How to start (and fix) your business partnerships with Sara Urquhart - 79

One of the things I realized as I'm talking to women in this situation is they stay longer than they should in these partnerships that aren't working because they are avoiding an awkward conversation. And that is not a reason to give away half of your money because that's an expensive conversation that you're avoiding.

This is Creative Council Episode 79. How to start or fix your business partnerships with Sarah Urquhart. Welcome to Creative Counsel with Brittany Rettell. I'm your host, Brittany, a practicing business and IP attorney that focuses on helping online business owners. I've helped hundreds of clients start, grow, and scale their modern businesses, along with selling DIY business resources at Creative Contracts. As a busy mom of 4, I know your time is precious, so I'm committed to bringing you practical tips, stirring founder stories, and the best resources to help you grow your business as big as your dreams. Thanks for being here, and let's help get you legally legit with Brit. Thanks for joining me. Our guest today is Sarah Urquhart. She has started and ran multiple nonprofit boards, raised 4 children, worked for campaigns on the national, state, and local level, and was the co-founder and manager of Alt Summit for 9 years. She has a master's degree in emergency management from Jacksonville State University and currently sits on the Salt Lake City Planning Commission and a board member of the University of Utah Women's Resource Center. Sarah owns an event service company called Sarah U Events and hosts the Shift Summit, an event series for the wellness industry. We're so grateful to have her here for this important conversation all about business partnerships.

Hello everybody, and welcome back. I'm so excited to be joined today by my friend Sarah Urquhart. Thanks so much for joining me, Sarah. Great to have you.

I'm so excited to be here. Thank you.

Awesome. You got to hear a little bit about Sarah's experience, but obviously she's She is no stranger to businesses of all types. And because we were having a conversation recently about some of the people we know who are in business partnerships and some of the highs and lows that come with that, really thought it was time for us to kind of document and open up and have a good conversation about what are some things you can do when you're in the thick of business partnerships, because it can be— there can be some really great things that come out of it, but there can also be a lot of challenges. And so to start it off, give us a little bit of your perspective of where your journey in terms of business, of being in some partnerships. Would love to hear a little bit more of that kind of origin story of you, and then we'll get into some of the kind of the phases of business partnership and we'll tackle those.

Sure. So over the years I've started a number of businesses and in my early years I really felt like I needed a partner because, and I felt I, now that I'm the age I am and have the experience I have, I realize I just, needed some emotional support. That doesn't necessarily mean I need a partner. So I have had partners of all different shapes and sizes, and sometimes it's worked and sometimes it hasn't. But yeah, I find myself in the thick of this. And the other thing I find myself currently in is in the conversations with people. I end up, when I'm talking to business people, I'll ask, do you have a partner? Are you sole proprietor? And often when they have a partner, it is not going well. And so we end up in these conversations. So you and I were talking about the same kind of thing, and I thought, oh, let's talk to your audience and let's see if we can't help people prevent ruining a relationship or straining a relationship. Let's keep things healthy in a business. I've seen businesses shut down completely because a partnership went south. And that's really too bad. It's a profitable business. Somebody should keep ahold of it. It was filling a niche. I've seen it from all sides, good and bad. I come with some experience and happy to talk about it.

Now let's start in, in turn then. What are some things that people should be thinking about before they get into business? As you mentioned, I think maybe one of the first direction to start is why do you wanna have a business partner? Like you said, sometimes we are missing something and that could be a complimentary strength, a skill. It could be the money or it could be emotional support, but it's probably good for us to be pretty introspective on what we actually want and need to have to the relationship.

That's exactly right. Now, I've been in this situation so many times where you're— you— someone comes up with the idea, you're so excited, and often it's me. So I come up with an idea, I'm talking with my friends, and we walk away from the meeting and I'm looking around going, oh wait, do I now have 3 partners? When I was just enthusiastically saying, is this a good idea? Needing feedback. And yeah, if you're getting serious and you're ready to start a business or you're in the early stages of it, the questions you asked are perfect. First of all, if you're looking for a partner, I always say date first. Don't dive right into marriage. Test the waters. See if you really work well together. Figure out what it feels like to feel pressure with each other, to hit some deadlines. You don't have to create that partnership immediately. There is some time to navigate. So date for a while and make sure—

Yeah, put an event on together, do a photo shoot or a collaboration. You should go camping with someone you're dating or have to put together an IKEA piece of furniture. But like you figured out a lot. The marriage metaphors are rife through business partnerships, but it's for good reason is because it really is a lot of the same skills and that you need to have eyes wide open when you're looking at someone in the beginning stages and really, and you're not doing that because you don't trust people, but because you need to really be thoughtful and intentional.

When you're thinking about a business partner, you're not necessarily going to your best friend. Friend, your sister, your— those intimate relationships that you already have. It may end up being those people, but don't go there immediately. Oh, we have to do this together, because you may ultimately have different life goals or be in different life situations. So it might not be the exact person you need. One of the things you should ask is, and you mentioned some of these, but does my potential business partner have the skills I lack, or are you the exact same person? Do you really jive because you're both great in the photo shoot and doing the same things? Or do you need to find the partner that really complements what you do?

