I see far too many people dissolve good businesses unnecessarily. They typically have more options than they think, but they limit themselves by believing they have to figure out the perfect solution before they approach their business partners, employees, vendors, etc.
That’s what happened with a colleague who had formed a business with a friend. He admitted that he knew in the first year of their six-year partnership he had not made a good decision. But he had invested a substantial amount of money in the business, and he had significant experience in the industry. He had convinced himself to stay and save the venture, out of obligation to his friend. He hadn’t considered the sunk cost fallacy that has us keep putting more into failing projects and relationships, rather than admit defeat and change course.
Five years after my colleague first saw his mistake, the irreconcilable differences gave him the excuse he needed to leave. He began calling his former friend names and labeling him. He claimed his partner was making it difficult to leave, when his sunk cost fallacy was probably the true culprit. Without discussing the conflicts with his partner, he had decided he only had four options:
- Sell his portion of the business to his partner
- Sell his portion to a third party
- Give his portion to his partner
- Liquidate the business and split any proceeds
Yet he knew he was “reading the label from inside the jar” and probably needed a mindset shift, which is why he reached out. I reminded him that there could be tax and other unintended consequences to anything he did. I also noted that he seemed to value his relationship with his business partner, even if he didn’t want to continue in the business. That gave us a wider range of options, which he eventually discussed with a business advisor and arbitrator in his home country.
Almost immediately, he responded, “I probably have overthought the whole process and have not considered the outcomes for anyone other than myself and my partner.”
When he began to consider what he wanted for himself, his partner, the business, and their customers, his conversations became more productive. They powered through the negotiations despite the global coronavirus pandemic, and eight months later, they have an agreement that addresses the tax implications and everyone’s needs.
What he learned: Don’t try to make the decision for everyone else involved and then deliver it as though it’s some sort of gift. An owner’s departure has an impact on others who should be included in the decision-making. (Please try this at home.)
Want a do-it-yourself program?
Prefer a little more guidance?
Need one-to-one coaching?
Nance L. Schick, Esq., is a workplace attorney, ethno-religious mediator, and conflict resolution coach based in New York City. Her goal is to keep you out of court and build your conflict resolution skills so everyone has a better work experience. She helps managers and business owners have empowering conversations about emotionally-charged issues such as gender, race, religion, and disability. She is creator of the Third Ear Conflict Resolution process, author of DIY Conflict Resolution, and an award-winning entrepreneur acknowledged by Super Lawyers (ADR, 2018 & 2019), the New York Economic Development Corporation/B-Labs (Finalist, Best for NYC 2015 & 2016), U.S. Chamber of Commerce (2015 Blue Ribbon Small Business), Enterprising Women Magazine (Honorable Mention, 2014 Woman of the Year awards).