Readers took the opportunity to “Ask Al” some start-up questions.
How do you get rid of an unwanted partner that has a 20% shareholding in your business? – Joe
There are three ways to deal with a troublesome minority shareholder:
Buy her out
This only works if the counterparty is willing to be reasonable. For example, if your 20% partner is your former wife that you left for the office secretary, thereby embarrassing her in front of her entire community, then you have very little chance of a reasonable negotiation.
Pretend she’s not there
A minority shareholding in an unlisted company is worth nothing. She has no voting meaningful rights, so she can’t influence the company. If you don’t want her to have financial upside then instead of paying dividends you can pay yourself a salary that equates to 100% of net profit. Whether this is ethical is for you to decide.
Sell your shares
Sometimes the only ethical and pain-free solution is to sell-out. This can be painful. Maybe the business is your baby. Maybe you’re emotionally invested. The thought of handing it over to your useless partner makes you want to vomit. That’s life. The trouble with troublesome partners is that they add no value, and they know it. They don’t want to get off the ship because they know no other ship will pick them up.
If you can’t reach agreement on a reasonable valuation to buy her out, cutting yourself loose from your venture is perhaps the only way to get on with your life.
Going into shareholding relationships is liking joining the mafia. It’s hard getting in, much harder getting out.
Who will pay for my app? – Anonyomous
Ahhh… the million-dollar question. You want to make an app, but you don’t know who will pay for it.
Before you invest your life-savings in the app of your entrepreneurial dreams, start with a quick-and-dirty version. There are online services that will cost less than R10 000.
Once you have something to show in real life, start showing it.
Try find a company that’s willing to sponsor the app, therefore de-risking any further investments in app development.
If you can’t find a company to sponsor you, you should have a serious rethink.
The only revenue model for apps are paid-for, in-app purchases, and in-app advertising.
None of the above work outside of the top 20 apps in the world, none of which are from South Africa.
It’s easy to spend money on apps, much harder to make money from apps. Tread carefully.
I have registered my company but I’m daunted by the prospect of starting. What is the first step I should take? – Lwazi Ngozi from Alexandra Township
Congrats! You are now an entrepreneur. The bad news is “being an entrepreneur” is not a wildly difficult thing to be. It’s easy to be an entrepreneur. Just like it’s easy to be poor.
What’s hard is being a successful entrepreneur. Success for an entrepreneur is measured by how much money you’ve made.
In order to make money you must sell. To sell you must have a product. Before you find a product, find a customer.
Find someone, with money, that has a problem. Figure out how to solve that problem. Ask the customer to pay you for solving the problem.
Try find solutions for which people are willing to pay you a monthly fee. Annuity revenues are the only path to peaceful sleep.
In the meantime, try find something that people are willing to pay for, then find a customer.
Where does a start-up business start looking for angel investors in South Africa? – Charl Visser
S.A.V.C.A have a list of investors. But almost all of them are venture capitalists, i.e.: not angels.
The uncomfortable truth is that angel investors are usually relatives, friends of relatives, or colleagues.
If you’re not lucky enough to have successful/connected parents, or to have gone to a fancy high school, then the only path to finding angels is working in a successful corporation where you can develop a reputation as an honest, smart, hard-working person. When you want to raise money, you can approach the successful execs in your company for angel funding.
Do you have a burning start-up question? Email: email@example.com
Listen to this
Alan’s audible book Be a Hero: Make Life an Adventure is now available on amazon.com and Audible.com
Read by Alan himself, Be a Hero is a collection of stories on how to make your life an adventure but also changing your mind-set and tackling adversity.