And one of you like the vision person and one's the detail person, a little bit more of an executioner.

So you're really— so think through that. And then everybody's going to answer their questions differently. So just because I'm putting the questions out there saying, at least think through this, write down what your answers are. As you are contemplating a partner. So be thinking like that. Maybe you're looking for a partner because you need funding. You mentioned that already, and that's a legit reason. Walk in with your eyes open and understand what you're giving away and what kind of control you're giving away by accepting any money. And then does your partner have the time to do what you're expecting? Are you— are your expectations the same? Are you on the same page? So think through all of those things as you are contemplating whether you should get together.

Those are so great, especially even the money, because I've had people come to this. And what's great is that once you have these conversations, a lot of this stuff should get also get formalized into an agreement and should be in an operating agreement, founder's agreement, partnership agreement. They're called all those different things. We're talking about the same thing. Shocker. I know that the lawyer recommends getting stuff in writing. When you've seen stuff, but especially on the funding, I've seen people just regret because once someone's on your cap table, once they have equity, they're there unless you can buy them out. And even then sometimes that's very difficult because of what you've put into place or any kind of valuation or whatnot. And make sure that you, like you said, eyes wide open and like beg, borrow, steal. Is there any other way you can get that money, including crowdfunding, including presale, including going and trying to get a business loan, going and talking to the— whatever. All your options.

Yes. And that's— and so a few more questions. Really ask yourself, do I need a partner? If the answer is yes, keep asking, why do I think I need a partner? Because often the answer is actually no. So be okay with the answer being no. It feels scary. I remember talking to a woman and she was trying to partner with me and it didn't work. She tried to partner with someone else and it didn't work. And I was mentoring her. I was helping her. And she just said, I don't think I can do this alone. And to her face, yes, you can. This is the scary place, but it's the jumping off place. You can do it. And people have more skills than they think, especially women. We think it has to be perfect and it's not.

It doesn't. It's like the contact study. Like you just have to have 60%. You don't have to have a—

guess what?

Guys have even less than that and they go into a room with swagger. You're exactly right. Consider this your permission slip. Right now, Sarah and Brittany say you don't need a partner.

You don't start it yourself. That's right. You're thinking about what they bring to the table and what you bring to the table, and you're matching— you're answering those questions. Are they compatible? Or how much do they overlap? And then are there other ways to get the things you're looking for? Same thing you just said, big bar on steal. You really can barter those skills with people. I've seen it happen over and over again. I'm not a great photographer, so I have to hire one. Or I need a partner who is— no, you don't need a partner who it is. I can't afford it. Are there other things you can do to get that photography skill? Barter with someone for their skills. There's so many things you can do before you, you sign away half of your business. So think about that. The other thing I want people thinking about is when you're talking about what people are bringing to the table, we always immediately jump to money because that's often something people can bring, but Sweat equity is a real thing. And now when I start businesses, if I can't just write a check for someone's service, which I try to do, I always try to just pay them, or like we're saying, barter. If I can't, or we're so early in the stages and there's some kind of risk, I'm saying, okay, you can come on for a percentage, but you're giving actual sweat equity. I'm not paying and you're risking. It may be a great risk for you and it may not. It may pay off, it may not. But I give them that option. And if I'm putting in 500 hours, if you're going to be a 50/50 partner, you're putting in 500 hours or the equivalent in money. And I've been burned by that before where I was putting in all the hours and I would have these partners who would come in for the last minute And they would want equal pay. They would want all of the benefits I was getting. And per hour, I was getting a lot less than they were because I was working 1,000 hours and they were working 20.

They came in to take their— they took their victory lap at the end when everything was going well and set up, but everything before— and that brings up a really good point. I do— I just want to briefly mention, because we're talking about most of the time static equity, which is at the beginning you decide what kind of equity people are going to have in a company. There are ways that you can have dynamic equity or even vesting. And so I do always wanna make sure people are aware that there's other ways to split the pie. There's even something, it's a whole book called Slicing Pie, and I have a whole nother podcast episode on that. It's number 45. That's all about partnership questions. But that system is really nice because you actually track your inputs to the company. Like you say, you track your time or money, and then your share of the company goes up and down.

Yeah.

Until you are profitable. And it's really the most honest and transparent way that you can have equity in the company. Company, because you can't say that you look at the thing. If you don't do the time, if you don't do the work, you don't get the shares.

That's right. I don't think enough people do that. And, and there are reasons we don't. I was in partnership with family and I was really trying to protect that familial relationship. And it ended up biting me because I wasn't— I could have removed the emotion and said, we're going to do it. As if we were strangers, this is how we would treat each other. And that just would be a better way to protect yourself. So we have to remember as we're starting partnerships that partnerships and friendships are different things.

