In this YouTube video, Evan Carmichael answers a viewer’s question about managing a four‑person startup partnership. He explains why partnerships can become stressful and likens them to marriage, emphasizing the need for the right people from the start. Carmichael then outlines five practical recommendations: (1) ensure partners share a common vision and core values; (2) define clear roles and appoint a single CEO to avoid a “four‑headed monster”; (3) compensate based on performance while splitting equity‑based profits proportionally, using replacement‑cost benchmarks for salaries; (4) establish a tiebreaker—typically an advisor or mentor with a small equity stake—to resolve dead‑locks; and (5) draft a robust shareholders’ agreement that includes mechanisms such as a shotgun clause, right of first refusal, and provisions for buy‑outs or death. He concludes by summarizing the five steps and encourages viewers to subscribe and read his newsletter. The video also includes a brief endorsement from Jason J. Ros Fonseca.
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How to deal with difficult partners. So I got a great question from one of my readers, Zishen, love you guys, who wrote in to say, hi Mr. Evan, I was interested in knowing about partnerships, like how do we generally need to get along with each other? For instance, we are 4 people who are doing and working on a startup, but in the end I get confused that 4 partners can't sit in the same chair and share equal money with each other. Even if we do, there'd be an ego clash about sharing equal profits because of work tasks. So could you give me an idea about what kind of policies would be implemented in such a situation amongst us 4 partners and how money should be allocated in such instances. Thanks and regards. So this is a great question and one that causes a lot of stress for people working in partnerships. A lot of times when you're starting the business, you think, well, I can't do everything myself and I don't have all the skills I need, so you find related people who have complementary skills and everybody's all excited at the beginning and then it falls apart as soon as it starts to get difficult and tough. And being in a partnership is just like being married. Where you're gonna have to go through a lot of great times, but a lot of bad times together too. And you have to make sure you have the right people with you and not just jump into something because it sounds exciting. So dealing partners is hard. I've had, uh, for the most part, great experiences with it, but I want to give you 5 suggestions for how to make your partnership work. Number 1 is have aligned vision and values. This is so important. Now this may be a little too late for you because you already have your 3 partners, but the start is what's so important, right? You need to bring on people who have complementary skill sets to you, but who have a vision of what you want to build with you, right? They love what you're all about, they love what you stand for, they love the mission that you're trying to accomplish, they're aligned, right? They love what this company is all about beyond just making money. And they share the same values. This is so important. This is one thing that people almost never look at. You have to— just like getting married, you have to be with somebody who has the same values as you, because most of your fights are gonna be around values-related stuff. And if you share different values, it's not gonna work. You can't get somebody to change what their core values are. It's better to align yourself with people who have the same core values as you and who have the complementary skill sets. So there's a lot of work that you have to do right up front to make sure that you're bringing in the right partners from the start. Number 2 is have defined roles. So you may not be able to choose your partners now that you already have your 3 business partners, but you can have very clearly defined roles. You have to know who's doing what. I have no idea what your company does, I have no idea what everybody's responsibilities are, but you have to set that up. You have to know that you're in charge of this, this guy's in charge of this, she's in charge of that. You have clearly defined roles and you don't step on each other's toes. Have a job description and somebody's got to be the CEO, right? You don't have a four-headed monster at the top of this thing. Pick one person who's the best person to lead this business forward. That's your president, that's your CEO. CEO. Everybody else has their roles, they have their responsibilities, and you're not stepping on each other's toes. Otherwise, it's mayhem. You're never going to agree, you're always going to be fighting over what to do, and that means no progress for the company. Number 3: Pay for performance and split the profits. So you ask about how do you, how do you get paid? How do you decide who's worth what and how you split the profits? I'm assuming you're equal partners, right? Before, you are equal partners in the business. What you want to do here is you get paid in two ways. One, you have equity, right? So if you're going to give a dividend to the owners, or if you're going to have a management bonus, or if you're going to have profit sharing, that should be equal, right? It should be based on how many shares you have. If, if somebody owns twice as many shares as somebody else amongst your four partners, then that person gets twice as much of a dividend when you're sharing those profits at the end of the year. Or however often you're gonna do it, right? So the profit sharing is equal. But what doesn't have to be equal