How to Deal With a TOXIC Business Partner

John Lamerton (0:04)

So we've had a question in from an Anonymous business owner, and you'll see why they're Anonymous when I read out the question. So Anonymous says, My business partner vetoes every decision, treats the company bank account like their own personal ATM, and rarely pulls their weight. How do I deal with a toxic business partner without blowing up everything we've created?

So Jason, what's it like working with a toxic business partner?

Jason Brockman (0:34)

It's terrible, mate. It really is.

This happens more often than you probably think. When you first said perhaps the question coming in, I thought to myself, that is funny because we've had a number of one percenters that have had that situation arise in their business, one or two have managed to deal with it. I guess from my point of view, the first piece of advice and that's to absolutely everyone who has a business partner is a shareholder agreement is having something in place which actually spells out when things don't go to plan, what's going to happen. With all the best will in the world, having a business with your best mate or whatever that might be.

Yeah, you get on like, I was on fire, absolutely amazing. Everything goes on dreamy. You all know what you're doing and everything goes well, but there is also a propensity to something to happen, something to change, some of these circumstances to change. One person I kind of got in mind, they went through a real big health issue that affected their mental health, that affected how they were performing in the business with their business partner. And for that person that is in our world asking for some help, it's kind of like really, really difficult because obviously, they're really struggling with two things there. That's their best mate and somebody who's really poorly, who's having some real big issues and they need to support them too as a friend. But as a business, it's really, really tricky, isn't it? So having, I think, the best way of realizing you haven't got one now and you've got a business partner is have a shareholder agreement in place, something which you can look back on. I know we had some great fun when we went into business with a friend that we kind of knew. And we had a great time really sitting down and thinking about all the things that could go wrong. Everything from someone in the business dying to somebody shacking up with one of the other business partners, wives, and all sorts of things in between.

John Lamerton (2:15)

Stealing the customer base, everything. It was literally a red team. It was like, what could we go wrong? Because again, you go into these things with best of intentions. And like you say, you mentioned best mates. I think quite often the problems that we see in the 1% Club with business partners does tend to be, I went into business with a friend, and it turns out that they're a friend and not a business person, and I shouldn't be doing business with them.

But yeah, it's having that agreement up front. Like you say, we've just exited a business this year, and that was probably easier than it otherwise would have been because there was a shareholder agreement that we signed nine years ago, 10 years ago to say, right, when we reach this situation, this is what we will do. I'm guessing that doesn't help anonymous though, who already has the business partner, I'm guessing there isn't a shareholder agreement in place, and they're trying to manage that. So what would your advice to them be? What would be the next thing that you would tell them to do?

Jason Brockman (3:16)

So for me, it would be looking at what the actual issues are, independently, i.e. on your own, sitting down and working out actually what is the actual thing that's given me beef? Is it because they're getting an easier ride? Is it because they're spending all the cash? Is it because there's an imbalance in workload and things like that? Is it the fact you've drifted off in different directions for the business? Is it because you'd like to take the business in this way, and the business partner actually know I'm quite happy with the way it is right now? We've had somebody who wasn't more ambitious, and the other partner was more lifestyle, and actually the two diverged quite considerably, and that was the challenge. For me, I think it would be working out what the issues are that have arisen over that period of time, and we're probably talking, it's not something that's happened yesterday. It's something that's been happening slowly, but surely over the last 12 months, two years, five years. The second thing is remember that you're friends, and you're friends for a reason, and that probably hasn't changed all that much, just the expectations that have changed.