Brittany Ratelle: 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.
Sara Urquhart: I’m so excited to be here. Thank you. Awesome.
Brittany Ratelle: You got to hear a little bit about Sarah’s experience, but obviously she is no stranger to business as of all type. And as 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 are 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. We’d 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.
Sara Urquhart: Sure. So over the years, I started a number of businesses. And in my early years, I really felt like I needed a partner. Cause, 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 some of times 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 a hold 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.
Brittany Ratelle: 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 want to 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 in the relationship.
Sara Urquhart: That’s exactly right. 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 three 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 .
Brittany Ratelle: Put an event on together, do a photo shoot or a collaboration, go, you should go camping with someone you’re dating or have put together an Ikea piece of furniture, but like you’ve figured out a lot. The the marriage metaphors are rife through business partnership, 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 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.
Sara Urquhart: When you’re thinking about a business partner, you’re not necessarily going to your best 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. 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 compliments what you do, one of you like
Brittany Ratelle: . The vision person and one’s the detailed person, or vice
Sara Urquhart: Yeah. A little bit more of an executioner. So you’re really, so think through that and and 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 are expecting?
Are you all, are your expectations the same? Are you on the same page? So, think of through all of those things, as you are contemplating, whether you should get together.
Brittany Ratelle: 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.
Yes. 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 beg, borrow, steel. 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 rich uncle, whatever, all your options.
Sara Urquhart: 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? Beause, often the answer is actually no. So be OK 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.
Brittany Ratelle: It doesn’t. It’s like that Compaq study, like you just have to have 60%, you don’t have to have it! 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.
Sara Urquhart: You can 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, beg, borrow, or 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 are 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 becasue 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, then 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 a thousand hours and they were working 20.
Brittany Ratelle: 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 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 investing.
And so I do always want to 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 other 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, 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.
Sara Urquhart: 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. There it’s a bit on event 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. And then as you said, build into the partnership agreements the equity is part of that growing business and you’re going to 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.
Brittany Ratelle: So you’re not even having to reevaluate. It’s just always doesn’t become, “Hey, you’re in trouble. We want to time out”, a standup meeting that’s not already on the calendar gets people in a lot different head space and more defensive than, “hey, remember how we agreed we were going to have an annual meeting, we were going to check in, let’s have that,” and that brings it just a totally different vibe to the conversation and 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 three minutes or five minutes of uninterrupted that all you can do is listen to the other person feels really understood.
Sara Urquhart: 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 will share a story with a friend that I was working with on some of this. Her name’s Debra, she cuts hair and she is 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. 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 Debra would’ve gone into business with this person. Not that they’re fine. They have a professional relationship.
Brittany Ratelle: Yeah. But it’s a little bit of an arranged marriage.
Sara Urquhart: Yeah. It’s exactly right. So they both kick in $10,000, which is great. They own 50/ 50. In the last three years, since they bought it, Deborah, she’s working 40 to 50 hours a week, every single day. For three years or, five to six 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, three 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 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,
Brittany Ratelle: that’s an option on the tables. We’re looking at all of our options.
Sara Urquhart: It’s 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 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 said, 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 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, is there a way to keep it. 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, and if you’re in the middle of it, okay, here are some possible options that could help in this scenario.
Brittany Ratelle: And I think it, it illustrates, a couple 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 go 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, that’s how people do in marriages of these are all the tasks that we need to get done. So we’re going to put ’em 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. We’re not usually as good as hiding that as we think we are.
Reminds me of the book eMyth Revisited, which is a great entrepreneurial startup guide classic that’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.
Sara Urquhart: Absolutely people, most people want 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 going to 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?
Brittany Ratelle: Yeah, no one loves a martyr.
Sara Urquhart: Exactly. Are expectations realistic? 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.
Brittany Ratelle: The fact is, it’s hard to argue with facts and the more you keep it, and 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 in, 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.
Sara Urquhart: 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 going to 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 five of us in this room. We’re going to go now and who decide on each thing, who’s going to spearhead that who has time, who can do it? We ended up with three items that we were going to move forward on because they wanted me to do the other 37! And I was already out of time. It was by, 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.
Brittany Ratelle: Yeah. You don’t let the good idea fairy, run rampant just because it’s a great idea. Doesn’t mean it’s a good fit for you or a good fit right now.
Sara Urquhart: 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 yeah, until I could do this until we went through that, they were like, oh, okay.
Got it. And we really, it resolved a lot of things. So that was really a good exercise for that team,
Brittany Ratelle: 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 three times as much. And it happens a lot.
Sara Urquhart: 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 if, once you are 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. And that is not a reason to give away half of your money. Because, that’s an expensive conversation that you’re avoiding.
Brittany Ratelle: I love that. That is an expensive conversation and it’s not likely going to get any better.
Sara Urquhart: No!
Brittany Ratelle: Likely only going to get harder. When you should eat Crow, you should do it first thing in the morning.
Sara Urquhart: 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, eh, 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, right?
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 going to 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 I issues in my family right now. I have, I’m having these mental health challenges, whatever
Brittany Ratelle: They’re not showing up the way they want to and they want to be right.
Sara Urquhart: Thank you. Yeah, so it’s having those conversations is probably not going to be shocking to your partner.
