Innovation

How to Break Up With Your Co-Founder

As a company evolves, one founding owner may be left behind. How to help your business partner move on

Written by Advisory Board

Welcome to Advisory Board, a weekly department in which a panel of experts—made up of entrepreneurs and professionals—answer questions you have about how to run your business better.

This week, a reader asks:

“€‹The nature of my business has changed in recent years, and my co-founder’s skills don’t fit with the company’s new direction. How do I bring this to his attention and encourage him to move on diplomatically?”

Here’s what the experts have to say:

“Talk about your growth plans, and ask how he sees himself best fitting into the new market economy of the business. Then prepare a negotiation and buy your way out respectfully.”

Kelsey Ramsden, business guide and founder, SparkPlay Inc., London, Ont.

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“Consult your shareholders’ agreement. If you have any kind of formal agreement, you can’t just have a little chat, and hope that he takes the hint to get out of your way. Perhaps you have some buyout provisions in your agreement or a shotgun clause.

“Issues of ownership can easily become issues of the heart or ego, so you need to tread very carefully. He may have completely different views of the situation, and even see you as the partner that should move on. What I have done in the past is to use a trusted third party, almost like a marriage counsellor—maybe your company lawyer or accountant can help. Sit down together and explain to that person what your concerns or plans are. Chances are, this will keep the conversation rational and prevent emotion from getting in the way of a rational business decision.”

Randall Litchfield, CEO, Inbox Marketer Corp., Guelph, Ont.

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“Satisfy yourself that the business possesses the skills to replace whatever contribution he does make. Call a formal meeting with him to clarify the vision and direction for the company going forward. Circulate an agenda if there are specific points you want to cover and invite him to add items of his own. Add a preamble to the agenda which clearly states your belief that the business is at a crossroads and the status quo needs to be examined.

“Discuss whether you are each the best candidates to contribute to the next leg of the company’s business plan. You might actually find that he resonates with some of your views and may have already thought about some. You should also come armed with a methodology for acquiring whatever interest he has in the business, although you do not need to present any numbers immediately.

“Your intent should be to deal with him as amicably and fairly as possible as any nastiness could have a polarizing effect on the business.”

—Michael Koff, owner, Michael Koff & Associates, CPAs, Markham, ON.

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Originally appeared on PROFITguide.com