A 42-year-old client with a strong banking and finance background has decided to go into business with a progeny of an old-line California real estate development family. The proposed partners plan to acquire, remodel, and sell existing high-end single-family residential properties along the Central Coast of California. My client’s specific expertise is in real estate finance. His proposed partner’s background is in marketing and sales of residential real property.
While the proposed relationship looks like a match made in heaven at this point, the client and his intended partner have sought my services (with appropriate conflict waivers) as a “strategic facilitator,” i.e., someone who can assist the proposed partners, neither of whom has ever owned a business of his own, in envisioning the future of the business, particularly as it pertains to avoiding conflict between the proposed partners. This is a service that is in increasing demand, particularly from a corporate and real estate lawyer like me, who is also a “neutral” mediator of business disputes.
Through the process of strategic facilitation, the proposed partners and I were able to take a look at issues that would be better dealt with at the beginning of the business relationship. Some of those issues were as follows: (i) Since neither of the proposed partners had experience as a chief executive of a business, would one take charge of daily operation of the business, or did they intend to govern by “committee”; (ii) Since each of the proposed partners had specific skill sets, but only one had access to the “seed financing” necessary to get the business up and running, how did they envision equity ownership of the business being divided; (iii) Since a portion of their business activity would involve remodeling, and neither of the proposed partners had any contracting experience, would they simply bid out each job to general contractors, or should they bring one in initially (or eventually) as an equity owner of the company, in order to ensure consistency of work product and instant access to a contractor when needed; (iv) Did each of the proposed partners intend to make his livelihood from the business, and, if not, would this affect their respective commitments to the enterprise, if and when times got rough; and (v) How much influence might the one partner’s “old-line” real estate family want to exert over the business, or was the “progeny” partner really going out on his own?
It is important at the outset of a business, as well as at other key points in its development, to surface the issues that will affect the future of that business, particularly from a conflict avoidance vantage point. Once the future is upon you, conflict avoidance is a much tougher task. If you are not at all concerned about conflict avoidance, come talk to us about your business, real estate, labor and employment and intellectual property issues, or about existing disputes with which you need immediate assistance.
by Joel Fishman