They're—

it's a bit on a Venn diagram. They can overlap, but there's a risk that you're going to ruin what's good about the friendship. Be careful in that. Then, as you said, build into the partnership agreements The equity is part of that growing business and you're gonna reevaluate it on an annual basis or however. So you're, as it goes up and down and like you said, you can build it in automatically. So you're not even having to reevaluate. It's just all—

So it doesn't become, hey, you're in trouble. We wanna time out.

Right.

A standup meeting that's not already on the calendar gets people in a lot different headspace and more defensive than like, hey, remember how we agreed we were gonna have an annual meeting? We were gonna check in. Let's have that. And that brings it just a, a totally different vibe to the conversation. And it allows people, like you said, to even check in on those big picture vision. Is this what we said? Is this both what we want? Is this working? What's not working? Practice those skills that we all learn in therapy of have the 3 minutes or 5 minutes of uninterrupted that all you can do is listen to the other person feels really understood.

Yeah, absolutely. So if you're building all of that in early, that's great. And if you're listening to this on the front end of a, of starting a business, you're better off than most because you can think through this. Most people who are listening, my guess is they're in the thick of it and it's not working and they're frustrated. So I want to share a story with a friend that I was working with on some of this. Her name's Deborah. She cuts hair and she's 50 years old. She was approached by her salon owner and he said, I need to sell Do you want to buy my business and how much? He said $20,000, which was a fair price. And he said, but I'm offering you to buy it for $10,000. And Kim, who was another much younger salon stylist, he offered her the same thing. So this was a forced partnership. Okay. I don't think Deborah would've gone into business with this person. Not that they're fine. They have a professional relationship.

It's a little bit of an arranged marriage.

Yeah, it's exactly right. So they both kick in $10,000. Which is great. They own 50/50. Well, in the last 3 years since they bought it, Deborah, she's working 40 to 50 hours a week every single day for 3 years, or 5 to 6 days a week, right? Kim, she has stayed behind the chair. She stayed a stylist. She works about 20 hours a week. She keeps all her tips. But both of them are getting a $5,000 paycheck from the business. Kim is just working essentially for herself, where Deborah is working for the whole business. The business is now worth $40,000 3 years later because of everything Deborah's done, and she's starting to really resent that Kim is not stepping up. Okay, so that's the situation when she and I meet. So she's like, what are my options? At first, she's— she doesn't even know that she's got options. She thinks this is— she's in this arranged marriage for the rest of her life. And then as we start talking, she immediately jumps to, how do I kick out Kim? And I'm like, we can jump to that, and we can—

that's an option on the table. But let's just look at all of our options.

Yeah, it is an option. We keep talking, and as I realize more about Kim and more about Deborah, I said, you're going to want to retire in about 15 years. Yes, she says. I said, Kim is very young with young children, so she doesn't have the time you have. Yes, she says. I said, in 10 to 15 years, she's going to probably be primed to buy your share of this business. So I said, I don't know that you want to kick her out, but you have now put in— I calculated this. I said, you've put in about 3,600 hours of sweat equity that Kim has not put in. I says, you need to talk to her. And there are some options. You can either kick her out, buy her out. You can give her a smaller percentage. Say if she doesn't want to add anything to her plate, okay, then really you now are a 25% owner, or you give her the chance to build up that and match the sweat equity that you put in. Or yeah, did I say, or she can give in money, sweat equity or money. So you're giving her some options, but you're saying, here they are. We can't sustain this business the way we've been going. We have to do something different. So what do you want to do? Rather than just ruin and burn the bridge down, which I tend to do sometimes, rather than doing that, is there a way to keep— because she likes Kim, she's a hard worker, she's been great, but it's not working. That's just something to think about. It's one more How do you resolve that before it's even a problem? If you're starting the business, if you're in the middle of it, okay, here are some possible options that could help in this scenario.

And I think it illustrates a couple of things there for sure, which like you said, it's really good to check expectations and to set up roles. And the more that you can do that on the front end of a business, or even if you're in the business, it's like the whole plant a tree. When's the greatest time to plant a tree? 20 years ago. When's the next best time?

Tomorrow.

So when's the next best time to talk about roles and lay those out and even do the— how people do in marriages of these are all the tasks that we need to get done. So we're going to put them each on a Post-it note and separate it out. And it'll start to become really clear if one person is doing way more than the other in terms of their contributions and things that are on the line. And so if that looks like it's imbalanced, then yeah, we— you need to have a conversation because whether you recognize it or not, that builds resentment in the relationship and it's not something that you're going to be able to sustain long term. And that, that kind of energy, people can feel that. Your customers can feel that. You can feel that. And we're not usually as good at hiding that as we think we are. Reminds me of the book E-Myth Revisited, which is a great entrepreneurial startup guide classic. It's been around for 40 years. Talks about position contracts and how it's really good in a business to write out like a standard operating procedure of, look, this job, this is what this person needs to do. And when you can have clear role delineation, people are really happy and they know what success looks like in their role.

