Tip 13: Agree on an Exit Plan during the Negotiation Phase
Many couples opt to draft a pre-nuptial agreement before they get married. While some people believe that signing a pre-nuptial agreement puts the couple on a mindset that their marriage will not last and eventually fail, the fact is that pre-nups do make sense. Pre-nups are exit plans. You’ll never know what will happen in the course of the marriage, and the pre-nup ensures that the couple’s assets will be protected in the event they decide that they do want to end their marriage.
When you are in conversation on creating a partnership or alliance with a potential partner, it’s good to discuss the exit plan as well. It may sound counterproductive to discuss how to break up while you’re still dating, but this is actually the best moment to discuss delicate matters like dividing the results and assets of the partnership and how you will handle that when breaking up. In that way, your decisions on these matters won’t be colored by whatever personal feelings you may have upon the dissolution of your partnership or alliance.
It is a fact that many partnerships fail. Hence, you need to design an exit plan that you and your partner will use when you break up before you actually break up. You should look at it as an essential element of your negotiation and design phase. There is often a debate if this plan needs to be part of the business plan or the alliance contract. I would prefer the later, as the business plan has its focus on building the alliance and the contract in general is only needed when the business plan lacks clarity or when the alliance is not delivering on the promise.
Leaving an exit scenario out of the equation in the early phases can be a costly omission. Think of how ugly a divorce can get when there isn’t a pre-nuptial agreement in place. In general, lawyers and mediators will not step in for free to help you solve the issues that have occurred. Hence, an exit plan is also a cost-avoiding part of the design phase.
Even if the alliance turns out successfully, it’s still good to have the exit plan in place. In one case with my customers, there was a product alliance that combined products from the partner with products from my customer into a new product line with a separate, jointly owned brand. After four years into the partnership, both partners expressed in a steering committee meeting that the alliance had served its purpose and that it was time to dismantle and part ways. Based on the predefined exit plan, this was an easy and clean exit. Both parties knew what needed to be done; one of them wanted to continue with the established brand and acquired the brand rights from the other partner. The exit was professionally handled and concluded with a final evaluation to allow both partners to capture the learnings from their partnership.
“A good preparation is half the battle” is a saying that’s applicable to all elements of the alliance preparation. No matter how odd it may seem to plan the exit when you’re still dating, it’s actually the best moment.
An exit plan created at the design phase of the alliance allows you to enjoy an amicable split from your partner in the event the partnership has run its course
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