I read this past week that Hayley Barna is no longer Co-Chief Executive Officer of Birchbox (a beauty subscription company). Birchbox co-founder, Katia Beauchamp, is now CEO (formerly Co-CEO). Although no reason was given for her departure from the company, their official statement says that she will continue her relationship with the company as an advisor and member of the Board of Directors. Apparently, in a previous Inc. magazine interview, Barna and Beauchamp talked about how they structured their business relationship early on. Barna was quoted as saying, “(It’s) questions like, “What happens to your equity if you are no longer working full time at the business? … It’s almost like having a pre-nuptial agreement before you get married.” The two are friends who met at Harvard Business School.
Last month, brand face and co-founder of Burt’s Bees (a personal care products company), Burt Shavitz, passed away, and we were reminded of the humble beginnings of the now global brand. Burt Shavitz and his girlfriend, Roxanne Quimby, founded the company in the early 1980s. She brought her creativity and entrepreneurial skills to the table, and he brought his bees and expertise as a beekeeper, and they formed Burt’s Bees, giving a one-third stake to Shavitz and the remainder to Quimby. The business expanded, but by the mid-nineties, their personal relationship had expired and in 1999, Quimby bought over Shavitz’s stake with a US$130,000 house in Maine. In 2007, she sold the company to Colgate for US$295 million.
Business co-ownership is like a marriage. Most people go into it trusting, optimistic, and expecting happily-ever-after, but the truth is that, even in marriage, sometimes people drift apart, goals change, true personas are revealed and the relationship falls apart. What happens to the relationship, the products of the relationship and the things acquired during the relationship when one party is ready to move on?
Partnerships can turn once best friends into bitter enemies and create feuds that continue for generations. Just as you would before accepting a marriage proposal, there are several questions that you must ask yourself and get satisfactory answers to before you decide to form a partnership with someone. They are sometimes difficult but very essential questions.
Compatibility — Can I work with this person? There is no point going into business with someone whose work persona is not compatible with yours. If you think differently about business ethics, work productivity, and even the level of personal sacrifice needed to get the partnership off the ground, then you probably should not be in business together. Your compatibility is crucial because as the saying goes, ‘a house divided cannot stand.’ On some level, you must be able to vouch for your partner.
Long-term vision — Do I have the same long term vision as my potential partner? In what direction do we want to grow the business? Are we on the same page about how to handle the finances? For instance, to grow the business, are all partners willing to take home a smaller share of the profits so that more capital can be invested into the business?
The Benefit — Is the partnership mutually beneficial? This is where you allow your selfish side to rule. You must gain something from a partnership: additional skill, resources, or just simply economies of scale advantages. Two heads, they say, are better than one, and more heads are better than two. The partner may bring something to the table that you lack – their network of friends and/or business associates, administrative skills, or something else that complements the skills that you have.
Intimacy – Can I be intimate with my potential partner? A partnership forces intimacy on all parties involved. You must share information, make yourself and your resources available for the benefit of the partnership and spend a lot of time together ensuring that the two entities function seamlessly in the partnership. When partners are intimate and committed to the partnership, then issues of sabotage and conflict of interest rarely arise.
Accountability – This is closely related to intimacy. The whole point of going into a business is so that you can make money. You go into a partnership because of the potential to leverage on both skills and resources to make money for yourself and your partner. Nobody wants to feel that they have been cheated, which is why transparency and accountability are essential. The rules about finances must be clearly spelled out for and respected by all concerned.
Exit – What if something goes wrong? How will you end the partnership? Unfortunately, people do not like to think about the possibility that a partnership will fail. Including an exit clause in the articles of incorporation may seem like a pre-nuptial agreement, predicting doom for the relationship, but it is better to think of the what-if situation when everyone is still ‘friends’ because if/when something goes wrong and the partnership has to fold, rarely are people rational in the decisions they make at that point. This is the main ingredient for bad blood and lengthy legal battles.
So, while your university roommate might have been a great study partner or the perfect person to unwind with, they may not be the best business partner for you and that is okay. Do not go into a business partnership with your heart alone. Use your head so you don’t get burned!
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