Forming a Business

7. A Common Pursuit

Many of the difficulties and disagreements in managing a business arise over everyday policies and practices, rather than legal structure. You can avoid most of these problems by drawing up a comprehensive agreement on how the business should be run. Ideally, you need to discuss these issues with your partners and key employees.

7.1 Discuss what motivates you all.

• Why do you want to start a new business?
• What is the purpose of your business?
• Be frank about personal priorities - work, family, money, holidays, cars, travel.

7.2 Agree your business strategy and the short and long-term objectives you are working towards.

7.3 How will you manage the finances?

• How is the business going to be financed?
• How much will different partners contribute?
• How will profits (and losses) be shared?

7.4 Discuss responsibilities.

• Who will manage what?
• What is the decision-making process?
• How will you resolve disagreements?

7.5 Discuss day-to-day operations.

• How are you going to reward different individuals?
• What holidays are different people going to be entitled to?
• Will any friends or relatives be on the payroll?

7.6 Discuss what if scenarios and write down your conclusions.

• What if you need to raise more money?
• How will you cope if one of the partners decides to leave the business?
• Do you have an exit plan? For example, do you aim to sell the business at a certain stage?