Dr. Roxanne Arnal, CFP®
Are you considering joining another individual or individuals in an ownership position? If so, this is what I call a business marriage. It’s the amalgamation of two or more people to operate a business. When two or more people come together, we generate opportunities but can also expose ourselves to potentially disastrous outcomes.
The Positive
Let’s face it, we are better together. As the proverb goes, “Two heads are better than one”. When we can tap into collective brain power, we have the ability to create exceptional things. This can include growth at a faster pace, a share in responsibilities, or division of management duties. All of which can be good things. The start to any great marriage is a sound relationship built from trust and understanding. It requires honesty and a shared vision.
The Negative
We all begin our business marriages as friends; beginning with a mutual respect and recognizing perceived strengths and weaknesses in each other. Take note that I said “perceived”. But have you had tough conversations? Have you reviewed how you may respond to undesired things happening? Have you encountered serious strain in this relationship and worked through it to find resolution when things got challenging or you disagreed? This is where things can start to derail.
When I was a practicing Optometrist, I believed that my new partner would be a great co-manager because they enjoyed handling personnel issues and I had grown weary of it. My new partner had been my associate for over five years, and I assumed they understood my business philosophy- the one that permitted us to grow exponentially in those preceding years.
In hindsight, I made assumptions and failed to recognize the need for frank conversation. It wasn’t that either of us was intentionally misleading the other. It was simply the result of our perceived understandings and expectations.
Expectations Can Lead to All Sorts of Misery
When someone lets you down, more often than not, they didn’t know what you expected of them. It’s virtually impossible for them to meet our unvoiced expectations. Frustration ensued and emotions rose to the surface. We eventually move on, but we rarely forget. Now we are keeping score.
Step One
Like pre-marital counseling, a successful business marriage also needs proper planning. Working with a qualified advisor to walk you through all that might go wrong and to identify and clarify expectations is step one. When our clients are considering a business marriage, we work through a thorough process of interviews and mediation to help them prepare the shareholder agreement or joint venture agreement template to take to their lawyer for legal drafting. We facilitate important conversations that need to be had before any hardship may surface. All parties get to express their interests before a crisis occurs. It sets out all the rules that the parties agree to play by. We consider all the options and the ‘what if’s’. No one ever starts their day thinking “Today is the day I’m going to fall ill and not be able to go to work for 6 months”. But should that happen, then what?
Legalities
A buy or sell agreement should be executed concurrently with the signing of the shareholder agreement or joint venture agreement. Though great for helping us get through the paperwork, I will caution you that not all lawyers are of equal competence in this subject matter. Even a great corporate lawyer executing your buy or sell agreement will often place less importance on the shareholder agreement or joint venture agreement. Despite looming deadlines, the desire to quickly create a clean year end, or to make the bank deadline, having the rules of your business marriage clearly defined and executed is paramount. Plan the marriage, not just the wedding. Time, good communication, and the proper paperwork are all necessary to choose the right partner in marriage and business.
Advisory
As your Chief Financial Officer, I’m here to champion your successful business marriage. I have, personally, lived the results of a poorly created (and never executed) shareholder agreement and a bitter business divorce. I have witnessed other businesses implode because they were all friends until one partner just stopped showing up entirely. My experiences demonstrate that we can’t leave something so critically important to chance.
I help you manage a team of financial professionals and ensure that you have thought about the potential issues and opportunities. Helping you succeed is our focus.
Have more questions than answers? Educating you is just one piece of being your personal CFO that I offer. Call (780-261-3098) or email (roxanne@c3wealthadvisors.ca) today to set up your marriage prep.
Roxanne Arnal is a former Optometrist, Professional Corporation President, and practice owner. Today she is on a mission to Empower You & Your Wealth with Clarity, Confidence, & Control.
These articles are for information purposes only and are not a replacement for personal financial planning. Everyone’s circumstances and needs are different. Errors and Omissions exempt.
