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MONEYYOUR MONEY | VC VIEWPOINT |
MONEY GUY | STARTUP FINANCE
he day you enter into a business
partnership is much like the day
T you say “I do.” Both events create
a contractual relationship that can be
extremely costly to untangle, and most
do need to be untangled.
San Diego-based attorney Robert J.
Steinberger says 80 percent of business
alliances fail for one of two reasons:
“They are undercapitalized, or the
parties involved cannot agree on how
to run the business, including issues
around money.”
I certainly didn’t expect to be on the
wrong side of this stat. I co-founded a
business I knew would be successful,
Partner problems
Don’t let money matters destroy your relationship
By Steph Wagner
but money matters tore the relationship
apart. I assumed my partner and I both
understood the responsibilities of equity
ownership and the way distributions
would be made. Then I realized she
expected to be paid monthly, and as
a percentage of revenue, not earnings.
That was the beginning of the end.
Maybe it’s one partner wanting to
purchase new equipment, while the other
believes it’s a waste of money, or one
using an increase in earnings to supersize
lifestyle, while the other prefers to
reinvest in the business. Whatever the
case, varying opinions about money can
sabotage the partner relationship, as well
as the profitability—and, consequently,
the value—of the business.
When you enter into a business
partnership, you’re literally tying your
fortune to that person. Therefore, it’s
important to discuss your perspectives
on money upfront.
The two biggest monetary issues that
sink partnerships are compensation and
financial infidelity.