COACHES CORNER
Coaches Corner
The Curse Of Small Business : Partnerships !
I
once worked for a company , now public and very successful , where the owner sold 40 percent of his ownership interest so he could access the financial resources required to grow that very capital-intensive business . The new partner brought access to capital , board-level advice , and the desire to have a disciplined approach to running the business , while we brought the domain expertise , winning moves , and hustle that grew the business dramatically . Although not without some confrontation , especially in the early years , this became a successful partnership where both sides made each other better in addition to making each other a lot of money . The partner learned a lot about the realities of running a growing business and used this experience to make other successful acquisitions . We learned the intricacies of how to scale our business from founder centric to professionally managed and globally focused .
However , I ’ ve found that type of successful partnership is rare .
I have been coaching for more than a dozen years and have come to view partnership issues as a major impediment to scaling a business . When I facilitated CEO peer groups , it was the most common issue we dealt with in our monthly forums , and it ’ s often an issue in my current coaching engagements where I work with entire leadership teams . Sometimes the partnership issue is so subtle that people have accepted it as “ how things work around here .” Other times there is obvious dysfunctionality , even outright conflict . Neither is acceptable and both need to be corrected if the business is to grow .
I ’ m referring to two different types of partnership situations , each with its own potential challenges . The first , like the personal experience I described above , is where there is an external partner — typically financial — who is not active in the day-to-day operations of the business . The second and more common source of partnership issue is where there is more than one owner and these partners also work in the business in management or leadership roles .
In the first scenario , the issues tend to stem from different expectations . The financial investor has done his or her due diligence and made an investment in the company . The investor wants profit growth or at least no negative surprises . Generally , the investor lacks strong operating experience ; however , he or she expects to add value by providing sound financial management and strategic advice . The investor is often surprised by the other partner ’ s lack of operating discipline including timely and accurate financial reporting . Sometimes margins erode and some hard conversations inevitably follow .
The operating partner , on the other hand , has welcomed the investment , yet naively expects to be left alone to run the business as usual , often resisting the financial partner ’ s well-intentioned efforts to help the business improve . Nowhere are all the adages about resistance to change more prevalent than when an outsider tries to get the operating company to improve or change things ! The solution to this mismatch is finding the alignment in the goals of both parties . Generally , both sides want to grow so that ’ s a good starting point . With some patience from the financial investor and some openness to new ideas from the operating company , a successful , executable , growth plan can be created . As a coach , I ’ ve been able to help facilitate both sides of these partnerships to find this common ground and move them forward .
I find the second partnership scenario , where partners ( minority owners ) are working in the business , leads to more problems and the solutions are trickier . This type of company structure is common not only amongst formal partnerships like engineering companies or other professional services type firms , but also in contracting businesses , software companies , in fact , in virtually any type of company . The following are some of the issues I ’ ve encountered and some suggestions on how to work through them :
ISSUE : EQUAL OWNERSHIP AND EQUAL PAY BUT UNEQUAL EFFORT AND ACHIEVEMENT . It ’ s a common mistake for owners with
8 | SPRING 2017