Startup failure can stem from a multitude of causes, such as negative cash flow, failure to conduct market analysis or expanding too quickly. But did you know that the majority of businesses with two or more founders fail because of co-founder conflict?
According to one study, 65 percent of promising startups fail because of clashing co-founders. If you started or are thinking about starting a business with someone else, you need to know how to manage co-founder conflict before it has the potential to destroy your business.
4 tips for managing co-founder conflict
Starting a venture with someone else requires strong communication, conflict resolution and teamwork skills. Whether you incorporate as a partnership, multi-member LLC (limited liability company), or corporation, conflict between co-founders is bound to come up.
The conflict might be due to differing opinions, work ethics, personalities, backgrounds, or management styles. It can also be due to a simple misunderstanding, or over insignificant things that build up, like cleaning up your office space.
You should treat a co-founder relationship like any other type of relationship—with respect. Failing to listen to your business partner can cause resentment and eventually separation, either from your co-founder or from your business itself. But if you handle co-founder conflict effectively, you can improve your company’s bottom line, promote teamwork and increase efficiency.
Related: How 2 HGTV Entrepreneurs Overcame Major Co-Founder Discord
Have a plan of action
Before conflict even arises, you should be prepared. Put your roles, liability, profit distribution and conflict resolution strategies in writing. Creating a founders’ agreement gives you and your partner something to refer to in times of conflict.
How are you going to pursue conflict resolution? Will you involve a third party? Will you split up decision making to play up one another’s strengths? By creating an agreement ahead of time, there won’t be any surprises when conflict arises. Instead, you’ll have a fair plan you can follow.
Your founders’ agreement should name your company and its owners and provide information about your business. And, the agreement should go over each founder’s responsibilities (e.g., who is responsible for maintaining your accounting books), business ownership, owner liabilities, wage distribution and how decisions will be made. By addressing these things, your agreement can help you avoid or address conflict.
Creating your founders’ agreement also helps you identify issues early on, before you’re in the heat of the moment. You can determine what you might disagree on and assess how you will overcome these disagreements.
Address conflict head on
If you wait too long to address co-founder conflict, you increase the chances of it escalating, repeating or permanently damaging your relationship, and your company.
You might think that avoiding conflict will salvage relationships. But, embracing conflict can actually be more beneficial for building teamwork in the workplace. If you and your co-founder are able to understand one another and work through conflict, your overall team dynamic may improve.
The moment conflict comes up, put aside time to meet privately with your co-founder. Don’t discuss co-founder conflict in front of employees, as this could cause them to lose respect for you. And, it may embarrass your partner.
Give and take
Truly listen to what your co-founder says during times of conflict. Although you might be determined to vocalize your point of view and convey why you’re right, there needs to be give and take.
You will win some conflicts and lose others. In both situations, you need to be humble. Enter conflict with the mindset that you aren’t always right, and work to understand your co-founder’s point of view.
Your business will be most successful if you and your partner capitalize on each other’s strengths. There are some things that your co-founder will be better at than you. Acknowledge your weaknesses and play up each other’s strengths. Remember, your collective goal is to run a successful business, not to control everything.
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Come up with a solution
Again, your founders’ agreement should detail how you will come to a solution. If you have more than two founders, you can put decisions to a vote.
The solution should benefit your business, not your personal agenda. You and your co-founder should work together to assess the pros and cons of possible solutions. If you absolutely can’t reach a solution to your conflict, you may need to involve a third party, like a lawyer.
Just like in a marriage, you and your co-founder need to team up against conflict, not against one another. By being prepared ahead of time and prioritizing your startup’s wellbeing, you and your co-founder can resolve conflict before it harms your startup.
