Shared Ownership of a Business
Brian’s rules of shared ownership.
Rule 1 – Each partner must be significantly better off in the shared situation than alone.
We often find somebody keen to go into a business partnership with us.
Their keenness is because they can see clearly what is in it for them – they will be substantially better off with us involved than by themselves. Our question would always be “But, how much better off will I be?”
One of the questions that we address in the initial partners meeting is “How will each of us be better off?”
Rule 2 – Each partner must contribute something different to the mix.
Complementary skills and abilities
This is where we allocate responsibilities not tasks.
Rule 3 – They must share a common set of values – expressed as house rules.
Spend time working these out and documenting them
Rule 4 – Only do business with people you trust – and document it as if you don’t!
When you start, discuss EVERYTHING and document it all:
– in a legally enforceable way.
It is the assumptions and hidden stuff that will create havoc later on.
Drag it all out now and save the compounding damage.
Keep some flexibility in the agreement for unforeseen changes.
Rule 5 – Always plan (at the start) how to remove one or more owners from the mix.
Agree to valuation methods and buy-out processes
If the business has significant value – look for partner insurance
Rule 6 – Reassess the basis for the ownership blend every year.
As part of the annual business plan update process.
Rule 7 – In terms of profit split – any split that all agree to is a good start,
But the most sustainable splits are based on contribution to the value of
the business – i.e. not just current year profits.
Rule 8 – Develop protocols for handling the inevitable disputes.
Don’t be frightened to involve a professional in this.
Never compromise – look for no-lose solutions.
Use honest collaboration as basis of partnership
Rule 9 – The business and their share of the profits and cash-flow must meet
every owner’s personal needs for status, satisfaction, income etc.
Rule 10 – Run the business as a business
– document processes, set targets, measure performance.