Absolutely. People, most people want to to do well. They want praise. They want to feel like they're succeeding. And so maybe that's part of the conversation. So as you're reevaluating a partnership, I have some questions you can ask. What is working? Okay, start with that, because always start with positive things where you can. And if your business is functioning, you're making a little money, even if you're breaking even, something's working. So acknowledge those things. Then you can talk about what is not working, who is resentful and why. And you said resentment. I call it my resentment barometer. And we're gonna talk a little bit more about that because I outwork a lot of people and then I start to resent it. That's not always fair to them. And so I've had to learn, okay, my resentment barometer's going off. Let me reevaluate what's happening and can we fix it before I get too deep into that.

Yeah. No one loves a martyr.

Exactly. Are expectations realistic on, from all parties? Are expectations aligned? Because often that's where you're having problems is you just have misaligned expectations. And then are you tracking the data? And I love that you said there are apps. Of course there are apps that do that where you're, you can really track who is doing what. And once you have the data in front of you, it's hard to argue. I should be getting twice as much as you when I'm doing half the work. Right.

Yeah. The fact it's hard to argue with facts and the more you keep it, even using some of those tools, like you said, using that gratitude sandwich of doing positive things first and then the negative and then finish up. And then also staying and staying with I statements. This is good for any kind of conflict management or my experience has been, or I have observed this very hard to argue with that. It's a lot more difficult for people to give that versus you are this, or yeah, conclusory statements, assumptions, obviously getting to ad hominem attacks when you're just being petty or negative about somebody. We want to try to stay out of that territory.

You want to try to stay out of that territory, but it's tough, especially when you're feeling some resentment, when you're feeling like you're not being appreciated. So I was in a partnership, and story of my life, I was doing a lot of the work. And I had other people on my team and they were coming up with great ideas for what we should be doing next and what— and I was as thin as I could be. I was worked to the end. So in a team meeting, I didn't know how this was gonna go, but I suspected. And we wrote down every idea. It was awesome. We probably came up with 40 ideas of things, ways we could grow, things we could do. And then I said, okay, there are 5 of us in this room. We're going to go now and decide on each thing who's going to spearhead that, who has time, who can do it. We ended up with 3 items that we were going to move forward on because they wanted me to do the other 7 and I was already out of time. It was— but by physically doing that and having that visual, I was able to say, until we are able to hire someone new or until we're really able to change our roles, let's not talk about these other wonderful ideas. Yes, they were wonderful, but you can't do everything.

Yeah, you don't let the good idea fairy run rampant. It just— because it's a great idea doesn't mean it's a good fit for you or a good fit right now.

That's right. It might not be serving you. And that was one of the resentments I was feeling is I was having to fight all of their ideas and they were mad at me because they didn't think I was listening. They were like, I brought you another great idea, why aren't you doing it? And until I could do this, until we went through that, they were like, oh, okay, got it. And we really resolved a lot of things. So that was really a good exercise for that team.

Is to get the ideas out, keep them safe, appreciate them, but also to be realistic about constraints. And it happens with all different types of collaborative work and project management. I can't tell you how many clients I've had who got burned developing their app because they get scope creep and they want this and then they want this. And then suddenly the app is taking twice as long and costing 3 times as much. And it happens a lot.

And likely not doing what they originally wanted it to do in the first place. Yeah. Stay in that— any of those creeps, anything that creeps out beyond where it's supposed to, That's where you can get into trouble. So once you're in the situation, you've done this, you've reevaluated your partnership. Now what do you do? And you're going to have— I'm sure you have some good stories on this. I have a few. One of the things I realized as I'm talking to women in this situation is they stay longer than they should in these partnerships that aren't working because they are avoiding an awkward conversation. Yes. And that is not a reason to give away half of your money because that's an expensive conversation that you're avoiding.

I love that. That is an expensive conversation and it's not likely going to get any better. No, likely only going to get harder. When you should eat crow, you should do it first thing in the morning.

That's right. What I'm learning also is they don't always have the language for it. They know there's something wrong. They don't know what their options are. So seek out somebody. Brittany's a great person there, but there are other people out there. Find a mentor, find someone who's been in this situation, ask them for 30 minutes, because I'm surprised how quickly I can get to the root of the problem, even in a 30-minute conversation with somebody. So find someone to talk to, find out what your options actually are, and then you're going to know what feels right to you. You're going to know what feels fair. There are times when I'm like, burn the bridge. And they're like, this is a relationship that's more important. Of course, you make the decision. It doesn't matter what your mentor says or what the advice you're given. You're going to know what feels right, what feels honest, and what is going to hold on. Can that relationship be repaired? Don't avoid that conversation. Seek out the people that can help you with it. Sometimes you're going to pay money. Just to have them leave. And sometimes you're gonna pay a little more than you want. Pay it and move on. Try not to fester too long on that. Some businesses, as we've talked about, just dissolve. They just don't work anymore. They can no longer work together, but it doesn't make sense for one of them to do it alone. So I've seen that happen. And then as we've talked about, you can change partnership percentages. And it's amazing when that happens, Everybody can feel a sigh of relief. I thought with what I was saying to people, I'm going to have to take you down to from 50% down to 25%. I really thought there would be this fight, but there's this relief because at least in some of the people I've talked with, because they're like, I knew I wasn't doing enough. I have issues in my family right now. I have—

I'm having these mental health challenges, whatever, show up the way they wanted to, and they want to be on weight.

