Forbes: Entrepreneurs
July 23, 2007
By Alex Davidson
Original Article (free on-line subscription required)

Lorene Reed, now 46, and Larry P. Bearg, 49, had known each other 11 years--and been married for 2 of them--when they decided to go into business together. That was on Valentine's Day in 1997, when they used all their savings, $25,000, to buy a produce delivery service, Planet Organics, in San Francisco. A former clinical psychologist, Larry had opened a chain of ritzy pet stores in the Bay Area with his younger brother and initially planned to stay out of the business; Lorene, a hairstylist, would deal with farmers and delivery trucks. The day after they bought the company, Lorene discovered she was pregnant with their second child.

After struggling for a decade, Planet Organics is finally doing well, netting $160,000 on sales of $4.4 million last year. But it's been rough on the relationship, which ended in divorce in 2005. Despite the breakup, Larry and Lorene remain partners.

Lots of couples go into business together. And, according to therapists with this subspecialty, a surprising number of them thrive. Kate and Andrew Spade still work at the handbag company they cofounded in 1993 (it's now owned by Liz Claiborne Inc. (nyse: LIZ - news - people )). Tim and Nina Zagat, who launched their restaurant guide in 1979, are still going strong. Key is learning to manage (and survive) constant confrontation.

Lorene and Larry certainly tried, making one sacrifice after another. At first they decided to not draw salaries from Planet Organics, and kept their day jobs. To find a bigger place for their growing family, they moved farther north, to Sonoma County. Having a longer commute and two jobs apiece exacted a toll. "He'd be in Sonoma taking care of the kids while I slept on the futon in the San Francisco office," Lorene recalls. "Sometimes you just wouldn't go to sleep because you'd be thinking, 'Why bother going home when you're just going to have to get up again?'"

Things were about to get tougher. Planet Organics was just scraping by in 1999--losing $40,000 on sales of $1 million--when Webvan launched its grocery service in the Bay Area. As a much smaller rival, Larry and Lorene suddenly had to expand and include nonproduce offerings. That required new suppliers and packaging, and a much more complex Web site and database. Larry went through four software developers ("It was a disaster," he says) before getting it right. But on New Year's Eve in 1999, while watching the ball drop on TV, Lorene burst out crying, "I just can't do this anymore." But the couple vowed to stay together. "We have to make this work," Larry kept telling himself.

He found himself working at home when he was supposed to be looking after the kids, using the TV as entertainment for them as he hit the books. At the same time, says Lorene, "I started feeling more like I could step away from the business and have family time." She offered to sell her 50% stake in Planet Organics to Larry for $5, explaining that the move would let them focus more on the marriage. Larry said such a deal was unrealistic.

Still, it dawned on them that Planet Organics, and little else, was keeping them together. At dinner they could talk about the business or about the kids, but only rarely about each other. The $5 offer became a nasty taunt and surrogate for broaching the subject of dissolving the business and the marriage--and for mutual recrimination. "It was too late to put everything back together, even though we certainly tried," says Larry. The couple began seeing a therapist but settled into seeing as little as possible of each other. In 2002 they decided to separate.

But, by dint of all the personal distractions, the business started slipping. From a $100,000 profit on sales of $2.5 million in 2002 Planet Organics began spilling red ink--losses of $300,000 in 2003 and $400,000 in 2004. Larry and Lorene blame the decline on poor delegation, hiring incompetent folks to manage operations and negotiate prices with farmers.

In June 2004 they found someone--on Craigslist, no less--to help save the business. Shahin Khosravi, who had managed finances at a software company, was hired as chief financial officer but also had to serve as a therapist. Larry and Lorene admit they were less than forthcoming about the situation Khosravi stepped into.

Rationalizing the company was easy. Khosravi trimmed staff and cut costs. His challenge was getting Larry and Lorene to talk to each other as business partners, free of personal barbs. Khosravi recalls one meeting where Larry threw out a new idea for the business--introducing prepared meals on Planet Organics' menu--and Lorene immediately shot it down. Khosravi had to mother them through the conflict, suggesting that the two compromise on a test run. (The meals did catch on and are a successful part of the business.)

Khosravi must still play middleman. Recently Larry proposed a guided-tour feature--a movie that shows prospective customers what the company does and where products come from--on the company's Web site. Lorene immediately objected, kicking off an e-mail war between the former spouses. Khosravi told Lorene she had to explain her objections in person. These days he is trying to get Larry and Lorene to have more face-to-face meetings instead of relying just on e-mails, which "allow them to read [too much] into things," he says. "I ask Larry and Lorene to communicate with each other rather than get at each other," he laughs.

This detente has led to the revival of Planet Organics' prospects. The company cut its top line and broke even in 2005. This year the company expects to earn $400,000 on $4.7 million in sales.

In some limited ways Lorene and Larry are closer today than they have been in years. They live just six blocks from each other and share custody of the two children. Neither has remarried. But they live constantly with regrets. "What would I recommend to other couples?" muses Lorene about starting a business together. "I'd say, 'Don't do it!'"