Even the most compatible business partners can find themselves facing disagreements. These disputes can range from minor operational hiccups to fundamental clashes in vision. While some conflict is
inevitable, understanding common pitfalls and having conflict-resolution strategies in place to draw on can save your business time, money, and heartache.

Here are some of the most common disputes between business owners in Australia, how to avoid them, and what steps to take if an amicable solution seems out of reach.

Common disputes that can arise in business partnerships

Financial management: Disagreements on spending, profit-sharing, and investment strategies are frequent. One partner might be fiscally conservative, while another prioritises growth opportunities.

Strategic direction: Differences in vision for the company's future can lead to conflict. This could involve disagreements about marketing strategies, target markets, or product development.

Roles and responsibilities: Unclear roles and a lack of defined responsibilities can breed resentment and confusion. Who's in charge of what? How much work should each partner contribute?

Workload and work style: Personalities and work styles can clash. One partner might be a workaholic, while another prefers a more balanced approach. This can lead to feelings of being under- or overworked.

Decision-making: Disagreements on how decisions are made can create a frustrating environment. Should all choices be made collaboratively, or should specific areas have designated decision-makers?

How to prevent disputes in business partnerships

The best way to manage conflict is to avoid it altogether. Here are some proactive steps you can take:

Draft a clear and comprehensive shareholders' agreement: This document, created with the help of a commercial lawyer, should outline ownership percentages, profit-sharing structures, roles and
responsibilities, decision-making processes, and dispute-resolution mechanisms.

Ensure open communication: Regularly discuss financial performance, goals, and challenges. Encourage open and honest communication, fostering an environment where partners feel comfortable expressing concerns.

Define roles and responsibilities: Clearly define each partner's role, outlining their areas of expertise and decision-making authority.

Establish decision-making protocols: Decide on a clear process for making choices. Will all decisions be unanimous, or will a majority vote system be used?

Regularly review and update: Schedule regular reviews of the shareholders' agreement to ensure it reflects the current state of the business.

How to resolve disputes between business partners effectively

Despite best efforts, disagreements may still arise. Here are some strategies to navigate them constructively:

Focus on the issue, not the person: When addressing a dispute, focus on the specific issue at hand, not personal attacks. Aim for a collaborative approach to problem-solving.

Listen actively: Seek to understand your partner's perspective. Listen receptively and acknowledge their concerns.

Understand that compromise is key: Be prepared to find common ground. Negotiate a solution that addresses both parties' needs.

Undertake mediation: Consider facilitated mediation. A neutral mediator can help guide communication, explore options, and work towards a mutually agreeable solution. This can be a cost-effective alternative to litigation.

What to do when agreement seems impossible

If a solution remains elusive, you have legal options:

Deadlock provisions: Some shareholders' agreements include deadlock provisions that outline a process for resolving situations where partners cannot agree. This might involve a pre-determined voting process or the appointment of an independent advisor.

Buy-sell clauses: A well-drafted shareholders' agreement might include a buy-sell provision. This allows one partner to purchase the other's shares, facilitating a clean exit from the business.

Litigation: Litigation, while expensive and time-consuming, may be a last resort. Seek legal advice to understand the potential costs and benefits of taking legal action.

Business partnerships require clear communication, mutual respect, and a willingness to compromise. By implementing preventative measures, fostering open communication, and having a plan for resolving conflict, you can significantly reduce the likelihood of disputes derailing your business. Remember, a strong partnership built on trust and open communication is the foundation for a successful and sustainable business.