety in the future.
Let me know what you decide to do.
Quick answers, and definitely not an exhaustive list - just based on my own experience:
1) try to buy his shares back. point here is that he will get nothing without you being involved so question is to be credible in showing your determination in not making any progress until you two find a solution. he might be attracted by the short term gain, but at least you regain control on future earnings.
2) try to find a "buyer" for your project, and you negotiate a deal with the new owner so that you can get a fair deal of the project - for instance: get %%% of revenues for x number of years. expect to loose value no matter what, but keep in mind that at least you will get something out of it instead of nothing.
3) this one is tricky but it might be the only solution and you must have solid evidence to support your action: gather all claims/promises that your partner made, even BEFORE your two went into a deal. it is called something like "pre-contract info exchange" and law states that parties engaging in a relationship must do so in an honest way. So if you can prove that your partner lay to you in order to contract with you, you could fight him on these grounds. This might really scare him off as you could sue him for damages as well. You might even want to prepare this option just to be in a solid position to negotiate point 1 or 2.
Hello John, that can be a big concern, but I would review what your initial agreement was, if documented or verbal I only mention because you need make a sound decision that will not hurt your new business venture that is what is important right now. And the right approach is communicate with him face to face and ask him what his intentions ours, and explain to him the level of commitment you need to launch your technology so that the business will grow, especially at this early stage of you launching it. If you don't establish a communication process with him now, you may lose a foot hold on getting him to focus. because the way it seems from your description he does not see the big picture, and the growth you both can experience from your technology.