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How to Dissolve a Business Partnership Peacefully | Featuring Joe Mellin

by Pablo Fuentes | Last Updated March 27, 2017
How to Dissolve a Business Partnership Peacefully

Let's face it:

There are a ton of challenges with starting a business, especially if you have never done it before.

That's why having a business partner with complimentary skills can be so helpful. Someone to help you stay focused, bounce ideas off of and ultimately shoulder the load.

However, what happens when that business partnership fails? Can you stay friends? How do you dissolve a business partnership peacefully?

To explore these questions, we talked with Joe Mellin, who use to actually be my original business partner.

We met each other when we were both grad students and then started a company together. That company would eventually become Proven.

We broke up as co-founders a couple years after that. We are still friends to this day.

On today's episode of Small Business War Stories, find out first hand how and why our business partnership came to an end and how we remained friends.

Check it out:

Listen to the podcast:

Show Notes

A summary of our interview with Joe Mellin is below.

You can use the links below to jump to your interests.


You have started a few businesses. Can you tell me about some of those businesses? Why is it that you decided to have a partner? What are some of the advantages that you see to having a partner starting a business versus starting it on your own?

Joe Mellin: Sure. Just general overview, I guess, in terms of the businesses. I started Proven with Pablo. Actually, with that, I was interested in the space for a while. Basically, when we met, I had been working on something for a while. It's really nice to have somebody that's with you. When you have down days, they're there to keep you up a little bit and you balance the other out.

I also started a company or grew a company with my mom, and there are multiple dynamics there. I think it's very clear that the relationship really matters and you care about the relationship. Because the business could fail but, I want to have a good relationship with my mom. I have my priorities straight on that one.

I started two other businesses. One was called, nReduce and one was called, Now.

Both of those were with friends or people in my network that were a little bit more on the technical side and just helps. It made a lot of sense to team up with somebody so we could have different skillsets and work together.

Did you always team up with people who had skillsets that were complementary to yours?

Joe Mellin: Yeah. Definitely. In our sense, your excellence in fundraising was definitely something that was not in my wheelhouse at the time and just general business stuff. With my mom, it was a healthcare company. She's the healthcare person and knew a lot more about product design. I ended up doing a lot of operations stuff at Proven, but generally my field is product design.

With the other two businesses, I tried to take on a little bit more of the fundraising and business side and had more technical people as partners. It's been interesting playing different roles on a team and seeing what that's like.

I'm fortunate enough to still be friends with you. Are you friends or on friendly terms with all of your former business partners?

Joe Mellin: Well, being that there's a pause there, I probably wouldn't say, fully authentically, yes. I have positive feelings towards all of them. My mom and I are actually still very good friends. The other ones are, I wouldn't say that we're hanging out regularly. I have very positive, good feelings towards them.

One of them was not really a close relationship going into it. We went our separate ways afterwards.

The other one was a friend and then afterwards, I don't know, we haven't seen each other in a couple years. But I'm not flying out and visiting him in another city somewhere, so you're in the 50% of positive outcomes.

What are the things that have helped you get along with different business partners who have different qualities, characteristics, and ways of dealing with things than you do?

Joe Mellin: I think what I've learned is that setting the right expectations is very important. With our relationship, we agreed on roles pretty early on how we're going to work together. Eventually, I decided to split up. We had some pretty good conversations where I came to the office, I think, once. We just said, "Okay. This is how we're going to negotiate these things. These are things that you need to care about so that the business is successful. These are things that I care about."

We wrote a contract and then we did those things. We both honored the contract. That was a pretty clear expectation setting. With my mom, we just said at the beginning, both of just made it very clear that we would much rather be friends and love each other and hang out on Thanksgiving than bringing a little bit more or own more percentage with the company or something like that. Those are pretty clear.

Let's see. The times that it hasn't worked as well, I was starting a business with someone whom I really didn't know before. I went in and said: "Okay. I want to do this but I'm not going to agree to give up a large part of the company right off the bat." We negotiated a pay-as-you-go structure.

How do you think about that negotiation when you're starting a company? Does it matter who was there before? Does it matter whose idea it was? How do you think about the process of divvying up ownership and equity when you partner up with someone?

Joe Mellin: Sure. I think that when you start a company there's actually a relatively low chance of success. Especially if you're going for a startup like high growth company. If it's a winner, everybody is winning. Negotiating really hard on things whether it's 2% or 5%, it doesn't really matter too much because most of the time, you're negotiating about something that doesn't end up mattering. I think the things that are a little bit more important are just making sure that everybody involved feels that they're appreciated and they don't get resentful. If someone feels like they are not getting enough and they're not talking about that, that can fester. It just creates resentment and it's just not good.

Communication is important, and having everything really clear and above board is important. Also, it's good to have everybody involved with the mindset of: "We're not battling against each other, but we're battling against the industry or the market. We want to go achieve something." We are a team that is together and we're helping each other. Having infighting on the team is not a good way to take on a large challenge.

I think the other thing that I've personally learned is that some people don't necessarily know how to value what they're asking for, and they have a tough time deciding personally whether or not they're getting a fair deal.

I think it's a good test of a relationship. Can you have an open and honest discussion about this? Also, let's just say they come in with an idea of, "I want X percent." Let's say, "I want 30%," and the other person says, "I want to give you 20%," something like that. Can the two people come together as a compromise or do they both stay entrenched in their positions and then fight? Because that's indicative of how things are going to go. If both people aren't in the mindset of that, really, what matters is the success of the team. Also, "Hey, we're going to have different views. Sometimes I'm going to have to follow you. Sometimes you're going to follow me. Sometimes we have to compromise. Sometimes we're both going to feel we're getting, not that great deal but we're moving forward." I think that's the key thing for me.

