Business ownership can take on many different shapes, and partnerships are a common way to start. But there can be big problems down the road.
A few weeks back, one of my clients was kicked out of his own company of 8 years. He was the CEO and owned 25% share of the business along with three other partners and he was the only one of the four on the leadership team. The others worked in the business on their own terms with little clarity around their roles and responsibilities. This was a big concern that he was starting to address before getting the boot.
Clarify partner roles at the onset
In my client’s case, all partners came from the law enforcement industry and had a common bond that brought them together to build a growing security services company. As much as such camaraderie was good in the beginning, it wasn’t sustainable due to confusion of roles and responsibilities as the business progressed.
The initial appeal in any partnership could be financial (pooling money to invest) or to help mitigate risk (spread among 2 or more people). But that’s not enough. You must clearly define the roles of partners, establish expectations, and be willing to hold one another accountable for results.
If you’re an owner and work in the business, you’re also an employee
As you work in the business, you wear two distinct hats: Owner and Employee. When working as an employee, your roles and responsibilities must be crystal clear – no different from non-owner employees. Your compensation should be based on your contribution as an employee – not an owner. As owner, you get compensated separately, based on the terms of the ownership agreement.
Owner/Partners are not always on the leadership team
It takes a secure person to embrace this concept, but if one’s true talent lies somewhere other than leading the company, then why not utilize that talent where it’s needed most?
Within a few weeks of getting expelled from the company, my client started a new venture in the same industry. He received tremendous support from his trusted network and is now moving ahead with renewed confidence.
Some powerful lessons were learned, and most likely with a big payback as he nurtures his new company to greatness!
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