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Don’t Give Away Shareholding Too Easily

Unfortunately, you can’t always retain full ownership of your company. If it comes to selling shares, here are some potential hazards to watch out for.

Tim Berry

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The best way to own a company is to own it fully.You started it, you own it, and you run it. You don’t have to decide anything by majority rules. You bring in others only for good reasons – and reluctantly. There are a few good reasons to expand ownership:

  1. You are a team as you start. There are already two, three, four or even five of you. It’s unusual to start with teams of more than three, but it does happen, although it’s hard to make things work with several owners.
  2. You can’t get the critical essential knowledge and experience you need without creating a team. In addition, you can’t get a few, select others to join you without giving them ownership. This situation is quite common, but it’s also about as safe and steady as a minefield. Go very carefully and expect a lot of problems.
  3. You can’t start your business without outside money. This is very common. If this is the case, create a good business plan and consider start-up costs, initial cash flow and critical break-even points carefully. If you need outside investment, you’re stuck with that reality. Outside investment almost always means you don’t really own your company. There are exceptions, like very small investments, but those instances are rare.

Don’t Give Away Your Business

If your case doesn’t fall into one of those three scenarios, you probably don’t want to share your company. Don’t let myth,manipulations or relationships get in the way of this cold truth. Let me make some specific recommendations based on frequently asked questions:

  • Don’t give shares of your company to your friend who came up with the idea over drinks, while you were camping, after class or during lunch at work. Ideas have no value. If you build the company, it’s yours. Don’t apologise. Companies need their ownership as a strong foundation; they can’t spread it around to people who had ideas. If they wanted to have a company, they should have done it, not just talked about it.
  • Don’t give shares to people who have helped you. If they really helped you, reciprocate and help them in return. Buy from them. Recommend them. Invite them to lunch or dinner. Don’t let professionals do professional services for you without specifying their billing rates ahead of time, and then pay your bills.

If you have done either of these things,you’re in dangerous territory. You should know that companies with more than one founder who aren’t crystal clear from the very beginning about who owns what and how much are almost certain to end up with ugly and divisive fights over ownership. You must never assume that your partners and team members understand that you own the majority because you did something or paid a certain amount. That’s deadly.

Write it down, early on, before there’s real money involved, while you’re still talking. The idea is worth nothing; the money involved is worth a lot; and the work involved – so-called “sweat equity” – ought to be converted into money immediately. If you work for free to start a company, make sure your team members agree on how much your work is worth, by hour, day, week or month, and when it’s going to be paid. Or,if it’s to be converted to ownership, determine at what rate and when and according to what document. These things not only have to be talked about; they have to be written down and signed.

Unfortunately, there’s no formula for determining how much each founder of a small business owns. There’s some mix of work, money, know-how, experience, equipment already owned and, maybe, the idea. You have to agree on what’s fair or you’re doomed.

In these cases, most companies end up managing this as shares, like shares of stock. When founding the legal entity, the lawyer formalises how many total shares there will be and how many shares each founder owns. There’s a lot of legal weight to that, so pay attention.

If you need serious outside investment,then all bets are off. Buckle your seat belts and get advisors you trust who have done it before. Expect to see a lot of shares going in a lot of different directions. When you need to go back and get more investment, everybody’s ownership gets diluted. Founders of companies that go public often end up having surprisingly small shares in the final company.

If you aren’t in any of the first three categories I mentioned, use your savings or borrow the money.

Tim Berry is the founder of Palo Alto Software, a co-founder of Borland International, and a recognised expert in business planning. He makes several notable appearances in Fire in the Valley, Swaine and Freiberger's classic history of the PC industry, and is the originator of plan-as-you-go business planning. He has an MBA from Stanford and degrees with honours from the University of Oregon and the University of Notre Dame.

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Public Private Partnerships Can Work For Entrepreneurs

Property Point will develop 16 small business in the property sector of which two thirds are youth and women owned.

Property Point

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In a landmark partnership for collective economic growth in South Africa, the Department of Small Business Development (DSBD) joined forces with Property Point, a Growthpoint Properties initiative, to develop more small businesses for South Africa’s property sector. DSBD has allocated a R5 million grant to Property Point for a one-year small business development programme as part of its Enterprise Incubation Programme (EIP). This breakthrough initiative is the first public-private partnership of its kind in the property sector. It will develop 16 small businesses in the property sector of which two thirds are youth and woman-owned.

For  this  unique  16-business  intake,  Property  Point’s  programme  is powerfully market driven. It will raise the profile of the entrepreneurs and strengthen their competitiveness, with a deep focus on market integration. The programme aims to create market linkages for these small businesses that will see them included in procurement opportunities in the broader property sector, as well as Growthpoint. It is expected to set new benchmarks for small business integration into private sector supply chains.

