My Deepest Darkest Fear Around Shared Ownership

Too Many Cooks in the Kitchen

A friend of mine is fond of saying that when you start a business, everything has to go right.  You don’t have any capital, you can’t get credit, and you don’t have any customers.  The conditions have to be perfect for a new venture to work. The same is true for partnerships, if the relationship doesn’t work well, it can destroy the business.  The more personalities you bring in, the more conflicts and problems.  I think of it like bringing in particles to bounce against each other.  One particle creates zero friction, two particles a little bit, but as you add them up you might get a nuclear explosion of too many cooks in the kitchen.  Any move toward sharing of ownership could be a disaster.  And, realistically, how can you start a business that way.  It’s hard enough with one decision maker, how could one do it with 10 or 20.  Better to keep things the way they are, with one owner of capital who has the authority to make the decisions and keep the conflicts to a minimum. Fewer conflicts means better efficiency because you don’t get bogged down in all that negotiating between owners.

I Only Get One Chance to Get Out

It’s common to read about serial entrepreneurs who had numerous successful businesses with nice buyouts.  I think it’s less common to actually meet such mythical creatures in reality.  For most of us, we only have one chance to sell that business we spend a chunk of our lives building.  With my retirement and family’s future on the line, I can’t afford to play the shared ownership game.  I need to go outside into the open market and really push for the best price I can get.  My ideal is to look for a strategic buyer willing to pay more so that I can maximize my exit.  Why should I explore different ownership structures when I might have opportunities to secure my future and walk away? 

Deepest Darkest Fear

I could probably go on and on about why not to convert to a shared ownership model.  There are a lot of good reasons, but in the interest of brevity, it’s probably better to cut to the chase.  10 years ago I had the privilege of starting a new food distributor.  I started with about $2500 in a bank account and over three years worked up to a business that was doing $120,000 per month (probably roughly $1.4 million per annum run rate at a 10% EBITA).  It was hard, but exhilarating, and a solid little business (I came up with an ingenious way and very profitable way of marketing belly rupture hogs, ask me about it if you’re interested :)).  The business was organized as a non-profit and was governed under a shared ownership board model.  Around year three, we started to have conflicts around the business, where it should go and what the direction should be.  To make a long story short, I was forced out of the organization I was a big (even main) part of building.  It was a major loss and heartbreaking … and to this day is hard to think about without getting a little emotional.  Which brings me to my deepest darkest fear:  If I start to share ownership, not just financial benefits, which is less scary, but actual control, what is going to happen to me?   Am I going to get forced out again?  Will my work and effort be discounted?  Will I get my fair share of the benefits if I’m putting in the long hours, losing family time, feeling the stress, and losing my sanity during those lean early years?  Will I get pushed out before I’m ready?  Can I stay on in an ownership and governance capacity if I’m not ready to fully retire if I’m not full time in the business?  To me, this issue and question of “What will happen to me if I lose control?” is the main reason to avoid a shared ownership model.  The Germans have a word herzblut which translates literally into “heart’s blood”  but probably more accurately to “a piece of your soul”.  I don’t want to have to deal with the heartbreak of losing something I put so much of my herzblut into.  

Published by niklaus30

I'm an Iowa State grad with degrees in agribusiness, now living in Michigan. I like food science, grazing, and selling things, not necessarily in that order.

7 thoughts on “My Deepest Darkest Fear Around Shared Ownership

  1. Wow, Nick. Thanks for your transparency here. Like you, I tried a partnership with similar results. (Now there are two stories and a few pints worth of conversation). That failed partnership was actually a point of prayer/meditation for me yesterday.
    “I Only Get One Chance to Get Out” is a story I’ve heard from many business owners over the years. It makes a lot of sense that, especially in our American culture, rugged individualism dictates that we take care of our family first.
    I trust it was a helpful exercise to write down your “Deepest Darkest Fear”. It raised several good questions for me: 1. What are “belly rupture hogs”? hogs with hernias??
    2. The concerns you raise about a shared ownership model sound similar to questions one might ask before getting married: How do I know I can trust this person? Will she stick it out if I change? if I lose my job? How can we anticipate and navigate unforeseen circumstances? In light of these kinds of questions I have a few for you:
    On to my questions:
    What non-financial, non-legal principles of “divorce” did you and the owners discuss? Comment: I once had a prospective business partner say, “If we decide to go into business together, we need to agree ahead of time on how we’re going to divorce.” That was food for thought; she decided we weren’t a good fit!
    What might have you done differently?
    In that ideal world, what would need to be in place to create a coop that would be good for everyone?

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  2. Nick – thank you for this vulnerability of sharing your hard experiences and your deepest fears. THIS is the conversation we need to be having. I want to hear all of the stories like this. Shifting from individualism to shared ownership as a society is century work. It is not going to happen all at once. So what do you do when the work and the trust is not equal among all the parties? How do we account for that? This is part of what I was getting at in my post on hyperempathy. In a world where you can not rely on everyone’s good intentions, how do you open to empathy, while still protecting yourself?

    So I guess I’m curious:
    – What were the features of the situation that made it turn out so badly?
    – Is there something you and your team could have put in place at the outset that would have mitigated these circumstances?
    – How do we train over time to engage in shared ownership responsibly and with kindness? What would this training look like?

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  3. I really appreciate this. I’m glad you are taking the leap to really trust this space to wrestle honestly with the deeper questions on your heart.
    I resonate since I am in my own executive transition and wrestling eith similar tensions and thoughts.

