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What should I consider when entering into a partnership?

50/50 doesn’t always mean everything is split down the middle.

Sipho Pilime

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What advice do you have regarding entering into a 50/50 partnership? I work full time, my technical partner will doing the work and manage salespeople. What should we consider when setting up such an arrangement?

There are many advantages to a partnership. Firstly, two heads are better than one. In addition, a good partnership can provide great synergy. For example if one partner has a set of skills that the other party does not have.

However, both partners should have the same vision for the business and they both need to have clear understanding of what each member brings to the partnership which ideally would be complementary skills and professional backgrounds.

50/50 partnerships pose a particular challenge in that when people enter into this type of partnership, each assumes they will be allocated an equal work load and that is often not the case.

Therefore before deciding on the size or portion of the partnership, they should both consider each partner’s contribution based on the amount of time they’ll be putting in.

Every business needs a leader therefore they need to appoint a CEO or managing director even if it’s a 50/50 partnership. Someone needs to be accountable and take operational control of the business.

Find a balance that suits both of you

The output from the ‘technical and idea guy’ must be clearly communicated. Both partners need to be on the same page and share the vision of where the business is going.

If this is not the case, perhaps you should consider employing a technical worker on a contractual basis as opposed to bringing them in as a partner.

The pitfall of partnering with someone just because they have technical skills is that the latter may, in the long run, feel as though they are being exploited to achieve your dream.

On the other hand, the person who came up with the idea may also feel like the rewards of their entrepreneurial concepts are unfairly being used by the other party.

A business requires a lot of hand holding, so while the concept of working full-time and having a business on the side sounds easy, oftentimes people over-simplify the requirements of the business especially when considering the time aspect.

You need to consider the demands of your full-time job. For example, does the demand of the job allow you to put in another four to six hours in your own business per day? Or, would you be able to take an extended leave from work at the outset so as to ensure that the foundational structure of your new business has been properly laid down?

The partnership agreement

Employ a well-qualified attorney with a good track record in business partnerships because this is a specialised field. The attorney will ask all the right questions regarding the partnership in order to provide the best advice on, for example:

  • The objectives of this partnership
  • Roles and responsibilities
  • The measurables
  • How the partners will share and distribute income AND losses
  • Dispute resolution procedures
  • Exit strategies of the partners
  • What to do in the event of death or incapacitation of a partner.

 

Sipho Pilime is a business mentor at The Hope Factory. During his career he has assisted both small and large businesses across a range of industries to realise their growth and development aspirations. An entrepreneur himself, Pilime is passionate about helping to improve socio-economic standards in southern Africa through the empowerment of small businesses.

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Starting a Business

What are the do’s and don’ts of securing an online domain name?

We asked Domains.co.za founder, Wayne Diamond, what the do’s and don’ts are when it comes to entrepreneurs registering domain names for their start-ups…

Wayne Diamond

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There’s that L-word again:

“Location, location, location”. It’s the make or break decision. Every estate agent and business owner cannot overemphasise the importance of this Critical Business Decision Number 2 (Number 1, of course, has to do with what you’re going to sell!).

Related: As a start-up, what are the most important areas I should be looking at?

 

Whatever business you’re in, being close to customers and convenient to business partners and suppliers is essential. That bricks-and-mortar wisdom is equally true in the world of online commerce. Having the right domain name and the right support for your online presence has emerged as a real driver of success.

Some figures put the scale of the opportunity into perspective: US e-commerce is predicted to reach $440 billion by 2017, showing a compound annual growth of 13.8%[1]. While the Internet economy is in its infancy in South Africa and Africa, it is growing strongly: research by World Wide Worx showed that consumers, small and medium businesses and government were already purchasing products and services worth R59 billion on the web three years ago.[2]

So how to secure the best and most profitable Internet real estate to make sure your business can ride the e-commerce wave?

