Successful partnerships in business have many advantages. The successful ones work because partners have learned how to work together and to bring a variety of skills to the table. Good partnerships can also bring a sense of well-being that can lead to carelessness in thinking that problems can always be worked out. The following true example demonstrates how this can become very costly.
Company X had four partners that had been able to work well together over several years; they had never taken the time to implement a buy-sell agreement between the four of them. Over a short period of time, one of the partners became ill and died. This created problems in the ongoing operations because no succession planning had been done. The biggest problem came when the partners approached the deceased partner’s spouse to buy her out. The offer made was fairl based on a recent valuation of the business. The spouse was in no emotional state to recognize that. She hired her attorney to bring a lawsuit to try to get a better deal. One year, and $300,000 in legal fees later, she accepted basically the same deal that was originally proposed. The cost to the business was much than $300,000 when all the disruption was taken into account. It took several years for the business to recover.
These problems could have been averted had the partners taken the time to implement some simple risk resolution solutions. It is not uncommon to see business partners who have taken the initial steps in addressing these issues , but because there were no programs in place to track the solutions against desired results, the implemented solutions become outdated. Risk resolution must be a dynamic process, not a one-time implementation.