necessarily is the performance-based pay. So you wanna make sure that everybody that is on the team is getting paid, right? The president's getting paid, your developers are getting paid, your marketers are getting paid, however you split up your 4 roles, everybody's getting paid. And typically what companies will do is figure out how much would it cost to replace that person? If I have to go and hire somebody to come out to be that person, to be that lead programmer, to be that marketing director, to be that CEO, what would it cost me to find a replacement salary for? And that's how much that person gets paid. Now, at the start of a new business, you don't have a lot of money. You're not raking it in yet. So quite often what companies will do is everybody gets the same pay, everybody gets the same profit shares, until you start making some real money. And then people start to fight, right? When there's no money, when the company's not making anything, you don't have fights over who's taking what because there's not enough. But when your company starts to make money, then people start feeling like, hey, I'm worth more, I'm adding more value here, I should be earning a higher salary. And what you can do is look at what that person's bringing and what it will cost to replace them. So everybody can potentially have a different salary if people are bringing different value, if it's more expensive to replace one person than another. But if you're owning equal shares then you split the profits equally. Number 4 is have a tiebreaker. Sometimes people fight and you'll have partners who just do not agree on something and you need to have somebody who can be that tiebreaker for you. So you're in a situation where you have 4 partners, right? So you might have 3 partners against 1 or, or 4 against 1, which is great, but the problem comes with what if 2 people agree on one side and 2 people agree on the other side? How do you, how do you solve that? What a lot of companies will do is they have an advisor who will be a part of the company and own 1% of the shares, and that person is called on to split the vote, right? So it might be your accountant, it might be your lawyer, potentially a banker, somebody who can add value to your business, who can give you advice. It could be a coach, it could be a mentor, could be a business person you look up to who owns a really small piece of the company, and they can come on board if you guys are ever in a deadlock that you can't get past because you need to make a make a decision and move on. You will not have success just constantly fighting amongst each other. And so a lot of companies who are in partnerships will have that person set up as a tiebreaker. And number 5 is have a great shareholders agreement. As sad as it is to say, you know, I'm the guy who believes, but as sad as it is to say, most partnerships don't work out. And now you're talking about having 4 people in a partnership. It's probably not going to work out. With everybody staying on board for years and years, if you look at the history of companies, it's very, very, very rare that that happens. And so what you want to do is make sure you have a great shareholders agreement. And what it does is outlines the rules for coming in or leaving a partnership. So for example, one of the clauses you want to have is a shotgun agreement. So you need the shotgun clause, you gotta have that in. Basically what it means is you can— if somebody's being a big pain you know, you just cannot get along with this other partner or two partners, or you know that one of them has to leave, they can invoke the shotgun clause. And what it does is basically says, either I'm in or you're in, and I set the price. I think the value of my shares are worth this amount of money, so you can either buy me for that amount of money or I'm going to buy you for that same amount of money. And they have to make a decision, and somebody's in and somebody's out. And they set the rules. And this way you're not going to court and you're not continuing to fight and it doesn't cause a whole bunch of issues. But a good shareholders agreement will also outline other issues. So for example, if somebody buys you out, right, say somebody wants to acquire your business, do they buy out all the other partners or not? Or can they just buy out 2 and own 50% of the shares, right? Does everybody have to agree if somebody's selling the shares? Can I go sell my shares to my best friend who's now gonna own part of your business? Is that okay, right? Or do you have right of first refusal? If I die, do my shares go to my wife, right? And then she's a partner in your business. Is that okay? Or do you have right of first refusal, right? All of these things can be figured out because chances are somebody's gonna have a problem with the business and it may be easy to solve, but typically it's not. And so having a good shareholders agreement will save you aggravation, time, money, and help your business continue to grow. So in summary, how to deal with difficult partners: Number 1, have aligned vision and values. Number 2, have defined roles. Number 3, pay for performance, split the profits. Number 4, have a tiebreaker. And number 5, have a great shareholders agreement. And believe. For those of you watching and like the video, you can subscribe to the channel to see more just like this. Thank you so much for watching. I'll see you soon. Don't forget to check out my newsletter. Click the link below.
Hi, I'm Jason J. Ros Fonseca of RiseOnline.com, and I want to say Evan Carmichael's newsletter is consistent, fun, inspiring, and it's the only newsletter I prioritize and look forward to. Period.
