John Brown and Rebecca Schramm were partners in romance and business until their personal love died in a nasty breakup. Now, both refuse to give up their status in the company. Without a solid partnership plan or agreement in place, their constant fighting is killing the business.
"You always hear the advice that getting into a business partnership is like getting into a marriage, and that's because it is," said Peri Pakroo, a business author and consultant who specializes in advising entrepreneurs and start-ups.
Brown and Schramm bought West End Coffee, a regional roasting plant in Greenville, South Carolina, in 2012. A year later they split romantically, and a war between them ensued.
"The co-owners are living proof that you should never mix business with pleasure," said Marcus Lemonis of CNBC's "The Profit," who spent time at the company to determine if he'd invest in it.
The company generated $840,000 last year for $40,000 in profits. But this year the business is trending downward. West End's product is great and has high margins, but the owners are too busy fighting to sell coffee and make money, Lemonis said.
Pakroo suggests partners who are actively running a business follow these guidelines to survive and avoid major conflicts.
Examine past conflicts and accept some pestering
People can best gauge what kind of business match they'll be by considering how they've handled past conflicts. The pressure needed to get things done in business can come across as irritating at times. Daily obligations can grow so much that it takes sending a third email to ask for a document.
"You're going to find yourself in the position where you'll have to nudge or pester. And you'll likely be dealing with you're business partner the most. Try to be as pleasant and cooperative as possible," Pakroo said.
Resolving problems and managing potential points of conflict are important to maintain both the professional and personal relationships between partners.
Set job expectations up front
Both Brown and Schramm say they're in charge of managing their biggest client, but Lemonis can't understand why they're doing the same job.
"We don't have clearly defined roles or responsibilities, which I've been saying for over a year," Brown said.
Partners must discuss and write down realistic expectations and job descriptions at the onset, Pakroo said. "If situations change, or something isn't working, adjust it."
Entrepreneurs, especially first timers, can envision daily operations in a way that almost always turns out differently, she said. A written document allows for greater accountability and clarity if things should blow up down the road.
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Discuss doing versus building
During a tour of the warehouse, Lemonis found boxes of a seasonal product expired on the shelves. Instead of a few months' worth, a year's supply was ordered. The mistake could have been avoided if the owners had a proper ordering system or inventory process in place.
"A simple spreadsheet would have saved John and Becky from having to throw out thousands of dollars in expired merchandise," he said.
Partners must discuss system building from the start. Doing so creates a foundation needed for success, Pakroo said, and the work is much more manageable and sustainable for the future.
Require a legal agreement with an out-clause
No matter how well a partnership is thought to work out, require a legal document outlining the key expectations and terms before creating it. Include each partner's contribution, whether cash or labor, the share of the business, and any buyout or sell terms.
The option to exercise the right of first refusal adds another layer of protection.
Nobody really wants to think about the end when they're just beginning, but it's the time to do it, Pakroo said. It will provide some predictably and help streamline what likely will be an emotional time if a bad situation arises.
Seek meditation first if trouble hits
If trouble hits, seek mediation before considering a lawsuit. Whether a clause is included in a prepartner agreement or no agreement exists, mediation is less stressful and cheaper than going to court, Pakroo said.
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"Mediators are trained at gathering everyone in a calm setting with the goal of finding solutions for all," she said. Nothing guarantees it will work, but partners should go in with good intentions and a desire to work things out.
When people partner in business, the company is bigger than them. "You have a responsibility to make sure all employees get paid and you make money," Lemonis said. "You're either going to go forward together or you're going to burn together."
Catch the full story of West End Coffee on CNBC's "The Profit," a reality series with multimillionaire Marcus Lemonis turning around struggling companies, Tuesdays at 10 p.m. ET/PT.