I’ve felt like a bit of a marriage counsellor this week, where the underlying cause of the businesses underperforming – or not doing as well as they were – was down to the strained relationship between the business owners.
Without naming names, here are some of the interesting bits, and the lessons to be learnt.
Never invest in a business without a shareholder’ or partnership agreement and a clear business plan, even ( especially) if it’s with someone you know well. What starts out as a marriage made in heaven, can prove to be emotionally and financially draining if the business owners are not all clear about the direction and vision for the business, how they are going to achieve it and what their expectations of each other and the business are.
This all sounds simple stuff but you’d be amazed at the number of times businesses fail because of a breakdown in communication and relationship because of separate ‘hymn sheets’ and the business is (literally) being pulled in conflicting directions. And if you’ve got any staff working for you, they can sense that something is wrong which can also affect their performance.
In most cases, it’s possible to act as mediator, to help them find the common ground again, and get their mind focussed back on success of the business, effectively getting them to thrash out an agreement or business plan before the horse has actually bolted, and get them back on track.
However I did get asked for some advice from a solicitor friend of mine, where things were less certain – her client had invested in a business for a 50% shareholding and directorship, but the relationship had now broken down. The other director had removed her client’s directorship from Companies House, taken him off the bank account, and it was suspected he had moved stock out of the business.
So what could they do and how could they get their investment back ? Not a great situation, obviously – and in the absence of a shareholders’ agreement detailing the terms and conditions of the investment, the potential for full loss was quite high – as it is for any share investment – but there were a few practical things that could still be done to stand a chance of recovery.
Obviously it’s far better if this situation can be avoided in the first place and a well-documented Shareholders Agreement or Partnership Agreement covering all the issues that could arise, will be a great start - the corporate pre-nup, so to speak!
For someone who specializes on the nuts and bolts of business performance, I have to say that the emotional and interpersonal issues are always the hardest to handle – but when it works out, and both the business and friendships are back on track, it’s definitely a good feeling.
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