“Never have a partner unless it is absolutely necessary.” Victor Kiam Dear Dr Adams, When I started my business, my best friend asked to join me –not as a partner but as an employee. We worked well together, the early years were rough but I always made sure he got a paycheck and many a week my wife and I dipped into our savings before heading for the supermarket. We struggled and I mean struggled. Even a movie was too much. But we had faith and the determination to make sure we survived. And we did. In our fifth year, we were getting discouraged and tired of poverty. Then our luck changed, the neighborhood our store was located in changed. A new development came with new people and new money. It was a Godsend. So after the years of struggle we were blessed with prosperity. However making money brought new problems. One problem surprised me and has made me sad, angry, and confused. Dr Adams, sorry to write such a long letter but here is my problem. My best friend and my only employee (from the day we opened the doors) was my biggest booster, when my wife and I were struggling we made sure he got his paycheck and a yearly raise. I don’t think he knew how little we lived on. Now with decent money coming in we feel it is our turn, and guess what, our new prosperity has made our employee jealous as he feels he is not getting his share of our good fortune. He has hinted he should be a partner, he should share- after all he has worked faithfully from the beginning and now when things are good he still makes the same money, Last night he told me that if we do not make him a partner he is leaving as he feels exploited. My wife and I are sick over the situation. Dr. Adams, I read your column every week, I need your thoughts on what to do. Wendell Dear Wendell, You are not the first person to lose friends because of success. There are individuals who feel needed when they can befriend you during tough and troubling times. But when you are blessed with fortune, they no longer feel as important and jealously may rear its ugly head. And as expected, Wendell, you are torn. Over the tough years he was a faithful and loyal employee, now, prosperity at hand, he expects more than a paycheck, Will a raise do it? I doubt it; he sees the future and probably feels the new success is partly due to his efforts and expects to share in the pot of gold. If the situation were reversed, how you would feel? You have given five years of your life to your employer during difficult times and now that the Gods have favored your employer- your reaction may be, “what about me?” Wendell, you have a choice, do nothing and I expect he will leave for another employer. Losing him may hurt your business as it has only been the two of you and most likely, he has a relationship with your customers. A new employee may cause new problems. Or you can agree to his demands and feel a “gun has been put to you head.” Not a pleasant feeling. And it may leave a permanent scar as the two of you continue to work together. My suggestion is be practical, do not be hung up on principal or feel he is selfish, ungrateful, or even unreasonable. You need your unofficial partner; I suspect he has worked to build the business just as you have. How would feel without him? Yet you hate being dictated terms, and I do not blame you. My answer my surprise you, I say make him a junior partner. If you are not incorporated, do so and issue up to 10% of the shares to him as a bonus for his years of work. Then if your business is profitable, offer an additional yearly bonus of 1% in stock until a maximum of 20% is reached. After that (10 years away) revisit the situation. I suspect he will now feel that he is participating and you are recognizing his contribution. If not and he demands a full partnership, offer it only if he makes an investment equal to yours. Which most likely he does not have. If he expects a gift of half your business, it is time for a “divorce.” If you agree to his demands it will no longer be an employer-employee relationship and may not be a compatible one. Some advice for the future, do not hire your friends. Business and friendship can act like oil and water. If you have employees, it may be wise to reward and share the success, but do it with profit sharing not your equity. Because some day you wish to sell your business and additional shareholders may present demands discouraging a buyer. Good luck with your employee. Remember no one is indispensable there are many well-qualified people today looking for work. So do not feel trapped or dependent. Dr. Paul E Adams, Professor Emeritus Business Administration Ramapo College of New Jersey Author “ Fail Proof Your Business: Beat the Odds and be Successful.” Available at Amazon.Com If you have questions about your business- contact me: drfailproof@earthlink.net.