You were all excited about a new business idea. There were meetings in conference rooms, living rooms, and pubs where your business plans were discussed and your dreams were formed. Years into the business, conflicts begin to arise. Perhaps there isn’t enough money to go around. Perhaps there are power struggles. Perhaps visions for business success begin to diverge. Perhaps you are contemplating a business divorce.
If you were like the minority of the people I’ve helped over the decades, you have a solid operating or shareholder agreement. The dispute resolution mechanisms in that agreement should be your first choice to resolve the dispute. If you or your lawyer did their job, the very dispute you are having may have been contemplated in advance. If you are like most people that started businesses, that agreement was something you threw together because the bank said you needed one. A prime potential for creating a lasting solution to conflict lies in relying on, amending, or completely re-writing the agreement. Times change and agreements sometimes have to change too. You can hire an attorney on behalf of the company to write or amend the agreement. You can also engage in mediation with the goal of creating a mediated agreement.
At this point in my career, I am far more interested in mediating business owner disputes than litigating them. Far too many times, I hav
e been hired by an owner or group of owners to enforce their will on their partners in court. It can be the only option when there is an owner that no longer has the best interests of the business at heart. It should, however, be a last resort. Litigation is costly. If you think divorces are fun then, by all means, solve your business dispute this way. The lawyers are more than happy to be paid while you fight.
The costs, however, are high and the child in this relationship is the business itself. Litigating business management disputes often involves threats or actions to force the liquidation of the company. At a minimum, litigation is going to detract from attention and resources that the business needs to succeed. Here are some common causes of dispute that I have encountered in my practice:
EGO
“The challenges they had faced together had taught them humility—the need to subsume their individual egos for the sake of the boat as a whole—and humility was the common gateway through which they were able now to come together and begin to do what they had not been able to do before.” Daniel James Brown, The Boys in the Boat
You don’t make it far in business, or even have the courage to start one, without confidence. There is a line somewhere, though, between confidence and ego. Where confidence gives you the courage and resolve to do what needs to be done, ego demands recognition for that sacrifice and believes that it alone is responsible for the business’ success or the victim of its failure. When you are in a business partnership, ego can become the enemy of righting the ship.
MONEY
When the business is experiencing financial difficulties, tensions are inevitable. It’s one the primary stressors on any relationship. The trick in business is to understand when the money problems are causing relationship stress and when relationship stress is causing money problems. Jeff, in addition to representing small to medium size businesses and their owners, has helped hundreds of individuals and business owners facing financial difficulties and insolvency. With his MBA in finance, he can help you assess what kind of money problem you have.
It may seem obvious, but the best solution to a business with financial struggles is not for the owners to start suing each other. It may be time to close the doors and move on to the next opportunity. In that case, an orderly winding up of the business and protection of owners’ assets in the best course of action. One owner may be willing to buy the other out (or you can do a double blind bid by each to buy the other out). Where conflict is preventing the business from growing though and the relationship is salvageable, though, a negotiated or mediated restructuring can help put it back on the right path. An experienced business dispute mediator can help you see solutions beyond those you can see on your own.
LABOR PROBLEMS
Ownership and the employees can come into dispute. When morale is low, business productivity suffers. Boyd, Kenter, Thomas & Parrish has been active in labor negotiations for decades. Jeff has personal experience with labor and employment issues from the employer and employee perspective. There is the potential for mediation to address the concerns of these two groups…or you can try another team building exercise.
THE TRAITOR
An owner or key employee may have jumped ship and become the competition. These scenerios often do need litigation. If you have a non-compete, the Court will likely grant you an injunction to prevent them from injuring the business. Without one, you will have to overcome the presumption of professional mobility with evidence of unethical and illegal business practices.
In the case of the traitor, negotiation may only be possible when you obtain leverage over them in Court.