Related: 4 Black-Owned Businesses Participating in This Enterprise Development Programme That Are Growing – Fast

Estienne de Klerk, CEO of Growthpoint South Africa, says: “We believe in the principles of social and economic transformation and empowerment on all levels, and we are committed to achieving this. As a hands-on property owner, we own and manage our buildings – we recognise our unique position to develop small businesses to increase their access to market opportunities. We are proud to contribute to this pioneering public-private partnership designed to deliver on South Africa’s transformation, small business, economic growth and job creation objectives.”

Shawn Theunissen, head of Property Point and head of Corporate Social Responsibility for Growthpoint Properties, says:

“Property Point’s  objective  has  always  been  to  contribute  to  South  Africa’s economic growth. Using a best practice model, we have delivered positive results in our new partnership with government. This will escalate our impact on transforming the economy at a crucial time when South Africa is dealing with high unemployment and low economic growth.”

The beneficiaries of the Property Point and DSBD partnership have advice on how other entrepreneurs can make the most out of similar programmes:

Advice from Zoleka Ngema of Senzee Trading

zoleka

Contact www.senzee.co.za.

  • Be honest this helps you define your position and helps you view the real issues in your business.
  • Do every task diligently every business is different and what works for one might not work for you, so working diligently personifies the tasks and therefore adds value to your business.
  • Lessons are continuous remember & do the tasks done as these will create a cycle of growth even after the course is over.

Related: Want To Start A Property Business That Buys Property And Rents It Out?

Advice from Sibongile Shikwambana of Sandwind Coatings

sibongile-shikwambana

Contact www.sandwind.co.za.

  • Be fully present, participate and take advantage of every single opportunity
  • Drive your own business agenda; recognise that you and no one else can make your business successful
  • Build and maintain meaningful relationships.

Advice from Teko Motlhabi of Techmo Air

teko-motlhabi

Contact www.techmoair.com

  • Try to be present and involved with all the activities and opportunities handed to you
  • Ask for help from the Programme Managers and the rest of the team when you need it
  • Create relationships with your fellow entrepreneurs and collaborate.

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Partnerships

How To Partner Successfully With A Younger Boss

Age sometimes seems a lot more than just a number

John Boitnott

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younger-boss

Just a few years ago, millennials surpassed Generation Xers to become the largest cohort in the United States workforce, according to PEW research. As a result, more and more young people are assuming positions of management.

Being managed by someone younger can feel uncomfortable.

I have to admit, I get into the habit of comparing myself to other people. Those who are younger than us who have advanced further professionally can make us feel inadequate or resentful.

At one of the start-ups where I worked, one co-founder was a decade younger than me. At first I felt awkward with the heavy slate of marketing, sales and social media duties she assigned me. It wasn’t too long, though, before we settled into a groove and formed a strong working relationship.

Creating a bond with a younger manager can have significant positive effects on your own career. Here’s how you should manage it:

Identify skills that helped your boss advance and develop them in yourself

Even innovative businesses will adhere to rules of thumb. One rule of thumb many business leaders believe, rightly or wrongly, is that experience is valuable in and of itself. If your manager is younger than you, it means she probably had to overcome stereotypes and false assessments to get there.

Rather than assume your manager is a young punk who had a managerial role handed to her, work on identifying the skills that helped your boss to succeed. By developing the same skills within yourself, you’ll be more likely to enter a managerial role as well.

Related: How To Work Less And Still Get More Done

To get started, consider asking your manager point blank to identify the skills that she thinks were most useful in propelling her career forward. Once identified, make it clear that it’s a goal to develop those same skills within yourself. A good manager will take this conversation as a sign that you are a driven professional.

Alternatively, you could have a conversation with the person who decided to promote your manager in the first place. As long as you position your question to ensure that it sounds like it’s coming from a good place, the senior manager should have no problem sharing this information with you.

Think of your relationship as a partnership

Your manager is not your parent or your babysitter. If it feels as though your manager is overbearing, have a conversation with her about it. Otherwise, you should treat the relationship you have with your manager as a partnership.

Chances are you are both being evaluated on the same or similar metrics. If you fail, your manager fails, and if your manager fails, you fail. By changing your perspective on this important professional relationship, you may find working with a manager who is younger than you to be more comfortable.

Related: Build Better Business Relationships

Most managers simply want to ensure that whatever they’re working on is completed in the best way possible. They’ll be happy to work with employees who are collaborative, open to new ideas and motivated to get the job done.

In return, a manager who is satisfied with your work can make it more likely that you will also find yourself in a management role someday. If nothing else, you can consider leaving your current company and listing your current manager as a reference if you are able to develop a strong relationship.

