Readers are invited to submit a question for an entrepreneur, which we will then pose to a YEC member. This group is full of knowledge and experience — we’re eager to share their insights with you.
Question: When Is It Time to Call It Quits on a Partnership?
My business is struggling, and my partners and I disagree about how to proceed. Do you have any advice about ending a partnership?
Meet our Entrepreneur: Fritz Colcol, CEO, ABN Circle
Fritz Colcol, CEO of ABN Circle, is a lifestyle entrepreneur based in Chicago. He learned early on to pivot when his intuition called for a drastic life change. Fritz divides his time between several business ventures and consulting with clients on how to start their own successful companies.
Answer: Sometimes Ending a Partnership is Necessary
Partnership is about mutual understanding and trust. You get into a partnership for a reason: to succeed together, not alone. So for me, it’s time to call it quits on a partnership once the trust is broken.
My very first business restaurant venture was Thalia Spice, a Thai restaurant. I bought the restaurant because I loved the food and saw an opportunity to make it more profitable by simply tweaking its marketing. It had been around for over a decade for a good reason.
When I bought the restaurant, I partnered up with a good friend of mine, and he brought in two other investors I didn’t know. We decided that decision-making would be based on each member having an equal vote, regardless of equity shares. For every change we wanted to implement, three partners or more had to agree. Unfortunately, because my friend voted neutrally and the other two partners supported each other, most of my ideas weren’t implemented. I felt that Thalia Spice just needed some improvements to its marketing, especially in social media. However, the other two partners had different agenda in mind. They changed the entire concept of the restaurant.
Unfortunately, sales and revenue declined as days passed by. It was stressful and financially painful; I didn’t have hundreds of thousands of dollars just sitting in my bank. So every dollar that we had to put in was like a punch in the gut for me.
In the end, I decided to give the other partners a choice — either they buy off my shares, or I would buy their shares. They decided to buy off my shares. I was sad, and a little depressed, to be honest. But the change became a blessing in disguise. The experience made me stronger and wiser. I’ve applied what I’ve learned to my newest restaurant venture, Simply Thalia.
Through this experience, I learned the importance of partnerships and partnership contracts. Try to separate the friendship from the business relationship. There should be no politics. You simply have to do what’s best for the business.
I learned that entering business partnerships with individuals you haven’t taken the time to get to know well is a big mistake. Partnership is like marriage. When trust is broken and you get divorced, a lot of baggage and stress comes with it.
And most of all, I’ve learned that having a lot of money (capital for an investment) is not synonymous to having experience, management skills, values, and commitment.
Ending a partnership is messy and stressful. A lot of emotion is normal. Make sure to document the experience and have all contracts signed accordingly. Be precise and straight to the point. Come in with confidence and a set mind. You have to remind yourself that sometimes it is better to let go than to hold on to something that isn’t worth the pain.