Thank you. Yeah. So it's having those conversations is probably not going to be shocking to your partner.

If it is, then maybe you guys should part. If like this is all coming out of left field, because it means they're not paying attention to anything.

That's exactly right. What it means is your expectations are not aligned and they're not realistic. If you're both seeing things so differently, it may not be possible to get you in alignment.

Yeah.

One of you wants to live in the New York SoHo apartment and one wants to be ballerina farm in the middle of nowhere.

Exactly.

Those are just very different lives that we cannot match.

Neither one is wrong. Both can be a really beautiful life, beautiful success, but it doesn't necessarily mean you're a compatible pair. Understand that. Know that. Oh, can I tell another story?

Yes, of course.

This is a story about Jennifer and Aaron, and they own a little bakery. And Aaron was a 20% owner. So Jennifer owned most of the bakery and Erin was a 20% owner, but she asked for more ownership and more responsibilities. And Jennifer was fine with that. They have a decent partnership. They're actually friends. It was going to work. And so Erin's responsibilities increased, her pay increased to match that workload, but in 6 months, she kept saying, oh, I can't quite, I don't quite understand this new role. I can't quite do it. So Jennifer had to hire someone named Jordan to come in as the assistant who actually started doing all of the work. Erin loved that because she didn't realize it, but she was getting paid a lot more money. She had new, more ownership, and really her responsibilities didn't increase at all. And the company now was having to pay her more for doing nothing new and paying Jordan for doing all these new responsibilities. So Jennifer had to revisit and say, okay, we can't keep doing this. So what she did is she gave Erin a deadline and said, I'm going to give you this many more months. I think it was 4 months. And if you can't increase and take those responsibilities back from Jordan, You're going to have to go back down to your 20% ownership with payment that matches that. And if not, that's fine. If you can't do it, if you can step up, great. If not, that's fine. We're all still friends here. And but in an attempt to— we're back to avoiding that awkward conversation. Jennifer let it go on far too long. 6 months was too long to let that keep festering. It was not as long as letting it happen for 2 years. But so I was proud of her for that because I've seen that happen. But I said, because she just kept saying, how can I do this without making Erin upset? How can I do this? And I said, you can't control Erin.

First of all, we don't control other people. So that's a good thing to just let it go right now. You're going to show up the way you want to, thoughtful, intentional, but she's going to react how she's going to react.

That's on her. That's exactly right. So you can't control them. You're exactly— so what can you do? You can control yourself and you're building up resentment. That's not going to be good for your business. It just brings poison into the bloodstream. So what can you do instead? And so we sat down, we played through a couple conversations, a couple of ways that it could go. And she ended up having a great conversation. Erin, she's in the midst of it. It's actually a conversation that just happened. And so we'll see, will Erin step up or will she look around and go, yeah, this isn't working. Just take me back down to my 20%. So we'll see.

Yeah, but she's giving her some good options. And again, like you said, it's, it's always better to confront it. And it's good for us to be willing to have an awkward conversation now to avoid a massive fight later.

That's exactly right.

We need to trust ourselves and have our own back there that we can address that and that that conflict doesn't mean anything about us. We can still be kind. Thoughtful, empathetic, a good friend, all of those things. And maybe that was the way we wanna show up in the world, but that we can still address things that need to be addressed.

That's— yes, you just nailed it on the head. One other little thing I wanna talk about. A lot of times the resentment ends up building up around two things, time and money. Those are the two major resources. You're starting to ask as you're going through some additional questions, Who is getting paid and how are people getting paid? How are checks being written or distributed? People should get paid for their hours worked. If you're to a point with your company where you're past some of those startup where everyone's working for free, right? You need to build that into the budget.

They're having reliable revenue and you, now that you're an S corp, your accountant is probably telling you, hey, you guys both need to be on salary now. It's gonna be better tax-wise. Listen to that.

And how much it is will depend on how much you're investing in, how much time you're putting in. But yes, listen to your accountants, listen to your lawyers for sure. And then of course, the company should pay for expenses. As a business owner, I had a partner whose— her business, she had a couple of businesses that kind of overlapped, the one with me and then the one where she was the sole proprietor. And she went on a book tour and I kept seeing expenses come through to my business And I said, why is that? And she said, I'm representing our company wherever I go. And I thought, if it goes through your company, it's 100% your responsibility. If it goes through mine, I'm paying for half of your book tour. It was a place where I had to really put up a question mark. And if you're sending expenses through the business, you should be communicating with each other. Are these true expenses? Is someone taking advantage of that? Because again, that's where resentment can build.