Trade experience for new ideas

Both you and your manager have important knowledge that can be made more valuable when put together. You probably have accumulated wisdom from on the job experience, and your manager might have a fresh perspective or innovative new ideas.

Together wisdom and innovation can form a valuable pair that propels both you and your manager to success.

Make sure you make it clear that you are open to new perspectives and new ideas, and offer your experience when appropriate to guide your manager to making smarter choices.

Encourage open feedback in both directions

goldman-sachsFeedback is a critical component of professional growth. So much so that companies like Goldman Sachs are overhauling their feedback processes to boost employee performance. As a younger manager, she may feel anxious or conflicted about providing you with honest feedback. Instead, “manage up” and invite your manager to provide you with honest feedback.

In doing so, you will also set expectations that your manager should invite candidate feedback from you as well. By creating open dialogue between you and your manager, you’ll accelerate your professional learning curve and avoid passive aggressive moments.

Related: 7 Tips For Purposeful Communication To Better Lead Your Teams

Though your manager may be younger than you, she earned the privilege of managing a team for a reason. As an ambitious professional, it’s your job to understand why your manager earned that role and to begin cultivating the same skills within yourself.

Instead of feeling resentful, partner with your manager to share feedback and wisdom as you both work to achieve success.

By committing yourself to professional self-improvement, you may soon find yourself managing your own team of people who are older than you.

This article was originally posted here on Entrepreneur.com.

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Partnerships

The Case For A Business Partner Who Makes You Uncomfortable

Should you even have a comfort zone?

Kimanzi Constable

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As humans, we love living within our comfort zone. Science tells us that our comfort zones are a place where activities and experiences fit a pattern and a routine that we’re used to. It’s a place of minimum risk for us, which is why it feels so good to stay in that bubble. The idea of adding experiences and actions that could be stressful, lead to failure or worse is not appealing to our minds. So, we get into comfortable routines and rationalise why we are not doing all the things we’ve dreamt and talked about doing in our businesses. This is a familiar pattern that we’ve repeated most of our adult life.

As you grow a business, there comes a point where it makes sense to bring in others who could help the business grow.

This could be a business partner, it could be a board of advisors, or it can be contractors that do tasks we’re not qualified to do. There is a safe route where you can bring in only what makes you comfortable and only entrepreneurs that are YES people – they agree with what you do and say even though they know it’s not right. Or, you can take a different path. You can explore the zone right outside of your comfort zone.

Related: Choosing a Business Partner and Making the Partnership Work

Charlie Munger is the vice chairman of Berkshire Hathaway. Warren Buffet describes him as “his partner.” They have been in business together for 56 years.

Munger has been quoted saying, “we don’t agree totally on everything, and yet we’re quite respectful of one another.”

Over the years, the advice Munger has given Buffet has not been as a yes man to Buffet, and for that reason, both have flourished. They’ve built an amazing company that keeps growing every year.

In April of 1975, Bill Gates and Paul Allen formed a partnership that led to a little company called Microsoft. You are probably using some of their products as you read this article. Their company has become one of the largest in the world. These days, it seems their partnership is not what it once was but it was those early days of partnering with someone who made Bill Gates step outside of his comfort zone that helped the company grow. They complimented each other in different ways. They weren’t yes partners. They pushed and challenged each other and that’s what led to growth.

Embrace discomfort

A wise man once said that if you’re not uncomfortable, you’re not growing. We have run from discomfort when the reality is that there are situations in which the discomfort comes from growing. When you can learn to embrace the opportunity to get uncomfortably from growth, you can take your business to whatever the next level is for you.

There are things you excel in. There are things you’re not so good at. The right business partner – and business partnerships – can help complete the areas you lack. We know that we’re the average of the people we associate with. Traditional logic tells you to associate and partner with people that make you comfortable.

While we want to associate with people whose personalities match, we want to seek out entrepreneurs that will push, inspire, motivate, and challenge us in the ways we can’t do for ourselves.

You want a business partner that will call you out when you’re clearly making excuses. They will challenge traditional ways of thinking about growth strategies. They will inspire you through the actions they’re already taking in their life and business. They walk their talk and let their success doing all the talking for them publicly. They are sincerely invested in seeing you succeed without expecting anything in return. They have love for you. They will stay with you through the good times and especially the hard times.

Related: Why Partnerships Will Make Or Break Your Business

Don’t pick YES entrepreneurs or add them to your circle. Pick entrepreneurs that make you uncomfortable in a way that leads to growth in life and business. You only get one life to live. You have a goal and dream for your business. The right partners or partners can help you get there in a way that helps you scale.

This article was originally posted here on Entrepreneur.com.

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