Sem blunders entrepreneur
Build a business with partners? Do you have disagreements? What will become of the business if you finally quarrel? Discuss with your partners these seven questions at the very beginning of your collaboration. Then protect yourself, others and the business from unnecessary problems.
1. Equity of shares? 50 to 50%
A classic of the genre and at the same time a complete utopia, especially if both partners are bright entrepreneurs and both have their own views on doing business. Our strong vision is that there must be a main partner, a leader in the singular with a greater share both in decision-making and in the distribution of profits. Other partners should be aware of this and accept it before starting a startup. It is highly desirable that one of the partners still has experience in entrepreneurship, though not always successful.
2. Do not agree on how to diverge
Of course, at the beginning of any business, all partners are filled with enthusiasm and no one thinks that someday someone will have a desire to disperse, but at least it is necessary to discuss and fix the flow rules. The ideal option is to fix it directly in the charter of the company or, if the flow options are quite exotic, then at least in the minutes of the meeting of the founders. Legally, this will not always be valid, but there will be an opportunity to remind the partner of the originally agreed conditions.
3. Not approved plans for the distribution of profits, reinvestment
As a rule, at the stage of making a profit, partners have different desires for using this profit. Someone believes that all profits are subject to reinvestment in current or even new projects, and someone has personal plans for spending the company’s profit. As a rule, it is necessary to consolidate the minimum percentage of profit required for distribution (for example, 25%); for the rest of the profit, make decisions by voting based on shares. Also, some entrepreneurs have a desire to invest the company’s profits in new projects that are not related to the current business. We believe that at the initial stage of small business this should be done only through the investment of personal funds that will be previously received as distributed profit. That is, a new project must be organized just like a new project, albeit with existing partners and possibly a unified infrastructure. This allows you to significantly diversify the risks at the expense of partners.
4. Lack of business plans
As a rule, no one really bothers to draw up full-fledged business plans, business models, sales plans, and so on. As a rule, there is no full-fledged financial planning unit. We consider the preparatory phase before any startup as the foundation of a building that will be built in the coming years. Already at this stage of planning, important circumstances, opportunities or limitations that your business will be waiting for arise. It is advisable to have a plan with various options for continuing. This is especially important when there is a dependence on one large supplier, buyer or hired manager, that is, in a situation where all success can depend on only one decision, which is difficult to influence.
5. There is no separation of “functionality” between partners
Each partner should have its own area of responsibility and its functional responsibilities, preferably not overlapping with the responsibilities of the other partner. It is necessary to strive to avoid situations where “everyone is doing everything.” Functional division is also desirable to consolidate in writing.
6. Excessive romanticism when starting a business
Still, young entrepreneurs, as a rule, tend to romanticize business unnecessarily, and few people imagine that their business is a completely different degree of personal workload and personal responsibility to their employees, suppliers, partners, the state, and their family. And far from always (and at the initial stage of the business, as a rule, never) the level of stress and personal workload is less than if you worked as an employee. We highly recommend carefully weighing your strengths and opportunities before starting any business.
7. Project debt, search for attracted investments
We believe that it is necessary to develop your business not only with credit or borrowed funds, but also need to invest your personal funds. Yes, investing in a business is the most risky investment, but we are of the opinion that losing your own money is still easier than borrowing. If the partners decided to attract credit resources to their startup, this should be mandatory reflected in the financial plan.
Despite all the “passions” that we have indicated in this article, we are of the opinion that your business is an extremely interesting activity in life that brings much more joy and satisfaction than working as an employee. For many entrepreneurs, their business is not just a source of income, it is a way of self-realization in life.