It's really good to have people respect your business finances, to keep money separate. And to your point, especially if people have other businesses, to make it clear that a good question to ask yourself, if we wouldn't be paying somebody for this, then it's not a good business expense. Just because it's a write-off, I think of the great Schitt's Creek, it's a write-off.

Who's going to pay for that? I don't know the write-off people, like the government. No, that's not how taxes work.

So I'm sorry if someone has told you that is not if you wouldn't pay for it in your business, you're still paying— only 30% off is getting written off. That's how taxes work. Then don't be buying it. Don't pay for that.

Yeah. Yeah. And I will say this as well. Even the companies that go through and start off with all the documentation and they're in complete agreement and they feel so good about each other, life happens. So somebody gets in a situation where There are health problems. Someone's having babies or going through a divorce. What was this fun partnership and this business you're doing together turns into something you need, or there becomes a little bit of desperation, a little bit of panic, or they're like, oh, I'll just— this'll just help bridge me until we get this other thing fixed. So it's not like you can protect yourself from everything. All the time. Life is going to happen. Problems are going to come up. You want to protect yourself as much as you can, but you also need to know that even the best can find themselves in a situation where they're going, oh, this was not what I signed up for.

This is not what I expected to happen. Yeah, use the tools that you have. Don't be afraid of boundaries. So hot right now for good reason. So put them up in your business just like you do in your personal life. But also know you've signed up to be an entrepreneur and that's a roller coaster.

And yeah, and it's a— for some people it's a fun roller coaster. I keep signing up for it because I like it.

So you're a fan?

Yeah, I like the problem solving. And I've had people ask me this: when do the problems stop? And I'm like, oh, never. That's when—

never.

Oh no, never. So if you're waiting for that, you're—

that bus is never going to show up.

No. So if you're looking for them to stop, you're in the wrong business. That's what businesses do is they problem solve for other people. That's the whole thing.

But hopefully your problems should get better and more interesting. And then you're learning something.

If they go away, you're out of work. Problems can look a lot of different ways, but that's a big part of what an entrepreneur is doing is problem solving. So if you've been doing it for your business to help your clients, and now something's happening in your business, use those same problem-solving skills to try and resolve this issue. Whatever you're dealing with, you are likely not the first. So find out, do a quick Google search to start, find a good lawyer, find a good business coach, find an accountant.

People, you know, there's all different other third parties. Sometimes in agreements, when I can't convince people not to do 50/50, which is— I really try to talk them out of Most of the time I'm like, do you really want it? Because, because normally there's one person who wants— has slightly more skin in the game or wants to be more the decision maker day to day. And if so, that's a much better thing even to just do 51/49 split. But if people really fight me on that, I say, okay, let's put in our agreements and talk about it. Now, if you get in a deadlock, who are you going to go to? Who's going to be your tiebreaker? Is it going to be a neutral party? Are you going to go talk to someone who's an expert in whatever the issue is, go talk to an evaluator or someone who is— if it's a supply chain issue, go talk to someone who knows something about supply chain to help you and then agree that you're gonna abide by their decision to save the business partnership.

Yes. Cuz you need to have those things in place before there's a lot of emotion. So I love, and I'm going to second that for anyone who's thinking about a business right now, don't do 50/50. Really, if you are the one spearheading this, and this goes back to, if you're spearheading this, for— and you have more skin in the game, you ultimately are going to be paying the money if there's some debt. You should have far more ownership.

Way more. Yeah, do not split that baby 50/50.

It's not true. You do it because you think you're being polite, you think you're being kind. All you're doing is creating resentment. Yeah, all you're doing is planting the seeds to ruin this friendship. So The kindest thing you can do is, hey, I want you to be a partner at 5%, at 20%.

It—

remember, between 1 and 50, there are lots of numbers.

There's a lot of numbers in there. There's a lot of different ways you can play with this. And, and like we said, be really realistic about those resources, be scrappy, and don't fall and be into the game of being flattered that you're like, oh, I wanna have a business partner cuz that sounds cool. Or you think that's gonna, that it's gonna be cool, but we're not moving into thinking about what that really looks like and if that's a good fit for what you're talking about for this business, for this idea.

So I, in another instance, I had a partner and she just, she really cared about her percentage. Okay, what was her percentage of this business? And she wasn't doing near— she did about 20% of the work to the 80% I was doing. I put in all the money, I put in all the risk, Over the years, she kept wanting more and more percentage, and I kept having to say to her, the percentage shouldn't matter. Our pie is actually getting bigger, so you're getting more money even with the percentage you have. But she just poisoned the business where the pie got so small. Now she had 50% of it by the end, but I'm like, the checks you're getting are so much smaller. Than this huge pie.

So short-sighted. Yeah.

And I just can't even wrap my head around. And I kept trying to have those conversations. I kept trying to salvage it. It just wasn't gonna happen.

It's—

but I was too deep into it and I couldn't figure out a way to resolve it other than I ended up finally walking away from that business because it just didn't work.

