Q & A Table of Contents
My (Ex-friend) Partner Split And Took Our Business
From: Jason Chattanooga, Tennessee
Question: I formed a partnership with a friend (1st mistake I know but too late now) basically advertising products for many companies through several avenues.
We got this idea from my partner's brother who was already in the business doing the same thing. We got into the business and were very similar to his brother's business in the respect of advertising similar products but as the business grew we branched out to varied products while his brother still focused on this one type of product.
Things really went well for our business and we found a certain company with products no one else was advertising so we started advertising these products and doing very well with them since we were the only company advertising their products.
After a year of doing great my partner calls me and states he is going to split from me and join his brother because his brother is going to start branching out with more products to advertise, he is much better at it, will be more stable, have longevity, and be more profitable.
So my partner left me with all the business at no charge, just a clean break and we settled any payment from that day back. Well, within weeks of the split and as soon as they got their business up they immediately started advertising the same products my old partner and I had found that no one else was advertising and competing directly against me in the same advertising avenues which drove costs up obviously and split sales in half for me.
So the question I have is this really ethical what he is doing? Taking a marketing plan for these products no one else was advertising for and advertising him with his new partner. I can see if another competitor started advertising these products but what about your ex-partner who takes my ideas from our partnership and uses them with his new partnership?
Response: Your partner's behavior is quite unethical.
However, in addition to making the mistake of going into business with a friend, you also made two others:
1. You should have created a partnership agreement which included an agreement that, in the event of a termination of the partnership, neither partner would compete with the other for a specified period of time.
2. When your partner announced his decision to leave the partnership, you should have tried to get a non-compete agreement from him. If he offered to settle any outstanding financial issues with you, you should have been willing to trade a non-compete agreement for some or all of the money he owed you.
You have learned an enormously expensive lesson. President Ronald Reagan is said to have tried to live by the expression, "Trust, but verify." In your future business dealings, don't assume potential partners, clients, or suppliers are out to cheat you. But don't depend on words when a document is more likely to provide the protection you need.
Good luck,
Steve
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