How To Maintain Control in Partnership Business
The saying that if you want to go fast you go alone but if you want to go far you go together remains the bedrock of partnership business.
Control is however still a major issue for most start-up companies that must be resolved even from the word “go” as it has the capacity to cripple the business.
So you have this business idea you would like to execute like real soon.
You know you need people and partners to pull this off. If that’s the case, a company limited by shares would be ideal but you tell yourself that you would rather start small and so opt for an enterprise instead.
Because you want control of the business which is not such a bad thing. After all, it’s your business and your idea in the first place.
Understand that if you want some level of control in your business there are certain things you would need to do before introducing Co-founders or partners.
1- Start the business on your own no matter how small but start with the end in mind. Execute your business idea and start running with it.
2- Be ready to bear the start-up cost including business registration and other legal costs for legalizing the business. The initial cost of floating the business would have to come from your pocket.
3- Decide early on what percentage of the company’s shares you want to give out to potential investors and partners. You could decide to keep 60% of the share capital while you give out about 30% to your partners and keep the remaining 10% on reserve.
Aside from doing a percentage sharing, you can also decide to give out Units of shares instead e.g. 5000 units, 10,000 units or even 80,000 units etc depending on what you agree with your partners.
This goes without saying that your company must first be registered as a company limited by shares and not a mere business name.
4- Have an actual partnership agreement that is comprehensively drafted and personalised for your kind of business. Don’t just download templates that you will be struggling to understand the terms.
This 4th point is on the assumption that you are now ready to introduce Partners into your business.
Please note that your partners can come in at any stage of the business even at the start-up stage.
Now the essence of doing these preliminary investments into your own business is to ensure that when people come into your business. They are actually coming into an existing business.
They are not coming to help you execute a mere “idea” rather they are coming to build an existing business in which they have a stake.
The problem I see with a lot of start-up companies is that they cannot even take the smallest risk in their own business by being the first investor before seeking external investors or partners.
So if you currently run a business or intend to run one with partners while maintaining control as the originator of the business idea then you should be the first to take the risk in your own business by footing the Initial start-up cost at least to a reasonable extent.