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Tom Walter is a "serial entrepreneur" who has launched nearly 30 companies. He is the CEO of Tasty Catering, named one of Winning Workplaces best small companies in 2010. This post is republished with permission from Serial Entrepreneur.
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The majority of small business launches are done by partners. Launching a business usually requires emotional support as well as financial support. It always helps when each partner is knowledgeable in different aspects of business. For example one partner knows the product, another that knows the market and a third that understands generally accepted business practices. Legally the structure may be called a partnership, C Corp, Sub S Corp or LLC, but in essence, they are partners.
The launch of the business is the exciting stage of the business life cycle. Hope, anxiety, concerns and goals are prevalent in every conversation.
The emotional roller coaster is like falling in love and as we’ve all experienced, some love affairs blossom and die. The cause for the ones that wither stems from the realization that there is a discrepancy between the core values and vision for the future in a business relationship.
To combat demise, it’s important to set up a mutual understanding of the key elements that your business is built on.
Core Values
Discuss what values need to be met for each person. Some of those values may be:
- Morals
- Ethics
- Respect
- Work Ethic
- Approaches to Customer Service
- Responsibility
If these are agreed upon, included in the “partnership” documents, and posted in a visible work area, all members of the organization will understand what behavior patterns are expected. These values should be based on common sense, religious principals, Gallup’s 12 Questions or Abraham Maslow’s Hierarchy of Needs. These identify the organization’s culture and character. Once established they should last the life of the business.
Mission Statement
Why are you going into business? What is going to be your marketplace differentiators? Will you be responsible to your stakeholders? If so, say so. The Mission Statement may change as the business matures, provided that the majority of the shareholders are in agreement.
Vision Statement
This provides the GPS view of where the organization is headed. The vision statement should include all the personal goals of the shareholders that relate to the future of the business. It should be energizing, descriptive and paint a vivid picture.
Exit Plan
Experienced entrepreneurs, who had have other shareholders, state that the greatest internal problems occur when the organization is making money or losing money. Tranquility reigns in the middle. Some shareholders achieve success and want to leave for retirement, pursue other investments or new challenges. When business sours, the owners that lack resilience crumble and need to escape. Those owners need to be removed
An exit plan (the business pre-nup) should contain trigger steps for activation. These should include violations of moral principals, substance abuse, conflicts of interest, incapacitation, death and voluntary exits. A valuation formula is vital ingredient. The formula should be upgraded with actual numbers at the annual meeting. This will avoid quibbling about the value of the shares. Financial advisers, CPA’s and attorneys usually take part in the structure of the exit plan.
Following these steps will allow “partners” to concentrate on the important aspects of the business instead of dealing with the pain of personality clashes and the unexpected circumstances that will trial the business.
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