Here’s What’s Happening to Strained Business Partners During the Pandemic
A business partnership isn’t all business. When two people start a company together, they often were friends already, and they see that bond strengthened by the hard work they put into building it up.
So when things go south, it can be traumatizing.
In fact, the emotional stages of the breakup of a business — what people in my line of work sometimes call a business divorce — are strikingly similar to that of a marital divorce.
Just as Covid-19 has put a financial and emotional strain on marriages, it has also strained business partners struggling to work through the pandemic. In some cases, the pandemic is also making pre-existing issues harder to avoid.
Many business owners say that they knew they had issues in their business partnership arrangement before Covid-19 and their problems only worsened in the current climate.
A business divorce is by far the most traumatic event that a business owner will experience. The foundation of a business partnership is usually a familial relationship or a very good friendship. Just as employers tend to hire people they’d like themselves, people tend to go into business with people they have strong relationships and connections with.
Business divorces typically evoke the same feelings of stress, resentment, doubt, blame, betrayal, guilt, fear, and other emotionally fueled reactions seen in a typical divorce.
In fact, they go through somewhat predictable stages of grief.
1. Disillusionment and Denial
Denial is when a business partner knows there is a problem but has trouble acknowledging the gravity of the situation and the possibility that there may not be an amicable resolution. When this is present a business partner may have stored resentments, feelings of a breach of trust, and overall discontentment towards the other person.
This usually manifests itself as a feeling that the other partner is not pulling their weight and doing their part to help the business thrive.
There are a number of decisions that will need to be made about how the business will continue to operate, if at all, after a partnership separation and denial allows a business partner to distance themselves from the likely reality that the business structure and the partner’s responsibility will undergo significant change if the business is separated.
2. Letting Go
In this stage, a business partner realizes that there is nothing that can be done to salvage the business relationship and that separation is inevitable. This is usually followed by a strong desire to review as much information as possible to understand the current state of the business and the options available to value and separate the partnership interests.
3. Deciding to Divorce
In this phase, the partners discuss their discontentment and float ideas about how to separate their interests. If one partner strongly feels that they were blindsided or betrayed, this will set the tone for how the business separation will proceed and the process of exchanging information and completing the steps to finalize the separation will no doubt be contentious.
4. Acting on the Decision
In this phase, the partners learn how much the business is worth and decide what they want in the separation. Do they want to stay in and operate the business, do they want to sell their interest and go work for another company or change fields completely, or do all partners want to sell to a third-party?
All of the foregoing options will be largely dependent on a valuation of the business and may require a partner to start the process of obtaining a loan or financing to buy out the other partner and continue to operate.
Filling out loan applications and hiring accountants and/or lawyers, to value the business and draw up a separation agreement, coupled with publicly announcing the separation, all make the emotional and physical act of separating a business very real and can cause emotional flareups.
5. Acceptance and New Beginnings
Adjusting to a new normal, whether that is continuing to run a business without the partner who was there from the beginning, or starting anew with a job at another company, requires acceptance.
The changes force partners to create a new identity and make new plans for the future, inevitably forcing them to regain a sense of power and control in addition to reconciling feelings of animosity, blame, anger, and forgiveness.
Although the old saying has it that some things are “just business,” it’s never that simple. A business divorce can evoke the same — if not more — emotional turmoil on everyone involved.
D. Margeaux Thomas, founder of the Thomas Law Office, has been assisting small business owners with resolving contract and partnership disputes for nearly 15 years. The Thomas Law Office based in Fairfax, Virginia assists clients throughout the greater Washington, D.C. area with breach of contract claims, non-compete issues, and business torts. Attorneys at the Thomas Law Office also help companies through all aspects of business partnership divorce, including records inspection requests, valuation, buyouts, and dissolution. To learn more, visit: https://thomaslawplc.com