THE BLOG
08/15/2012 01:04 pm ET

Tips From The Rock n' Roll CEO No. 7: Breaking Up Is Hard To Do (And Expensive, Too)

They say marriage is grand, and divorce? About a hundred grand. Don't laugh too hard: I've been there and done that.

This post is about exit strategies. In business, you need one. Anyone's who's been divorced knows how messy it can get when two people split. Now imagine the financial and emotional messiness that can occur when business partners or business partnerships dissolve.

When my first band was coming apart I handled the process of divorce haphazardly. Quitting a band isn't as simple as taking your amp home from the practice space and calling it a day. If you have income coming in from records, shared copyrights and touring/merch, well then some tricky shit can arise. Had I known then what I know now I would have made a pre-nup for my band, a quick and painless formula for splitting up the shared assets and a way to sail into the sunset without a barrage of legal bills.

2012-08-13-jared_lolla.jpgLuckily in that band the stakes were low. There were no incoming revenues or advances to split. But at that moment I had a lightbulb go off in my head. It occurred to me that if we HAD been successful then this process would have become a knock-down, drag-out war. No one ever plans to become a smash act. The same way businesses never plan on being the next Facebook or Zynga of the week.

Almost everything I didn't do right in bands (and in my first marriage) was remedied when I started Jingle Punks. At every step of the way I remembered some basic lessons I learned in my rock band days. When I met my partner Dan Demole we first agreed on our roles in the company and ownership splits. Like Lennon and McCartney, we had a working formula for how to split up our creative and business contributions. When we took money from our angel investors, we again devised a detailed set of rules that not only outlined the parameters of our deal shape but also implicitly explained how everyone could get out (or how more people might get in) should we end up, well, not liking the deal. Luckily we did and still do like each other! But it's reassuring to know you're not in a prison of circumstance -- which is typically why many people don't get divorced, fire partners they don't like, or stay in unattractive long-term contracts.

Another advantage of a clearly defined exit strategy? It's attractive to potential business partners. Jingle Punks has many joint venture scenarios with some of the biggest media companies in the space. The good news is we have always worked hard to get our deals, while the risk, of course, is that we must service these properly or they go away. Almost all contracts we enter into with our partners allow an escape route so that everyone lives up to the expectations of our partnership. I bet Van Halen wishes they had one of these in place when Diamond David Lee Roth quit the band during the first go-around. It's my understanding that this was a hole that took 20-plus years for them to dig out of.

So what's the big lesson here? Plan for success. Cocktail napkin contracts don't hold up in court. When money is involved, feelings tend to get hurt.

Always make an escape plan because breaking up isn't just hard to do, it can also affect your bottom line. It can be expensive. So make a plan. Draw an agreement. Do a pre-nup. You may hurt some feelings by walking through these scenarios at the outset of a relationship, but if you ever need to split, you'll be glad you did.

Jared Gutstadt is the co-founder and co-CEO of Jingle Punks, a global licensing and commercial music production company based in New York. Follow him at @jinglejared and follow Jingle Punks at @jinglepunks, and on Facebook.

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