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Well, if you’re a Daimler shareholder, you fight over sausages, apparently.
Plenty of people will tell you that being in business with someone is a lot like being in a relationship. There needs to be honesty, good communication and trust between business partners.
Everything can seem pretty peachy when the business is growing, making money and everyone is happy all around. At the start, or in the golden days, people doubt they will ever have a serious dispute with their business partners - 'we'll work it out somehow' is a common attitude.
It's really when business isn’t going well that everyone starts to panic, and the relationships start to strain. One of the advantages of having a Shareholder Agreement right at the start of your business venture (or at least before the proverbial stuff hits the fan) is that it gives business owners a framework to work out their problems. Our Simple Shareholder Agreement has some great dispute resolution clauses. No matter what document you use, it is important for all the owners of a business to at least have a think through problems and disputes that might arise - no matter how unexpected - just going through the mental exercise with an open and honest discussion with your business partners will help prepare you for future challenges.
Have a think about some of the potential pitfalls before falling into them - here are a few common reasons why shareholders fight.
It's a good idea to think about some of the potential pitfalls before falling into them - so here are a few common reasons why shareholders fight.
Different areas of focus - It’s a good idea to have business partner that have skills that complement your own. There ain’t enough room in the kitchen for 3 chefs, someone has to do the books and someone has to wait the tables.
When everyone in the business isn’t playing the same tune, it’s hard to keep the business on track. That’s why purpose and a shared vision is so key to a business - each person needs to know the ultimate goal and use their skills and expertise to drive in that direction.
Take the example of a business that makes cool coffee cups. Maybe Steve is the engineer and designer - he’s created the masterpiece of a cup, with triple insulation and non slip stuff and new technology that keeps your coffee at the perfect temperature. Jack is a marketing guy - he likes writing articles and publishing content and PR. The business has a budget of $50,000 a year, and each of Steve and Jack makes an argument that he needs that money for his ‘area’ of expertise. Steve wants to spend it on R&D on 3D printing, and Jack wants to put on a huge marketing stunt with holograms and explosions to promote the product.
Both functions are ultra important - we all know products don’t sell themselves, but there has to be a darn good product there in the first place. If each of Steve and Jack keep insisting on their idea only, they’re going to come to a deadlock (assuming they are the only 2 shareholders in the business). What is important for both of them is to keep sight of what the purpose of the business is, and match their priorities accordingly. What do they want the business to actually do? What is the purpose of the business? Does that decision advance the purpose of the company? The point is, somewhere along the way there’s going to have to be some kind of compromise.
Personal circumstances changing - Small businesses can be great. They allow for tonnes of autonomy, and the owners can invest their time into building a business that is theirs.
Small businesses also tend to rely on individual people quite a lot too. If someone can’t work anymore, or is taken out of action for a while, this can have pretty unpleasant consequences for the business.
Summer and Seth start a popsicle business when they’re at uni together. They make organic gluten-free dairy-free vegan mung bean icy poles. The business is a bit up and down - sometimes they’re flat out and churning out popsicles after popsicles, and other times it’s dead quiet. You’d expect the cycle to be seasonal but there’s really no rhyme or reason. Maybe the ‘feast and famine’ style of work was fun when they were young, but Seth wants to start a family now and he needs some regular income. His wife lost her job and he now needs to be the sole income earner. In a situation like this, either Seth is going to have to sell out his share in the business or try and get more business moving along. It's going to be extra important for Seth to clearly communicate to Summer what he wants to do, and for them to try and work out a plan together for the future.