It just didn't work. Yeah. And it happens. And I think it's good to point out, like you said, At the end of the day, is it always an option to sell and to have one of you buy the other person out? Absolutely. Is that a conversation that needs to happen awkwardly at the beginning? Absolutely. While you're in the honeymoon phase, I know it's weird to have discussions of divorce and prenup in the honeymoon, but that's actually the perfect time because right then it's, it's theoretical and it's safe because you haven't made any money yet or, and you don't have any debts yet. Either way, you can just talk about things really plainly and be clear with each other. And that conversation should talk about If someone wants to leave, are they going to offer a number in terms of which offer are we going to get outside valuation? What is that going to look like? And making sure that all— we're clear that all the assets that have been created into the business stay there. This is something I see coming up more and more with my clients because a lot of them are creating intellectual property is actually the biggest asset of their business. They may not even have a physical product. They don't have a warehouse, they don't have trucks. That was not what we're talking about. We're talking about a podcast. We're talking about a gigantic engaged email list that's now worth a lot of money. So it's really good to talk about, make sure all those things that we're creating, those are all going in the business pot. No one gets to walk away. Those stay with the business.

Yeah, that's right. And those things can happen further down the road, but they get— it always gets stickier. It always gets more emotional. Yeah. Plant your tree now if you can.. But if not, plan it as soon as you can.

Yeah. And get something in writing. You can find operating agreements and I sell them on my contract shop, but even a Word document that you guys both looked over and signed is better than nothing.

And an email exchange can help. Yes. You both need to say you agree to it, but it's yeah, there. And again, I'm not practicing law because I'm not a lawyer. I've been in situations where that has been enough. Oh, pull it up. Oh yeah. Here's where we agree.

Oh yeah. We talked about this. We agree. It's totally better than nothing.

For sure. Yeah. So having all of that in place. Yeah. And then the one other thing that we jumped ahead, cuz I was talking about ways that people are getting paid. The last thing is profit sharing. That's usually based on ownership and how much ownership there is. So knowing that going in, all of those things are always mobile. And it took me a lot of years to understand that. I thought once someone owned it, even as the managing partner, I didn't know I had that kind of control where I could say, we're gonna revisit this and we're gonna keep it fair. Maybe it was fair when we started, it's no longer fair.

It's no longer fair. And you can split. It's more the minority for sure. I think most people, the more standard is they match profit sharing is matched expense sharing the same as what the equity ownership is, but it doesn't have to be. There's nothing that says that. And so sometimes people really do care more about the voting and like having what their vote is on big decisions and are okay with their profit sharing changing or being linked to other things. This, I think, is especially helpful with businesses where maybe you guys both have to sell and there's almost like a commission structure where it's, look, we want profit sharing to be— you get to have a bigger chunk of what you bring home to the business. And that's why we're going to keep it really fair and honest and keep everyone motivated.

As a huge fan of being an entrepreneur, of all these businesses, I just love seeing especially women out there making it work in their lives. So I love ambitious women and I like to create spaces for them. And I just feel like ambition can look a lot of different ways and there's no wrong way. But if you are ambitious, find your people, because if you're having these kinds of problems, if you're having these kinds of issues or you're worried they could come up, having a flock, having a group around you where you can talk openly and honestly, and get good feedback. That's invaluable when you're really facing some of these issues.

Totally. I couldn't agree with that more. Second that about it being important and have to be something that sometimes you have to be intentional about. It may not happen naturally, especially if you are an entrepreneur who's virtual-based, as a lot of us are nowadays. And you need to find ways that you can curate those spaces for you. I'd love to share with us where we can find you and a little bit about Shift, cuz that's been your most recent project. That's been awesome. You guys had a fantastic first year.

Yeah, thanks. So I am on Instagram and it's shiftgathering.com and we are doing a number of things. We just had a summit in September. Tan France came. It was awesome. We are doing some networking events and some retreats this coming year. A number of things are unrolling and we're very excited, but yeah, we're creating a safe space for ambitious women. And if you want to be a part of that, we'd love to have you find us and join us and We are Utah-based, so our face-to-face things are happening in Utah, but we're doing a ton digitally as well. If you're not a Utahn, that's all right. We still love you and you're more than welcome to be a part of our, part of our flock.

That's awesome.

Yeah.

And it means you probably pronounce mountain the right way. So a little inside joke for you Utahns. Sarah, thank you so much for joining me. I thoroughly loved this conversation. I think this is going to be really helpful, especially for people, most helpful if you're at the beginning of that journey, but But like we said, even if you are farther down the partnership and you're like, shoot, some of these things are cropping up and I'm worried about this, or I'm worried my partner might be feeling some of these things. This is an episode I hope that you listen to, write down all these questions and really dig into because know that you're a smart, capable person. If you run a business, you can figure this stuff out too, and you can have these conversations and come out the other side of 'em.

Okay. Yeah. And you're not alone. There are people out there who can help you reach out to one of us. We're happy to, have those conversations. So thank you for having me. This has just been a lot of fun.

