This article describes the aspects of starting a joint business in cooperation. It will help you pay attention to the major difficulties in this area.
The Basic Principles to Start a Joint Business
So many business opportunities, and most importantly, the relationship suffered because of the fact that people do not know how to properly agree. The ideal way to create your own business is a sole owner of the business. If you are able to create, manage, and run a business on your own, then it is wonderful. If not, the co-founders will need to be selected and selected carefully, guided by certain rules. You can read more about these rules on do my essay. Your companion can be just an investor and can fulfill functional duties in business together with you. The most common variants of association in co-founders are a common business idea or an invitation to a professional, without whom your activity is impossible in whole. Here are some recommendations how to start cooperation in a proper way and to lead your idea to prosperity.
The choice is, as a rule, the same for all: relatives and acquaintances. Always remember that you can quarrel for the rest of your life with a joint business. There will be conflict situations, external and internal problems. Your companion may be just an investor and may carry out functional responsibilities with you in business. If you are not sure that this person will be able to find common solutions, it is better not to start a joint activity.
Principle One: Share in Business
Share in business does not make the co-founder a real co-owner. The owner of a business is a profession. Even the previous short-term financial success does not mean that the proprietor is a professional. To achieve long-term success in the business of the profession, the “business owner” must learn business features. If the owner wants to be a professional, he/she must necessarily engage in self-development.
The Second Principle: The Level of Business Development
The level of business development will always correspond to the level of responsibility assumed. Thinking of the owner of a business is different from the thinking of a hired professional, primarily it is about a degree of responsibility. The business owner is responsible not only for himself/herself but also for other people, those who work in his/her business. Without assuming this responsibility, it is impossible to become a real business owner.
The Third Principle: Work Inside Business
Personal business and work within the business are two different types of activities that must be paid separately. For the work inside the business, the owner must be paid a salary. For a share in the business, dividends are paid, which the owner spends at her/his own discretion. The total amount of dividends is divided among the co-founders in proportion to the size of their shares. Salary sizes and dividend payment rules are specified in the agreement and are agreed between the partners. It is necessary to distinguish these notions.
The Fourth Principle: Every Owner Must Be Effective
The introduction into the business of an effective co-founder should increase the income from this business for all partners. Conversely, if the introduction of a new co-founder into the business does not increase the incomes of partners, it cannot be considered effective. In such situation, there is no economic meaning in his/her participation.
Principle Five: There Must Be One Principal Owner
It is wise to enter your first business as a junior partner in the co-creation with an experienced principal owner whose style of leadership and success in business you like. Working with such a co-founder, you will gain invaluable experience.
The Sixth Principle: Business Finance
Business finance should be transparent to partners. Nothing destroys the relationship so much as a regular friction on monetary grounds. It is bad when the business is unprofitable and disagreements arise because of financial losses. However, no less than the relationship is undermined when business becomes profitable: many partnership relations are dying just because of the income section.
The Seventh Principle: A Right to Influence Strategy
The owners of the company, regardless of their shares, have every right to influence all strategic aspects of the company’s activities.
The Eighth Principle: Written Agreement
There must be a written agreement on intentions, goals, and principles of interaction. When entering a business it is important to think about how you will get out of this business. That is why these experienced business founders are different from beginners. The key issues for owners are:
- harmonization of the personal goals of the owners and long-term intentions for business development;
- written agreement on key issues;
- distribution of functional responsibilities among owners, liability and control areas, the level of authority, periodicity, and degree of reporting;
- development and approval of the mission of the company;
- strategy, principles, and values of the company;
- company goals (and their fulfillment);
- the image and trademark policy of the company;
- the policy of relations with strategic partners and power structures;
- forecast and analysis of the financial condition of the company (budget, dividends, security, cost);
- strategic aspects of marketing and pricing principles;
- sales and service strategy;
- status and staff development;
- information support of business;
- other important issues of the company’s condition and development.
The person who organizes the first business in her/his life thinks only about the business idea and how to start this business as soon as possible. The newcomer expects only one possibility: the new business will necessarily become successful. An experienced entrepreneur who already has several ups and downs behind knows that most businesses fail. It does not depend on whether the business idea was good or not. Business can be ruined by the changed situation in the market, competitors, taxation visit, default, strife among the founders or members of their families. Take into an account that all principles are important. Each of them requires a deep understanding and examples from practice.