Who's the boss? Why 50-50 business partnerships often fail.

AuthorCampbell, Carolyn
PositionLessons Learned - Eric Montague of a Executech Inc

Eric Montague has achieved remarkable success with his IT outsource company, Executech. The company boasts about 580 clients in Salt Lake City, Provo and Ogden. And, in its 12-year history, Executech has never experienced a year of lower than 30 percent growth.

But before he hit gold with Executech, Montague was involved in a couple of other businesses. He was a small partner with a 5 percent ownership in an IT outsource company and owned a 50 percent partnership in another firm. These enterprises did not work out so well for Montague, and he discovered that business partnerships can be as difficult and complicated as any other personal relationship.

Partnership Pitfalls

"My core belief is that partnerships in companies are very difficult. I work with hundreds of companies and witness how difficult partnerships can be," says Montague. "I believe that partnerships should be avoided unless there is an overwhelming business reason why they are necessary."

In particular, he says that 50-50 partnerships are a truly bad idea. "There are too many opportunities to reach an impasse, where one person wants to go one way and the other partner wants to take a different route. There is no one person to make the decision."

Montague says he would never again own a company where he didn't possess at least majority voting rights. "In a partnership that is divided with at least a 51-49 percent split, one person can evaluate the other persons goals, discuss them and say, 'this is the way we are going.' With a 50-50 partnership, you are both twiddling your thumbs."

Montague says his previous IT companies "were very difficult to manage because of partnership issues." He faced the issue of partners who he felt spent money in the wrong areas. "I felt it was no longer prudent for me to continue earning 70 to 80 percent of the company's money while spending only 20 to 30 percent of that money."

Get it in Writing

Today, as the owner of multiple companies, Montague outlines relationships in a document before money changes hands or business is transacted. "Partnerships must be strictly outlined prior to any LLC, organization or other legal documents being drawn up. If an initial agreement is not reached regarding these details, then the partnership will die before it is born," he says.

"While it may be a hard thing to sit down face to face for a difficult discussion about business aspects, a one-hour discussion outlining each others crucial expectations has a huge...

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