What to do when your partner is no longer a partner?
Finding a partner who shares both the risks and the objectives is a great opportunity for any entrepreneur. That’s why we strongly encourage building strong relationships from the beginning.
Sometimes, for economic, personal or professional reasons, a partner can cease to be a true “partner” and become, at best, an annoying partner. This situation can generate instability and slow down the growth of the project or the company.
The importance of a well-defined exit strategy
Although it does not always happen, it is prudent to foresee this type of situation and have a previously agreed exit mechanism. This will not prevent all conflicts, but it will help to minimize them and manage them efficiently. And just in case you didn’t believe me…
An exit strategy or exit strategy, is an agreement to define how a partner can leave the project, either because it does not want to continue or because it has ceased to fulfill its responsibilities. As our senior lighthouse keeper, Juan Ramón Balcells, pointed out to us, having this strategy clear in advance helps to avoid unnecessary frustrations and tensions.
Features
Keys to an effective exit strategy
There is no one-size-fits-all strategy. Each case is unique, but some common aspects to consider are:
- Assumptions in which the exit clause will be triggered.
- Exit price or purchase and sale price of the shares.
- Indemnifications if necessary.
- Deadlines for executing the output.
- Non-competition agreements.
- Confidentiality and collaboration in the process.
Key thoughts on the departure of a partner
Consultancy of The Lighthouse Team:
It is advisable to have expert advice to structure these mechanisms. At The Lighthouse Team, we have the experience and knowledge to support you in defining the best strategy for your business.
