Four Questions To Ask Before You Think About Adding A Minority Partner

Agency owners want to reward their best employees and prevent them from leaving. Obviously, the best way to do both is to offer equity or to become a minority partner in the agency, right? Not so fast. Crafting a pair of golden handcuffs for a model employee sounds like a great idea, but when those handcuffs are forged from the company’s own foundation, the proposition gets dicey. A model employee might be vital to the agency’s success, but initiating the transition from worker to owner can have far-reaching consequences. In fact, the world watched it happen two years ago: Former McDonald’s CEO Don Thompson stepped down after the company saw its worst U.S. sales slump in more than 10 years. Not surprisingly, Thompson happened to be the poster child of an employee-turned-owner. Starting in 1990, he worked his way up the fast food chain’s echelons from project manager to staff director to regional manager and, eventually, to CEO. As an agency owner who’s searched for a successor myself, I’ve seen the pitfalls. Before taking the leap to take on a minority partner, ask yourself the following: 1. What is a minority partner, really? Minority partners are a myth. If you offer someone part of your business, that person will act like a fellow owner — and not a minority one. He won’t think in terms of percentage of ownership, but in terms of haves and have-nots. In his mind, even a sliver of ownership puts him in the “haves” camp, and he carries all honors and benefits thereof. In some cases, that means the minority partner brings great ideas that drive the agency to new heights. In others, he slows down operations and starts fights [...]