Content Business Breakups: How to Protect Yourself with an Exit Strategy

Breakups are usually hard.

When money (or the potential of money) is involved, breakups are a lot harder. (If you’ve ever watched Judge Judy, you know what I’m talking about.)

Even if you think your business partnership will never end, it likely will. Research finds up to 70% of business partnerships fail. That’s why if you have a partner in your content business, now’s the best time to address the ramifications of a potential breakup in writing. 

The Tilt’s founder, Joe Pulizzi, is a big advocate for planning your exit strategy from the very beginning of the business. He explains how you want to depart the business can affect the decisions made as you grow the business. 

However, even if you and your partner don’t know when or why you’ll want to leave the business, you should address the potential.

(Of course, we recommend you consult an attorney before finalizing any agreements. Just as you are an expert in your content tilt, they’re the expert in the legal arena. And we’re not legal experts either.)

First, make sure you have a written partnership agreement that addresses many factors, not just the exit options. This written document should detail:

• Ownership stakes
• Split of profit and losses
• Roles and duties
• Adjudication of disputes 

Whether your partnership agreement is a new document or already exists, make sure it details exit strategy components for varying scenarios.

As the US Chamber of Commerce writes, “Partnerships evolve and dissolve for many different reasons. Perhaps one partner is ready to retire, start a new venture, or simply cash out. Or maybe you decide the company has run its course, and the partnership needs to be dissolved. When this happens, you need a game plan.”

Without a good game plan, your business may struggle to continue operating, find its valuation dipping, and see business assets go unprotected – none of which is good for you, your partner, or the business.

Among the questions to answer:

• How will the partners value the business when one wants to leave it? “If the exit strategy does not set forth the valuation method to be used, litigation can arise, says the law firm of Lubin Austermuehle. 
• How can a partner sell their business interest? Does the other partner have the first right to purchase the stake? Must the non-selling partner approve the sale?
• How does a partner depart a nonprofitable business when debt is owed?
• What happens if a partner dies? Can their heirs work in the business? Can the living partner purchase the stake? How else can the heirs sell their stake?
• What happens if a partner becomes incapacitated and can’t perform their duties? Will the business fund disability benefits?
• How does a partner handle their stake if they divorce their spouse? Is the spouse entitled to business shares or a role in the business?

Explore other potential breakup scenarios, too. What happens if a partner doesn’t fulfill their role or responsibilities? How does the partnership work if one partner wants to move to a silent investor role? You may not have every answer for every situation, but you can outline a path to arriving at a common understanding or resolution.

If you don’t address exit strategies and expectations in a written partnership agreement, expect to have existing relevant laws take over in the resolution.

Recently, lawyer Jonathan Katz spoke with Tubefilter about breakups in the social creator world. “Generally speaking, in the world of copyright, whoever is holding the camera owns the rights to the images that are produced,” he says. “The subject of the images also has a bunch of rights, but those rights get entangled really quickly.”

Even if you don’t have an official business partner, putting any relationships related to the business in writing is a must. Jonathan says, “It’s absolutely mandatory. Creators who don’t do this always suffer. Having everybody who works on the channel have what’s essentially contractor agreements or release agreements, so anything they create for the channel becomes the property of the company, is absolutely crucial.”

Helpful Resource: The Content Entrepreneur’s Essential Guide to Contracts

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