It’s all in the name:

The first decision is what domain to use. One of the exciting developments is the launch of new Internet domain names, so it’s definitely no longer a choice of .com or .co.za. The proposed dotAfrica (.africa) geoTLD (geographic Top Level Domain) is one option that’s set to come online around the first quarter of next year, but what about the ZAdotCities domains of .joburg, .capetown or .durban? Domain names within these additional geoTLDs will be able to be snapped up by the public around November this year.

While .com remains a good choice for truly international businesses, choosing a domain name with some local flavour is probably going to work well for many companies.

The greater range of domain names also makes it more possible that you will be able to choose the right name for your business. When it comes to the more established domains, like .com or .co.za, chances are higher that the name you want has already been taken.

When it comes to that all-important name, received wisdom used to be that short was best, but the trend nowadays seems to have reversed—even phrases are now used. The key is to choose a name that is easily recognisable, that will stick in peoples’ minds and that describes the business well.

Perhaps a good example is the domain used by the writer of this article: www.domains.co.za is both a brand name and a name that perfectly describes the nature of the business. At just seven characters in length, “domains” is also an easy to spell, easy to remember word – keeping names under ten characters is guaranteed to help audience recall.

Something people will remember easily is absolutely vital.

Some companies use specific names for individual campaigns, but always make sure the business as a whole has its own web address.

Experience has shown that it’s probably worthwhile to register similar domain names to the one you choose, just to keep competitors from taking them in an effort to sow confusion.

My final advice: it’s always a good idea to use an ISPA (Internet Service Providers’ Association of SA) member to help you register the chosen address of your start-up. That way you’ll be sure that all the formalities are correct, and that the company you’re dealing with abides by ISPA’s code of conduct.

Finally, as there are already almost 950 000 .co.za domains registered, it’s a good idea to surf to www.domains.co.za and perform searches to see if the domain you would like is indeed available.

Related: Does the South African government award grants to franchisees?


[1] Chuck Jones, “Ecommerce is growing nicely while mcommerce is on a tear”, Forbes, 2 October 2013, available at http://mashable.com/2013/02/05/ecommerce-sales-top-1-trillion-worldwide/.

[2] “Internet 2% of SA economy”, 29 May 2012, available at http://www.worldwideworx.com/internet-2-of-sa-economy/.

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Starting a Business

How to protect your business idea when sending them to financial instituitons?

Signing an NDA, is it necessary?

Anton Ressel

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How can I protect my business idea before I submit my business plan to financial institutions and other agencies for help?

You have a few options:

Firstly, you can include a disclaimer as an introductory clause, saying that any and all information contained in the business plan and related documents remain the Intellectual Property of xxx (your name) and may not be reproduced, copied or used in any manner without express written consent. This is not legally binding, but usually enough.

Secondly, you could ask them to sign a non-disclosure agreement, which is more binding from a legal perspective. The downside of this is that it can come across as arrogant, especially from someone who is approaching us for help. Personally I refuse to sign any NDA from clients who approach me for help, it just smacks of mistrust and arrogance.

On a final note, good ideas always get copied. If you are that worried that your idea will be stolen, you may need to re-look at it and find ways to make it difficult to replicate, or better yet, make sure you are first to market.

Related: As a start-up, what are the most important areas I should be looking at?

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Starting a Business

Does the South African government award grants to franchisees?

In my experience, unless you as the entrepreneur have some ‘skin in the game’ and a reason to get up and make the business work every morning, it seldom will.

Anton Ressel

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I am considering purchasing a children’s education franchise and wanted to know if the government offers grants. The cost of the franchise is R 86 000. If so what are the criteria to qualify and how does one go about it?

Accessing grant funding for a franchise may prove challenging, unless that franchise is registered and accredited, in which case there is a fund that may consider it – see CNBC for more info.

Otherwise, you could look at www.investmentincentives.co.za and see if any of those sources of financing are of interest. It naturally depends on your own PDI (previously disadvantaged individual) status as many of these funds are focused on youth, women and PDI’s.

Finally, on an emotional level I would caution against going all out for grant funding and not loan finance. In my experience, unless you as the entrepreneur have some ‘skin in the game’ and a reason to get up and make the business work every morning, it seldom will.

 

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