Negotiating an Exit Strategy with Business Partners
Sarah and Jane founded their business 15 years ago, when Sarah was age 45 and Jane was 30. Now, at age 60, Sarah is beginning to think about “what’s next” and how much longer she wants to remain in the business. She very much wants more time to spend with her new grandchildren, and her husband Jack, age 65, who recently retired from the government would like for them to travel more and spend more time at their beach house.
Meanwhile, Jane at age 45, has a vision for massive growth over the next 10 years and is fully engaged in making that happen. She has no plans to leave anytime soon, and actually now has her son Sam working in the business who has expressed interest in one day owning the business.
Fifteen years ago, Sarah and Jane shared a common vision for the business as their personal goals were much more in alignment. Things have now changed as their personal goals and dreams have shifted. And, at times these differences result in tension and relational conflict. What is good and promising is that they both realize their situation has indeed changed, and agree that they will need outside help in planning a way forward that considers their respective interests and goals.
Too often owners, in a situation like the one here with Sarah and Jane, quickly move to the tactical or practical before first doing the difficult but critical work of clarifying interests and goals while considering all possible solutions thoroughly and objectively. Emotions can begin to drive actions and reactions motivated by a sense of urgency to “just finalize something and be done with it.” Whereas, if adequate time was invested, with skilled help facilitating a thorough process of negotiation, both Sarah and Jane’s interests would be clarified and addressed in a mutually satisfactory manner, while the process would also be much more productive and less antagonistic.
Following are key steps, often neglected, that Sarah and Jane would be well advised to take in deciding on the strategy they could both be excited about:
Clarify their own interests and goals: personal, financial, values-based, legacy.
Seek to understand the interests and goals of one another.
Identify and clarify alignment and misalignment of interests and goals.
We have found that most business partners will require, and desire, professional assistance to ensure a thorough, peaceful, and effective process. And, in that there is typically not be one perfect strategy that will meet all interests and goals of each partner, there will probably be a need for negotiation.
In their book, GETTING TO YES: NEGOTIATING AGREEMENT WITHOUT GIVING IN, Roger Fisher and William Ury propose an effective method of principled negotiation developed at the Harvard Negotiation Project. Fisher and Ury describe the following as basic principles of this method:
People: Separate the people from the problem.
Interests: Focus on interests, not positions.
Options: Invent multiple options looking for mutual gains before deciding what to do.
Criteria: Insist that the result be based on some objective standard.
Because Sarah and Jane cared much about each other and preserving their much-valued relationship, as well as doing what was absolutely best for the business they had both worked so hard to build, they readily agreed to commit both time and finances to ensure a mutually beneficial and effective process.
There is much at stake on both sides of the table, as well as with the business itself, when negotiating strategies and solutions for partner exits. Make sure you invest adequate time and resources in getting it right. GETTING TO YES is a highly recommended resource, and engage the professional assistance you know you need. You can reach us at email@ennislp.com or 301-859-0860.