Thanks, Sarah. What an amazing conversation, right? I just love Sarah and loved getting to take advantage of all the knowledge that she's had and firsthand being able to see a variety, not only how open she was in sharing about her own business partnerships, the good and the bad and the ugly, but also ones that she's been able to mentor and help. And you can see why she's such a great source of wisdom, why she has had the chance to mentor and lead and network and try to help other, other business owners, especially other women business owners, through some of these sticky partnership situations depending on where you are on that business partnership life cycle. My big 4 takeaways here were: 1, you don't have to have a partner. It's actually okay to do it alone. It might be scary, it might be stretching. Spoiler alert, so is running a business business, so as being an entrepreneur, period. But don't feel like you necessarily need to have a partner, especially with some of the different ways we talked about of getting the resources you need. And those resources don't necessarily mean that you need to exchange equity for those and ownership in those in your company. Number 2, if you have a partner, it's hard work. And if it's really hard work, you're not alone. Business partnerships, like any important relationship, take a lot of care effort continuously. So listen to some of these questions we discussed. This is definitely an episode that you're going to want to bookmark and save and re-listen to. Maybe send it to a business partner or a potential business partner or someone else in your circle who's maybe having a, having a tough time, or maybe just wants to have some more tools in their toolkit to fend off some of these conversations before they get more emotionally charged. Number 3, have those conversations. Check in, adjust, know that avoiding it is not addressing it. And like Sarah said in the beginning, not having this conversation can be a very expensive conversation. Basically, the non-conversation can be very expensive for you and continue so, especially if you are carrying and harboring resentment that's coming out in other ways in your relationship, in your communication, in your personal life and well-being. Well-being. That can definitely take a toll on a lot of aspects of your life, whether that's something that you're aware of or recognizing or not. And number 4, partnerships can change and can have natural fluctuations, and sometimes ending with a, with an all-out end or an exit. That's a natural and normal part of a business life cycle, and it doesn't have to mean anything else about you, any personal failings or friendship failings or family failings, and hopefully we can avoid those ending those relationships and preserve those relationships, especially if we're being smart and being intentional and having things in writing and having those conversations early and often and checking in and amending things when we need to so that everyone's on the same page. So with that in mind, I've got some great resources and links in the show notes, so please take a look at those. Biggest, biggest thing here is if you are in a business partnership and you have not gotten an operating agreement yet, or partnership agreement, or sometimes called— these are called buy-sell agreements. This document is absolutely critical for your business. I really can't think of a more important proactive legal move you could do in terms of what it will pay on the back end in dividends. So if you have not taken the time to write up an operating agreement, or if you have something that's written on the back of a napkin or in a Google Doc but it's not formally laid out, you know, best best time is tomorrow. Get it on your list and get it taken care of. I sell one of these in my creative contract shop. You'll see the link of that in the show notes, and it's easy to go through. It has a video step-by-step guide that comes with it, so it's something that you can dig in, that you can send in, and you can have these conversations with your business partner and then both sign it. And now it's a legally binding document. Doesn't have to be filed anywhere, but it's for you and your records so that you guys know that at this date and you both came together on the same page. And that way, people's memories can change and their experiences or expectations can be, you know, can fluctuate over time, but that document is solid and can really help clarify expectations and just give you an amazing amount of peace of mind, which is what we want for you. So some of the other resources we mentioned in the show notes: Slicing Pie, E-Myth, and the other episode that I've done that that's all about business partnerships. That's probably one of my top listened and downloaded episodes, certainly one that I recommend nearly every week to somebody, which is episode 45 of Creative Counsel. And that's all about business partnerships. It even comes with a free questionnaire that you can go, that both you and your partner can work through, or business partners. And it's really designed to be something that you, you know, go away for and do a fun overnight somewhere. Right? You know, treat yourself and pair it with something fun, and then work through this document to make sure, especially in the beginning of a partnership, that you are really aligned in purpose. And it's a, it's a rehashing of a lot of the things that Sarah and I talked about, um, you know, everything from the, the vision and the woo-woo stuff to some of the technical, to make sure that you are really having the tools to have these conversations early and often. So thanks so much for tuning into this, and like always, if you are just beginning on your journey of getting legally legit and need some more guidance, I'd love to be and to help you with that. And so first step is you can download my free guide of how to get my Legally Legit Workbook at getlegitwithbritt.com. Links in the show notes. Also remember that my Black Friday sale starts next week, November 14th. So if you're listening to this live and you might be in need of a contract to help support you in your business, a contract template, note that I just do usually 2 big promotions a year, and this is my big semi-annual sale where you can get 40% off of my contract templates. And that starts November 14th. If you have any questions about what contract that you need, head over to Creative Contracts. We've got a free quiz for you there for you to put in and dial in exactly what do you do in your business, what do you sell, how do you sell it, do you have team members, and, and we'll give you a personalized recommendation of what we think that you might need and be ready for in your business business to help support you. Um, and we also have a, a chat function there to help if you need more guidance on what you need for your business. So head over to creativecontracts.co and do not miss that sale starting bright and early on November 14th.