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When Business Partnerships Fail

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What happens when business partners fall out? The answer lies in the hands of the partners, but outside experts can help them sort out options and make an informed decision. Sometimes, partners can find a “win-win” solution that will benefit each of them. Some partners may forgo something they’re coveted in order to win over other partners. These solutions, however, require a significant upfront commitment of time and forbearance.

Bringing in a CEO from the outside

Bringing in a new CEO when your business partners have fallen out is not always the best solution. In some cases, a merger of equals might be the best choice. Alternatively, you might prefer co-CEOs, who share control of the company but do not have the same power as the current CEO. If this is an option, you might choose a long-time friend or colleague to take the reins of the company.  


A lot of people consider mediation when business partners fall out as a good way to resolve disputes and avoid further conflict. Many potential partners seek mediation when the relationship is going well rather than wait until there is a major problem before seeking legal help. Using a third party is also an excellent option because it allows you to discuss sensitive topics without involving the other partner. You will also need to be able to deal with strong negative emotions.


When business partners fall out, they often opt for arbitration rather than going to court. This method allows a neutral third party to break a tie. This person is typically identified in the governing documents or by a process. In business divorce, the arbitrator can issue a decision that is legally binding and can help the parties work out a solution. Depending on the situation, mediation or negotiation may also be part of the process.

Financial issues

One of the top reasons why partnerships fall apart is financial issues. This is because, even though business partnerships are intended to help each other grow, financial disagreements can have a negative impact. For example, a partner with a higher investment in the company may become frustrated if the business does not progress as planned. In contrast, the partner with a lower investment may not be as concerned with the company’s failure and may even take advantage of increased control or profits. Such disagreements can ultimately ruin a partnership.

Lack of work ethic

When selecting a business partner, it is important to find two people with different skill sets but equally important to the overall success of the partnership. Do not select someone just because you were close friends in college – you should be sure that they can add crucial skills to your company. For example, Anders Thue Pedersen’s disastrous co-founder pairing turned out so poorly because his partner had a poor work ethic. To avoid such a scenario, you should clearly define roles and responsibilities, and make sure that you have equal skin in the game.

Like any divorce, you might need some serious legal advice to navigate the process.

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