I think the success of the co-founder relationships I have had is a combination of how well we communicated with each other and how authentic we were being with ourselves. If something wasn't working and it wasn't working for a long time but you don't realize that or you don't really feel you can share that, it's bad. It's hard. Basically, I think, definitely, that's a concise way of saying it. Just making sure that it's good communication.

What are some things that were not working with you and I as business partnership? We brought in a third business partner, Sean. Sean is currently my business partner at Proven, but in the time before you left Proven, what are some things that led to the outcome that we ended up in?

Joe Mellin: That's a good question. For me, when I think back on the disagreements that we had, a lot of it was on company direction. I remember, it felt like you had made some promises to investors and also, outside organizations and we didn't want to let those people down. I was feeling I didn't really believe in the product as much and there was a tension there of direction. Do we keep going in the direction that we're going? Do we change that?

We didn't really have a product or a business at that time. We're searching for one. There was a lot of uncertainty. Those are the things that I feel I remember the most of tension around, how do we make decisions? what do we say no to? what do we say yes to? Those type of things. I guess, a pretty large percentage of the reason why I end up leaving was because we had different visions of where the company should go.

I still remember the morning when we had the conversation when you told me you were leaving. You went for a walk around town and then came back and we had that conversation. How do you decide when it's time to call it quits? We're talking about different visions that we had for the business and different things. How do you say, "Okay. This is the time to walk away"?

Joe Mellin: We had just tried to raise money and we've just been building up a team. We're pivoting away to a new business model. We decided to lay off our team, and that was painful. We either had to try to keep raising money to keep everybody on team, shut down the business, or lay off people.

We either had to drive the car off the cliff and hope that something magical happens or let our people go to keep going with a basic team and regroup and have more runway. Basically, when we decided to do that, I think, that was best for the business. We did that. That was pretty bad. I think, for me, the decision was, I didn't believe in the direction of the company. I realized that, also, I had been motivated by keeping the team together for a while.

All of a sudden, the team was gone and then it was just back to the three of us and you and I weren't really on the same track of where we should go. I was like, "Man, I could stay here and I don't know, disagree and debate with you and stuff like that." We have no money. There's no product. There's no business.

Right now, if there's a shot of doing this, there needs to be a decision made and it needs to be done. That's it. For you and I, I think, we've talked about the stuff like you were getting more involved with product design. I was like "Should there be two product design people and one developer or should there be one product design person and two developers in terms of my salary?" I was like "I think it's probably better for the company to, me, leave. Also, it wasn't something where I was like 'Okay. Great. I want to start again and do this version too.'" I would say I was like "Yes, less interested in starting from scratch again. Also, I was like 'Man, I think that this is actually better for the company for me to not be there anymore.'"

What’s the hardest part about starting a business? How does partnering with the right person play into that?

Joe Mellin: I think that keeping with it is the hardest part. Even how you and Sean have stayed together, iterated a few times and now, it's a growing thing. It's great. I think that there are going to be hard times where both individuals are incentivize to quit, where it's easier to leave or not trust each other. Successful partners have to meet those times and be like, "Okay. I'm going to decide to keep going even though it's totally irrational."

Just sticking with it is the hardest part. I think there are a lot of other things where you can get support. But nobody is going to tell you, "Oh, that thing, that narrative in your head that you think it's totally right and totally justifies you doing these actions, that narrative is not helpful." It's just you. You have to decide like "Oh, yeah. I'm going to trust my business partner. I'm going to not trust my business partner. I'm going to whatever." All those things. I think getting up everyday and deciding to or choosing to do it is the hardest part.

You've now moved on to have a successful career at a large software company. If you were to start a business today, who would you get as a business partner?

Joe Mellin: I would like to have one. It is no longer a, "I need to have one." I feel like now I have a little bit more well-rounded skill set, where I feel okay with just executing. It's so much more fun to do it with someone. It's harder but it's also more fun when you have someone to share things with.

The bare minimum is that they are authentic and they're really honest, brutally honest. If those things aren't there, it doesn't lead to great places.

I would also ask myself: "Do we balance each other out?" Also, is it clear that there are roles and people are okay with roles and one person is going to lead and one person is going to follow sometimes or all the time? Those are some basic things. Those are the things that I found that I just need to have. From there, it's just, "Do we enjoy working together? Do we have complementary skills? Are we bigger than the sum of our parts? Do we add things?" I definitely have a new found appreciation for people who challenge me because it's very helpful.

There's definitely that moment where it's like diving off a cliff. Probably, you have fun afterwards and like "Oh, that was awesome." You're still up there looking down. You're like "Oh, this is going to be uncertain." When you ask someone for feedback and there's an opening and you have no idea what they're going to say, it could be horrible, it could be minute things that you don't even think about, but you still have to put yourself in that vulnerable position.

Final Thoughts

Joe has started several businesses, all with different business partners. With some of those partnerships, he has remained on good terms with, while others they have chosen to move on and go their separate ways.

He recommends that you partner with someone who has complimentary skills to you, can be brutally honest, and is able to balance you out.

The hardest part to developing a business is simply sticking with it. You need a partner that is capable of trusting you and continually getting up each day and deciding to do it.

If you have any question or comments about today's episode, please leave a comment below.

Topics: small business war stories, podcast

Pablo Fuentes

Written by Pablo Fuentes

Pablo Fuentes is the CEO of Proven. He is a graduate of the Stanford Graduate School of Business and UCLA. He is a Brazilian Jiu-Jitsu practitioner and a blues guitar player and builder.

 

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