Brittany Ratelle: If it is then maybe you guys should part if like this is all becoming out of left field, because it means they’re not paying attention to anything,
Sara Urquhart: 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.
Brittany Ratelle: 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.
Sara Urquhart: Exactly.
Brittany Ratelle: Those are just very different lives that we cannot match,
Sara Urquhart: And 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?
Brittany Ratelle: Yes, of course.
Sara Urquhart: This is a story about Jennifer and Erin and they own a little bakery and Erin 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 six months, she kept saying, ah, 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. Yeah. 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 four 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. Six months was too long to let that keep festering. It’s not as long as it letting it happen for two 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.”
Brittany Ratelle: First of all, we don’t control other people. So that’s a good thing is 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.
Sara Urquhart: That’s exactly right. So you can’t control them. You’re exactly. So what can you do?
You can control yourself and you are 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 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.
Brittany Ratelle: And 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.
Sara Urquhart: that’s exactly right.
Brittany Ratelle: 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 want to show up in the world. But that we can still address things that need to be addressed.
Sara Urquhart: Yes. So you just nailed it on the head. The one other little thing I want to 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.
Brittany Ratelle: You’re having reliable revenue and you probably now that you’re an S Corp, your account is probably telling you, Hey, you guys both need to be on salary. Now it’s going to be better tax wise, listen to that.
Sara Urquhart: 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 who’s her business. She had a couple of businesses that kind of overlapped with 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 a hundred percent 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 are 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.
Brittany Ratelle: 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 Schitts Creek, it’s a write off, who’s going to pay.
Yeah, I dunno right off people like the government.
No, that’s not how taxes works. I’m sorry. If someone has told you that is not, if you wouldn’t pay for it in your business, you are 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.
Sara Urquhart: Yeah. And I will say this as well, even the companies that go through and start off with all the documentation and we’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 of 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. Even the best can find themselves in a situation where they’re going, oh, this was not what I signed up for.
Brittany Ratelle: 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 reasons. 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 rollercoaster.
Sara Urquhart: And. And it’s a for some people it’s a fun rollercoaster.
I keep signing up for it because I like it so much. So you’re, you’re a fan, yeah. I like the problem solving and I’ve had people ask me this when do the problem stop? And I’m like, oh, never. That’s when. Oh, no, never.
Brittany Ratelle: So if you’re waiting for that, you’re that bus is never going to show up.
Sara Urquhart: No. So if you’re looking for them to stop, you’re in the wrong business. And 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 outta 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 buiness. 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.
Brittany Ratelle: Find a good business coach. Find an. People, you know exactly there, there’s all different other third party, know, 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? Cause because normally there’s one person who wants, has slightly more, skin in the game or wants to be more of 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 going to abide by their decision to save the business partnership.
Sara Urquhart: . Yes. Because 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? 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.
Brittany Ratelle: Do not split that baby 50/50. It’s not true.
Sara Urquhart: 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% at remember between one and 50, there are lots of numbers, there’s a lot of numbers in there.
Brittany Ratelle: So a lot of different ways you can, play with this. And why is that? 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 want to have a business partner, because that sounds cool.
Or you think that’s going to that? It’s going to 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.
Sara Urquhart: So I, on 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 percent of it by the end, but I’m like, you’re getting are so smaller than this huge pie.
Brittany Ratelle: So shortsighted. Yeah.
Sara Urquhart: 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 going to happen. It’s but. 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.
Brittany Ratelle: 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 by 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. Yeah. 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 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, is there, 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 were 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. Right. That’s 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.
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.
Sara Urquhart: 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. Plant your tree. Now, if you can, but if not plant it, as soon as you.
Brittany Ratelle: And get something, in writing. You can find operating agreements and I sell them in my contract shop, but even a word document that you guys both looked over and signed is better than nothing,
Sara Urquhart: and an email exchange can help, Yes, you above me to say you agreed 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 is right. You pull it up. Oh yeah. Here’s wherewe agreed. Okay.
Brittany Ratelle: We, We talked about this. We agree, it’s totally better than nothing for sure.
Sara Urquhart: Yeah. Yeah, so having all of that in place yeah. And then the one other thing that we jumped ahead, because 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. I even as the managing partner, I didn’t know I had that kind of control where I could say, we’re going to revisit this and we’re going to keep it fair. It maybe was fair when we started. It’s no longer fair.
Brittany Ratelle: 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 owner should is, but it doesn’t have to be, there’s nothing that says that.
And. 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 then that’s why we’re going to keep it really, fair and honest and keep everyone motivated.
Sara Urquhart: 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 kind of problems, if you’re having these kind 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.
Brittany Ratelle: 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 is 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, because that’s been your most recent project. That’s been awesome. You guys had a fantastic first year.
Sara Urquhart: Yeah, thanks. So I am on Instagram, and it’s shift gathering.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 you’re enrolling 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 Utah, that’s alright. We still love you. And you’re more than welcome to be a part of. Part of our flock.
Brittany Ratelle: That’s awesome. Yeah. And it means you probably pronounce mountain the right way. It’s so a little inside joke for you. Utah’s 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, the most helpful up here, the beginning of that journey, 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, or 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 them okay.
Sara Urquhart: 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.
Brittany Ratelle: Thanks, Sarah.