Partnership Issues - When to consider leaving?

Discussion in 'Growing and Managing a Business' started by dh686, Aug 21, 2012.

  1. dh686

    dh686
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    I'd like to thank anyone taking the time to read through my post, and offering their advice.

    I started a services business with two other partners about three years ago. One is in-charge of business development and sales, and the other has a technical background. My personal skill-set is primarily technical, but I also excel at customer service and account management.

    We have been equal partners for a long time, however we have never incorporated (something I have tried to push for a long time with resistance). We also have no formal partnership agreement other than documents signed when opening our bank account.

    Recently we have been undergoing an internal transformation and role changes. My role is now almost exclusively in producing the services we sell, and my other partners roles are the CEO and the Technical Director. The CEO is in-charge of business development, finances, and creating structure / processes. The Technical Director is in-charge of managing all of our technical resources, and our technology stack.

    This situation has me feeling more like an employee in my company than a co-founder, as we now have a regimented 9-5 schedule with a fixed number of sick days and vacation days (10 days each per year). I've been feeling very excluded from decision making in the company, and I'm not happy with the direction the company is going, to the point where I actually don't like working for my own company anymore. I don't believe in the growth potential of the market we are pursuing, and almost daily I leave work feeling very negative about my job and company. Our paycheques have evaporated as well, and I now make very little money with my current role, while working extremely long hours.

    With almost no say in anything now that the roles have been determined, it's left me feeling more and more like I should leave the company and start something else, as it doesn't feel like my company anymore. As a services company that is run solely by contractors and partners, I don't think the company has any value other than the money in our account, which isn't much.

    Recently I even had one of my partners inform me that my share in the company was lower than my other two partners, even though equal partnership was agreed upon (only verbally) a year ago. To me this was a massive breach in trust, and I'm unsure of how to handle this.

    Overall I'm very unhappy with my current situation and it has brought a lot of negative feelings towards my business partners and my company, but I'm not sure what to do. I was wondering if anyone could offer some advice, whether it would be wiser to leave the company, even if it means ending a 3 year venture with no real gain (other than a valuable experience). Alternatively, am I being unrealistic in my expectations and is it worth my time and effort to continue and stick it out?

    The part I struggle with is that I could be in a similar situation (working 9-5 with little freedom or flexibility or decision making ability) but make 5 times more money at a normal job, and with job security. Alternatively I could start my own company, and regain the passion I once had for it.
     
    #1 dh686, Aug 21, 2012
    Last edited: Aug 21, 2012
  2. ArcSine

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    Although this might come off as sounding that way, this is not to be construed as a vote, either for or against sticking it out. Just some thoughts at large...

    So they have unilaterally changed the original verbal agreement, and reduced your share of the pie. Not a good sign of things to come, not at all.

    I bundled these three separate thoughts of yours together for a reason. There's no harm in working for little or no current profits, so long as there is sufficient expectation and potential for outsized returns on your efforts later. I'd be happy to buy for $100,000 some asset that will pay me zero income for ten years, provided that I'm sufficiently confident of selling it for, say, $1,500,000 after those 10 years.

    However, you're saying that the current income isn't there, but then neither is that long-run payoff potential. Strike Two.

    In my book, it's better than ending a 7- or 10-year venture with no real gain (considering in particular the previous points). Strike Three.

    Strike Four, Five, Six, ....

    ************

    OK, maybe I am advocating a particular vote on the question ;). Seriously, though, it is a question that only you can answer after evaluating all the facts and particulars, and there may indeed be other factors present (although unstated in your post) which argue for sticking. Still, your post reads like you started one of those lists where you have the Pros on one side and the Cons on the other, but then couldn't think of any Pros.

    No matter how you slice it, it's not an easy call by any means. Anyway, just a few random thoughts coming to mind. Do keep the discussion alive for more viewpoints, and keep us posted on your thoughts as they evolve, as well. Best of luck with it, and looking forward to hearing more.
     
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  3. dh686

    dh686
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    Thank you for your feedback ArcSine, it's much appreciated! You brought up a good point, that I should still need to consider the pros of staying with the company, however I am having a hard time finding many.

    While we don't make much money any more, we still make money - enough to pay the bills, although not enough to dig me out of the massive hole of debt I've accumulated. As for the evaluation of the company itself, as we are a services company and not a product company, I am actually unsure of what our evaluation would be. While we make approximately 300K per year in revenue, if the partners in the company were to leave all that would be left is our branding, technology stack, and processes, and I'm not sure how to evaluate this. Regardless I don't think the current valuation would be substantial enough to be truly motivating, nor do I see a buyout anytime in the near future.

    I've put more time into the company than my other two partners, as I've been fulltime with the company for 3 years now, where they have been for 2 and 1 year respectively.

    As for our target market, we're in a relatively small city which means there isn't a tremendous amount of growth potential. Plus we're unable to tap into a very lucrative market in our city because we're not incorporated, and this market only deals with companies that are (something I have tried pushing for several years now).

    One of the major reasons I am upset because my partner's are building so much structure into my role that it feels like a job, and not like I am a third owner in a company. I have been designated a number of sick days, vacation days, and I have a strict 9-5 schedule now. Before this started I didn't work normal hours, often working weekends and nights, or early mornings. I value flexibility and freedom in my work, which is part of the reason I started a business in the first place. I can understand having this structure for our employees, but I don't understand why it is being enforced on the partners. Is this unreasonable of me to think this way, and is structure an eventuality in every business, even for the partners? Also is it unrealistic for me to hold on to my role in the decision making around operations / strategy of the company, and accept that that is the job of a CEO and I shouldn't be concerned with it?

    The main advice I am seeking is whether my expectations are unreasonable, or if I need to approach it from a different perspective in order to run a successful company.
     
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  4. ArcSine

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    Your expectations are quite reasonable. The two factors that typically must be present (for most people) to justify a major time-and-effort investment in a partnership are
    • A mutual respect and generally pleasant and favorable camaraderie between the partners; and
    • Either current, or expected future, gains and profits sufficient to make the overall return on one's investment more attractive that what could be obtained elsewhere.

    Both are necessary but neither one alone is sufficient. Your posts, though, indicate that you see the present situation failing on both counts.

    Is there any hard factual basis for expecting that both of those factors will turn favorable?
     
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