For the First Time Entrepreneur

Partners and Partnerships

Posted by Vijay on December 9, 2006

Too often businesses are started and partnerships are established verbally. “We’ll work out details later” is the common phrase used. Bad idea !!

While no one might want to cheat you, its a well known fact that shares in a company become more valuable as time passes especially if the business is successful. Suddenly issues like “What’s his value?”, “My contribution is greater” start to come up. I have seen so many companies that start out in right earnest and then get into these issues to such an extent that the business goes for a toss. Fortunately I have been lucky in this regard.

So here are some guidelines:

1. Establish shareholding at the very beginning. Holding patterns, Divestment, Exit etc.
2. Clear guidelines on roles and responsibilities.
3. Get an auditor that everyone is comfortable with.
4. Make sure that you have a comfortable working relationship with your fellow founders especially the ones who are involved on a day to day basis with the company.
5. Be professional. Don’t let personal likes and dislikes affect your decisions. Call a spade a spade.
6. Be clear on who handles finances. This issue will cause a LOT of heartburn if its not handled properly.
7. Teamwork is crucial in the initial stages. Don’t take major decisions unilaterally (if you are the only founder, then consult an advisor)
8. Be open to bring in new blood even if it means giving up some equity. Remember 100% of zero is still zero. I’d rather have a smaller piece of a bigger pie.


3 Responses to “Partners and Partnerships”

  1. prashanth said

    Thts wonderful piece of guidelines… When I was in college, we a group of close friends dreamed of opening our own organization… still we think abt those college days and that dream… who knows, one fine day….

    “Call a spade a spade” — its 3rd time this week I’m hearing about this phrase – from 3 different persons 🙂

  2. Thanks Vijay for the tips. I think this holds good for any leadership activity you own. Recently there has been some devaitions in a voluntary work.. I was questioning a principle stake holder(here may be a lead).. I remember him telling, I would be happy to walk out of the intiative if you can lead it.. I wanted to say.. please feel free then somehow controlled & oh.. come on.. take it easy kinds & we ended up with an action item like meeting with big bosses.
    ‘Call Spade a Spade’ – Hmm.. Many people will say it was almost a Spade & then later exploit the essence of ambiguity.

  3. wonderful tips for new entrant all key things have been listed importance of agreements auditors advocates etc., has been effectively
    indicated. It is wise to follow than repenting at a later date
    you can do a consulting wing for new enterprnuers
    lot of people fail because they do not plan correctly or they dont keep advisors even if it will cost. these things will pay in the long run
    they are like initial investment and you are bound to reap benefits for long time
    enjoyed reading it thanks for such a nice post

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