Posted: 2010-05-25 / Author: Bob Power Corporate Consultants
It's All To Do With People - Choose Your Partners Carefully
Although in running a business money is absolutely necessary, it is people who can make or break a business.
It cannot be over emphasised that you must select your partners carefully, but you often do not realise their limitations until it is too late. Unless you are happy with your partner, start with employees. However you may have convinced yourself that you cannot go it alone, because of your mental outlook and feel more comfortable with partners, especially if they add value, money and take some of the risk.
The fact remains that if they inject funds, you now have to share control of the business, which includes limiting your profits, but also reducing your risks. Always try to keep control -50% plus.
Factors in favour in bringing in partners would include-
- You can bounce off ideas with the partner, who can assist you with making decisions.
- They could bring new ideas and suggest ways in which the business can be improved.
- As stated he can take the pressure off you for financial injection.
Problem areas, however, are-
- Is the partner long term, or only short term to make his money and then walk away
- Is his vision in line with yours?
- Does he have the money?-be sure before you take him on.
- Is he prepared to get actively involved in the business and not just be a sleeping partner.
- Do his skills, knowledge and experience complement yours?
- Can he bring in contracts, which benefit the business.
- Can you work with him? Is he overbearing-arrogant etc. If you cannot work with him don’t. There are some big egos out there.
- Greed, take too much out of the business but making limited contributions.
- Some partners are more actively involved in other activities-like playing golf.
- Selling or making deals without your consent.
- Worse-even stealing from the business.
- Nothing was put in writing when the partner was taken on board, now his word is against yours.
- You had no other alternative than to take a partner, because you could not raise finances from the bank etc-dangerous.
I heard of a case recently when an owner was very busy, so he took on 3 partners-giving them, for nothing 25% each of the business-keeping 25% for himself. He believed that they could enhance his business greatly because of their political and other contacts. Unfortunately this was not the case; they rarely came into the office, and did not bring in business, but took big salaries. The owner in frustration decided to sell the business for R1m. The 3 partners insisted on their R250,000 each-for their 25% stake. The owner had signed a shareholders’ agreement and after seeking legal advice-realised that he had to pay. With help he managed to negotiate a deal on his behalf-whereby they received R100, 000 each. “Let the signer beware”
Many partnerships fold by the latest after 2 years-I wonder why?
Turning to employees-you must travel the minefield of labour law. Frankly I have found that outside of core employees such as receptionists, book-keepers-it is best to stay as a one man band and work through associates/consultants only paying them when you use their services. However size and performance may have resulted in you having to take on more staff. If this is the case-the following points are relevant
- Ensure that their working conditions are legally sound, especially dismissal terms-and are they motivated.
- Don’t be afraid to get advice from Human Rights experts-it is worth it.
- Recruitment is a process, which must be carefully pursued. It is estimated that 60% of CVs are false, some of a serious nature. They must be read and checked out carefully. If a CV states-I have been farming-it could mean he has been in prison. Overseas qualifications in particular must be checked very carefully.
- Background checks must be thoroughly checked out. References must be double checked. It is difficult to give a bad reference-because defamation could follow.
- Credit clearances should be carried out and a police clearance sought with the applicants consent. If he refuses??
- His letter of appointment/employment contract must include duties of the employee-remuneration terms-especially perks-duration and notice terms-confidentiality and where applicable restraints of trade.
- Financial rewards assist, but good management and sound relationships and communication are vital.
- Motivation, recognition, responsibility and advancement cannot be overlooked.
- Be firm but fair.
I was once asked what I would consider questionable activities one should look for from employees. My answer was-
- Coming late and going home early.
- Using the business telephone for private business.
- Taking extensive sick leave.
- Bad faith.
- Lack of loyalty.
- Overfamilier actions-sexual harassment being a major concern.
- Back stabbing.
In the real world people must be understood-think before you act.
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