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Take Time to Lay the Right Legal Foundation

Don’t let a lack of legal foundations cost you in the long run.

Jody Doyle

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Working at our practice can be very rewarding. Many of our clients are innovative start-ups and it is wonderful to see their entrepreneurial ideas in action. However, we always advise business that are starting out to lay the necessary legal foundations from the get go – failing to do so could end up costing them dearly in the long run.

A good starting point would be the drafting of thorough founding agreement(s), including a memorandum of incorporation and/or shareholders’ agreement. This often gets put off and delayed because it’s fairly tedious work, but it’s absolutely critical.

The memorandum of incorporation and/or the shareholders’ agreements are the documents that will likely regulate the main aspects of your relationship with the company and that of your fellow shareholders. There are no basic legal obligations attached to being a shareholder, generally speaking, so whatever you require of each other should be agreed and recorded in writing.

Getting the basics right

Founders all start out as optimistic and enthusiastic about their business and their partners – and their shares aren’t worth anything, so all of them are on equal footing, splitting the shares without considering the potential future value of such shares. But a few months down the line, those shares start becoming valuable, and some disillusionment sets in.

Perhaps there are founders who feel that they’ve worked harder than others, but the non-performing founder still holds the shares and is fully entitled to enjoy dividends, if any, in addition to the others.  Or perhaps, the founders of a start-up fall out, and one leaves to start a rival company doing very much the same thing.

But he refuses to sell his shares in the first company, entitling him to continue enjoying the rights attached to the shares in the original company while competing with the original company.

These scenarios aren’t far-fetched – in fact, they are quite common – which is why shareholders in start-ups can’t afford to be passive. It’s important to thrash out what is expected of every single party involved – whether it’s funding, skills or expertise – as well as reasonably objective criteria for deciding whether those obligations were met.

Answering the right questions

Our advice would be to sit down and agree to the value of each contribution before you start. Ask important questions:

  • How much is my capital investment worth?
  • What is the value of any person providing expertise? How is this to be compensated?
  • What is the value of the services provided by any person running the daily operations? How is this to be compensated?
  • What will happen if someone does not meet their obligations?
  • What will happen if someone wishes to sell?
  • How will we value the firm?
  • What will the payment terms be?
  • What happens if there is no cash to pay sellers out with?

These are the questions that will be asked sooner or later and to avoid a lengthy legal battle, it’s best to answer them beforehand.

These legal documents rarely feature high on the priority list when you are busy setting up your business. But it is almost certainly guaranteed to become an issue at some point. Take the time to lay the right legal foundation before building your company – or it may come tumbling down.

Jody Doyle completed a BA LLB at the University of Cape Town and thereafter worked at Edward Nathan Sonnenbergs Inc., during which time he specialised in corporate and commercial law, with a particular focus on mergers and acquisitions and corporate finance. He subsequently joined Dommisse Attorneys, a niche corporate and commercial firm, and has developed an advisory practice focussed primarily on assisting tech-based startup companies.

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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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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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