When you start running a business with a co-founder, it may be difficult to imagine your relationship straining. After all, you have the same goals, are passionate about the business, and you seem to be on the same wave length…what could you possibly disagree about?
Well, quite a few things, actually. In fact, co-founder disputes are often a cause of startup failure. Disagreements over equity share, salaries, unbalanced working hours, status, and creative differences, are all factors that can cause problems in a co-founder relationship.
So, even if you and your co-founder go into business with a mutual understanding of how things will work, you may still find you fall out.
If this happens, and you can’t resolve the issue between yourselves, it may be time to hire a mediator.
This an impartial person who works with both parties to a dispute, to find a mutually agreed resolution to prevent things from getting worse and/or you both ending up in court.
Mediation can have real benefits in enabling you both to sit back and see things more objectively, and from each other’s perspective. Sometimes, with all the pressure of running a business and the maelstrom of ideas, challenges, opportunities, set-backs and unexpected twists and turns, you can both end up being pulled apart and feeling as though you’re set against each other. And it isn’t necessarily someone’s fault.
A mediator will acknowledge each of your points respectively, and without judging anyone. They’ll start a conversation around your disagreement from an unbiased point of view – finding ways of potential compromise and mutual gain, before ideally helping you and your co-founder to reach a resolution.
Sometimes, these disagreements are unavoidable and, in some cases, there may be nothing can do to set things back on track. If this is the case, you’ll need to get expert advice on how you can proceed with the business (or how you can exit from it) and what the impact of no longer being able to work together will be. There’s no magic formula here since pretty much every case will have its own set of facts and co-founders are human and so not always predictable or rational.
But what could you do to prevent disagreements happening in the first place?
Don’t jump into anything too soon
Picture the scene: You’re at a networking event and have got chatting to someone about your business idea. They’re looking for a new project to get involved in, and they think your business plan is the best idea they’ve heard all year. In the excitement, you both decide to co-found the business, you exchange numbers and arrange to get started in a few days’ time.
This could work out fine. But, it’s likely that it won’t.
Co-founding a business with someone is a big commitment, which needs to be carefully considered and you need to do your research and look at all options before making a decision.
After all, you wouldn’t likely commit to buying a house, or a brand-new car, or a similar long-term commitment without thoroughly weighing up the pros and cons first. And the decision of who you co-found your business with should be reached with the same amount of consideration. It’s often described as similar to being married – and in many cases, you may end up spending a lot more time with a co-founder in those early stages, than with your family!
So just like when you hire an employee, you’ll want to get a good look at a potential co-founder’s experience. For example, have they experience in running businesses before? And do they have specialist knowledge of your industry? Do they have the same work ethic as you, and do they ‘get’ the branding and general feel of your startup? And be very clear on what they bring to the business – are they really going to add value? Will your future target investors feel the same way as you?
A good way to get some peace of mind is have someone else that you trust, and who understands you, as well as your ideas and aspirations, join you both for a coffee, informally, and help you to get a sense for your co-founder candidate. Ask them afterwards what they felt about the dynamic between you and about the answers to any questions that were asked – questions that should ideally be designed to probe your potential co-founder’s thoughts on the opportunity, likely market and sales targets and that build on the questions that you’ll have already asked, but might want asked again…
And don’t forget to check things such as their work history…do you know anyone who’s worked with them before, are you able to get any references? LinkedIn is great as a complement to this exercise. Check out the providers of any testimonials or recommendations. Are they from credible people, to whom you could also potentially reach out (if you’re not already connected) or do they look like they’re from friends or family?
All of this is known as ‘due diligence’, and it’s very important to do this before you embark on a working relationship with anyone, not just a co-founder. Read more about this in our guide to performing checks on a co-founder.
Check that you both want the same things
Perhaps you’re looking to quickly build your business, sell it, and then move onto another project. Or, maybe you want to build a business that you’ll stay in for the next 20 years. Both options are fine…but only if you and your co-founder both want the same thing.
So, in addition to finding out whether they’re right for your business right now, you should chat about their future plans too and ensure you’re both on the same page. Others will quickly pick up on the signs if you’re not both aligned in your aspirations – investors are especially savvy at spotting this and seeing it as a risk.
Clearly define your roles, and ensure they’re fair
It’s good to have a co-founder who has skills in areas that you don’t…and vice versa. This will make dividing up tasks and responsibilities much easier, as you can simply work on what your skills are best suited to. But, if you have similar skills, you’ll need to both figure out how everything can be fairly split out.
Do set down who will do what early on. While your roles will evolve and you’ll each inevitably take on more duties and responsibilities, having a clear blueprint for who does what from the outset, can prevent a lot of disagreements or any confusion or resentment later.
In addition to skills and preferences, don’t forget to also take into account the workload impact when splitting tasks out. For example, if you have 50 tasks and responsibilities to allocate, don’t just select 25 each. Take into account the complexities of each task, along with the estimated time it’ll take, before sharing it out. This should ensure you have a fairly equal workload.
Want to access this guide?
Already have a Farillio account? SIGN IN
Get unlimited access to 100s of legal resources by signing up to Farillio today.
- Manage your legal documents online
- Well written legal templates by our partners
- Guides to help you understand law
- Legal help available every step of the way