Jay and I settled who owns what at Cafe Oldrock before there was anything worth owning. I have said before that this is why the place runs without either of us needing to be present. I want to say something more uncomfortable, which is that it is also why we are still on speaking terms.
The conversation about how a partnership works is easy at exactly one moment, and that is the moment it feels unnecessary. Nothing has been built. Nobody has been wronged. The numbers are all zero, so nobody can lose.
Most founders skip it then and have it later, when the venture is either worth something or in trouble. Both of those are terrible times to discover you disagree.
Why it gets postponed
It feels like distrust. Raising the question of what happens if one of you leaves, in month two, sounds like you are already planning to.
It also feels premature. There is no revenue, so arguing about how to split it seems absurd.
Both feelings are accurate and both are wrong. The purpose of the conversation is not to divide anything. It is to find out, while it is still cheap, whether the two of you mean the same thing by the word partner. A surprising number of people do not.
The five questions
Who decides what. Not in general. Specifically. Which decisions can either of you make alone, which need both, and what happens when both are needed and you disagree. I have written elsewhere about decision thresholds inside a team. Between partners the same principle applies, with the added difficulty that neither of you reports to the other.
What each of you is putting in, and what it is worth. Money is easy to count. Time, relationships, a name that opens doors, a skill the venture cannot otherwise afford, are not. Write down what each of you is contributing and agree what it is worth now. Then the harder part: agree what happens when one of you stops contributing it. The partner who put in capital and then disappeared, and the partner who put in every evening for three years, will have very different views about fairness in year four unless you settled it in year one.
What happens when one of you wants out. Not whether. When. Somebody will want out, for a good reason or a bad one, and the venture has to survive that. Agree the notice, agree how the departing share is valued, and agree who has first right to buy it. A formula you both think is slightly unfair is worth more than a fair one you never wrote down.
What deadlock looks like, and who breaks it. Two equal partners who disagree have no mechanism. Name one. A third person you both trust, a coin, a rule that the partner closest to the problem decides. The mechanism matters less than its existence.
What fair means if it works. This is the one almost nobody asks. Partnerships fail in success as often as in failure, because the venture becomes worth more than either of you imagined and the original split starts to look like an accident. Decide now whether the split is fixed or whether it tracks something, and decide what.
Write it down badly rather than not at all
The lawyer’s version of this document is forty pages and costs money you do not have yet. So founders wait for the lawyer, and the waiting becomes permanent.
Write two pages instead. Plain language, five headings, both signatures, today’s date. It will not hold up to everything. It will hold up to the thing that actually matters, which is two people remembering the same agreement differently three years later. The lawyer can formalise it when there is something to formalise.
In a small market the partner is also the neighbour
In Harare, in Lusaka, in Sandton, you do not stop knowing your former partner. You will be at the same funerals. Your children may be in the same school. The person you fell out with over an unspoken assumption will be introduced to you at a wedding by someone who does not know.
This is the case for structure that nobody makes. Structure does not protect the equity. It protects the relationship. When the rules were written down before anyone needed them, a partner leaving is an event, not a betrayal, and the two of you can still greet each other afterwards.
The honest cost
You may have the conversation and discover that you do not agree.
Your would be partner may think their name is worth forty percent and you may think it is worth ten. They may assume the venture will be sold in five years and you may intend to hand it to your children. One of you may have been assuming the other would eventually go full time, and the other may have no such plan.
Some partnerships do not survive this conversation. That is not a failure of the conversation. It is the conversation doing its job at the one moment when the cost of the answer was nothing.
