Distributors

United they stand

By Carolyn Heinze

When Fil Cerminara and Michael Rizzo went into business together, it was kind of like an arranged marriage…of first cousins.

“We had family members that owned the company, and they presented us an opportunity, and it was presented to us as a pair,” Cerminara explained. “We were kind of chosen, and we took it from there.”

The pair had been working in the family business, F&M Electrical Supply in Danbury, Conn., for several years. Cerminara was appointed president; Rizzo, vice president—and that is how it has been for the past 28 years. While some may balk at the idea of arranged marriages—or business partnerships—Cerminara explained that both he and Rizzo weren’t really that concerned. “We just knew that we both wanted to be proprietors,” he said. “We had grown up together in a family, and we knew we were going to work together.”

The best partnerships, notes Kim Wilkerson, founder of Wilkerson Consulting Group (wilkersonconsulting.net), involve people who share a common vision and common values. This doesn’t mean, however, that partners are carbon copies of one another. “My perception is that with any partnership, great minds don’t always think alike,” she said. “And I think that needs to be taken into consideration. It’s an asset in business relationships, and it becomes a complication for day-to-day engagement, or communications, or dynamics, and that type of thing.” She added that strengths, weaknesses, similarities, and differences should be inventoried and considered at the outset.

Like many involved in business partnerships, Cerminara likens his own to a marriage – there must be give and take. “That said, there has got to be a clear-cut leader and co-leader; president and vice president,” he said. “That was something, again, that was pretty much laid out for us when we came in, and it’s very important. Otherwise, there will be a lot of tug of war, and you can’t have that.” It’s impossible, he said, to lead a company in two different directions.

Staying on track requires partners to continually nurture their relationship in the same way successful couples take the time to nurture their personal relationships. “Part of it is constantly reviewing the partnership agreement,” Wilkerson said. “When I’m talking about the partnership agreement, I’m not just talking about the legal aspects and how they are joined and tied, and whether it’s a corporation and that type of thing. I’m talking about the two partners coming to the table to decide how they are going to interact with each other as they are running the business.” This starts with the partnership agreement, and then progresses into a discussion of how the two partners actually feel about the partnership: what’s working, and what isn’t?

Partners must also have a process in place for conflict resolution, and at F&M Electrical Supply, for Cerminara and Rizzo, this mainly involves a lot of discussion. “Depending on what it is, we might really talk it out and dissect it,” Cerminara explained. “If it’s a business decision, we might bring somebody in from within our company, a key person to give us an opinion. We won’t present it as, ‘We don’t agree, what do you think?’ to let them feel like they are breaking a tie; we might just get an opinion.” At the same time, he says, there needs to be a division of responsibilities, enabling each partner to make certain decisions on their own. “There are things that I make decisions about, and then I will go back and let Mike know what my decision is. And he may say to me, ‘Geez, do you think? You’d better think about that.’ Or, vice versa. Unless you strongly disagree, you’ve got to let people make decisions, because they have to live with them. But I can’t tell you the last time we had what I would consider to be a disagreement.”

Whether it’s a disagreement or just a simple discussion, each partner should be able to be open, honest and respectful, Wilkerson underlines. “If you look at the polar extremes of that, there are some people who are brutally honest, and it can undermine the relationship because they are not being respectful,” she said. “And then you swing the pendulum the other way, and there are some people who walk on eggshells, don’t want to hurt their partner’s feelings, can’t be open and honest, and therefore they are not addressing the things that are concerns or issues.” She likens this to the Goldilocks theory of striking the balance between what’s too little, what’s too much and what’s just right.

But what happens when nothing is right anymore, and the partnership is headed for divorce? “Dissolution or an exit can be for good reasons or bad,” Wilkerson said. Regardless, exit strategies should be discussed and agreed upon at the beginning of the partnership. “You can’t account for all circumstances or variables as to why they may want to dissolve the partnership, but they can certainly hit a number of variations on a theme in regards to how and why that could happen.” Like the rest of the partnership agreement, exit strategies should be revisited on a regular basis. “If they make that decision in the partnership agreement and the dissolution is seven years later, and they have never had an update to that initial conversation in between, then the initial conversation is probably no longer valid. So it’s important that that dissolution strategy is discussed at a high level, continually, as they review the partnership agreement.”

When getting married, some people sign pre-nups; Phil Symchych believes that business partnerships need what he calls post-nups: what happens when one of the partners wants out? Symchych—who is a partner in three businesses, as well as being the sole owner of his consulting firm, Symco & Co. (symcoandco.com)—says it all leads back to what was in the partnership agreement in the first place, and whether or not the partners thought about how the company would be valued in the event of an exit or departure. “This is a major source of contention and a very expensive one to resolve if you don’t agree up front on that valuation formula,” he said. “The one exiting wants it high and the one staying wants it low, and valuation is part art and part science.” If the terms surrounding business valuation are agreed upon up front, the divorce can be a little less messy.

Things can get messy even if partners don’t wish to divorce; death and disability threaten a business’s health and chance of surviving as well. “The objective is to protect the value and operating value of the company as a going concern, while one partner may be incapacitated or worse,” Symchych said. “The main option there is to use insurance to buy out the dearly departed’s shares. Because who wants to be in business with the dearly departed’s spouse?” The spouse may know nothing about the business, and may not be qualified to be a part of it, he notes. “To protect the business and the sanity of the remaining partners, there needs to be insurance.”

Of course, as is the case with marriage, the best way to avoid a business divorce is to choose the right partner in the first place. “If you do parallel this to personal relationships, I think that there is a certain amount of excitement and charisma that comes into place in the front end of contemplating a partnership temporarily or permanently, however that may go. Sometimes the blind date is really exciting, and then you just can’t wait for the next step,” Wilkerson illustrated. “I think that people have to think long and hard about what they are looking for in a partner, and more significantly, not necessarily just what they want, but what they need.”

Carolyn Heinze is a freelance writer/editor. She can be reached at carolynheinze@free.fr.

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