Mistakes you can’t afford in a start-up partnership Sometimes the need for a partner to help push the business forward will come up. IN SUMMARY • If issues are not well defined at the start, a business founder could find herself being kicked out of her own company 0 inShare The road to a business venture usually starts with an itch that won’t go away. From the idea comes a name, a station of work, and a start-up business. Sometimes the need for a partner to help push the business forward will come up. It could be the skills and experience that need a boost. It could be the finances or the networks that need a kick. In some situations, the partnership is formed right at the start. The initiators of such a business partnership could be college mates like Larry Page and Sergey Brin of Google, or Bill Helwett and Dave Packard of HP. They could also be brothers like in the Tuskys Supermarkets chain, or the Dassler brothers (Adolf Dassler and Rudolf Dassler) of the Adidas sports footwear fame. Getting into a partnership is one of the alluring offers that the business environment proposes for young entrepreneurs. It is an arrangement that must be carefully managed, yet young engtreprenuers frequently leave it to trust. There are risks involved in being in a partnership, just as much as there are benefits. The risks range from the normal and expected, such as occasional conflicts over decision making, to major issues like getting thrown out of your own company. It happens. So, how do you secure yourself in a partnership? How do you keep your vision for the venture on track even when your voting rights have gone down by virtue of taking on a partner? These are some of the questions that any young person getting into a start-up partnership needs to answer before openning the door to a second party. The dean of the School of Business at the University of Nairobi, Mr Steven Nzuve, says: “Mwangi & Sons or Joe Brothers kind of partnerships are a tricky business. They require a lot of balancing. The partners must know where the boundaries lie between their relationships as brothers and as business partners. If they can’t separate the two, then there is bound to be trouble.” Usually, says Nzuve, problems start when the profits begin to pour in. This is particularly so when the family or peer partnership starts with very limited capital. At that level, the partners will have little to bicker about. For much of the time, they will focus their energies at getting to see the business venture work out successfully. Trust and friendship drive them. Hence Nzuve’s caution: “To ignore the legal aspects of the business’s administrative and ownership structure is a fatal move for any of the partners. Trust has a limited role when it comes to certain matters in business. The brother partners need a legal framework to give clear demarcations on where each partner belongs and what they can or can’t do.” The situation that Nzuve is warning against reminds of the troubles that Tuskys Supermarket owners have experienced in the past few months. The brothers have fought in and out of court. So did the Dassler brothers over the control of Adidas, to the point where one of them went off and formed the rival Puma. What of partnerships in which one individual has the idea or the skill and other brings in the capital or the market networks? How do you go about running your company when your partner is a well-established business person who provided 80 per cent of the start-up capital while you came up with the concept and made it a workable reality? Are the two or you equal partners? Who makes the final decisions? You the founder or the money man? According to a senior marketing and business management lecturer, Dr Okonga-Wabuyabo, It is possible to quantify the idea, the skill or the expertise. The partners will have to sit beforehand and come up with financial figure equivalents of the non-financial aspects of the partnership. The non-financial figure equivalents will then be compared to the capital input of the other partner. From the comparison, a relationship ratio can be worked out. Michael Macharia, the founder of Seven Seas Technologies (SST), talks of how he had to take care of some legal matters with his more established partners who suported him during start up, if he were to get the benefits of the arrangement. It was about understanding the terms and conditions of the partnership. Such legal matters are essential in that they dictate how profits and losses are shared. They outline the way changes in the partnership authority, inclusive of share ownership and responsibility, are handled. “The agreement must be put down in writing and a legal expert called in to oversee the signing of binding agreements,” advises Dr Okonga
Posted on: Thu, 25 Jul 2013 16:16:31 +0000
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