    As I read your post, I wonder: is there an even deeper fear you aren’t wrestling with or naming here?

    Clearly I hear the pain of your last company transition. Is there something else that has also been similarly painful in your life that might have something to offer to you in this moment?

    Holding and navigating relationships, especially ones that are so significant with regards to companies and power; money and employment; well-being of families… control… when there is so much on the line…. leaning into and really holding the relationship(s) with the other key individuals can be so hard.

    When have you leaned into a relationship when it got really difficult? When have you embraced the emotional labor and seen something surprising happen?

    I am really grateful for the practical questions you are asking here.

    I am really grateful you found this community and have been able to contribute so much….

    I wonder what this next period of months and this transition might ask of you?

    I wonder why you are here and why you have shown up so diligently and generously these past few weeks.

    I’m very grateful.

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    1. Thanks for reading Felipe! First off, I hope I didn’t come across as anti shared ownership. I was doing that Seth Godin prompt, which is to argue or take the opposite side of an issue you care about :). That said, the post is true, in the sense that these are all real fears and the story I told about getting pushed out of an organization I was a big part of starting. It’s also false, in the sense that I don’t agree with any of the conclusions I’m drawing in the post.

      To answer your questions: I’m not sure if there is a deeper fear…maybe failure, but I’ve failed so many times it doesn’t scare me as much as it used to :). If anything, it’s finding the time to do it. I guard my time and focus pretty closely because I want to avoid burnout and have time for my family. Like you mentioned in your other response to this post regarding Nathan’s article, starting to move along shared ownership lines is a new experience and culture and building this skill set or way of being is like strengthening a weak muscle (ie painful). I feel that I’ll have to learn some new ways of being and doing, which will take that time and focus I so closely guard. By the way, I loved that NIO groups solution of a trust for User shares. That is a crazy cool solution.

      In terms of what is coming up. Well, I guess I’m going to start looking around for some low hanging fruit in my own business to start exercising that shared ownership muscle :). You know crawl before you walk. I’ve got a few ideas where we can at least start crawling.

      I’m really glad I had a chance to join up with this workshop. Had a really good time and met some great people, which is what I really wanted. Also, good luck in your own transition. I’m excited to see where this next stage takes you.

      On Sun, Aug 30, 2020, 10:03 PM Shared Ownership Workshop wrote:

      >

      Liked by 1 person

  4. Nick- Nathan the author of prompt three also makes an argument here that we simply have not had enough experience with the kind of shared ownership business models that I think I really essential to the kind of teacher that we need. I like how he concludes the article talking about culture. I wonder if the challenging experience you’re having right now… and the one you have had in the past might be connected to the reality that we simply do not have enough culture built around shared ownership.

    It’s simply too difficult to really understand right now because we each have such limited experience with what it means to make decisions, trust each other, operate with significant risk, flexibility, and accountability in non-hierarchical settings…

    I am learning this myself right now.

    I think Nathan does a beautiful job of articulating the hope that I am staking my future work on…

    https://www.noemamag.com/exit-to-community/

    What does this article spark for you?

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  5. “Which brings me to my deepest darkest fear: If I start to share ownership, not just financial benefits, which is less scary, but actual control, what is going to happen to me?”

    Thanks so much for your vulnerability in sharing your experience with your previous company. As a person that meets with business owners exploring employee ownership as an exit option, this post really captures the reservations, named and unnamed, many of them have about shared ownership.

    You mention in your response to Felipe above that you’ve got a few ideas where you can start crawling toward shared ownership in your current business. Curious to know what those ideas are. What would you do differently if you explored a shared ownership structure again? How did your experience with your past company impact how you run your current business and how you address conflict with your current partner?

    I’m looking forward to checking in again in October.

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    1. Thanks for reading Jen! Hmm, so what would I do differently…where to start. First, the system we developed was an amalgamation of a non-profit, for profit with overlapping boards. The business itself was fine, but there wasn’t agreement on what the goal of the system should be and who was in charge. It was a finances vs mission conflict. It could have been solved, because these things are necessary condition for each other, but because it was nested in too many organizations with too many competing demands, it was more than my capability to navigate at the time (this was 5-10 yrs ago). I wouldn’t construct it like that again. Clear governance and clear goals would be the watchwords.

      In terms of idea moving forward…so my current business outsources a lot of stuff, so we actually have large businesses embedded within the larger business itself. I’m looking at some of the more simple things we outsource and thinking about possible bringing them in house under some sort of shared ownership structure. One easy place to look is our fulfillment programs, which for us is a huge business. Bringing it in house will have mainly positive impacts on our inventory (drain cash out of the business) and customer satisfaction (faster inventory turns=fresher product), so it’s not a hard sell for the business case. Also, It’s not a super complicated business and I believe that we could basically have a turnkey business with already developed markets (ie my business) almost instantly. This would be a good place to start because: 1) I know the economics and how to make money here 2) I have a need as we continue to expand the other parts of our business 3) It’s not complicated and I already have the skill set’s to do this –> I’m of the opinion that if you want to learn something new, best to not to learning both shared ownership and sending someone to the moon. Do one at a time, so you got to choose one or the other to do first, in this case, I don’t have to choose.

      So, I could dip my toe in the water in a relatively simple business with very little investment and build the skill sets I need/figure out the governance system. I live in the rust belt, so rent is cheap.

      Like

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