Boss, you must say "ugly words" first! Expert: Even if you care about face, you still have to talk about what needs to be discussed

When starting a business, you don't want it to be just a flash in the pan, but you also want your business to continue to grow and operate sustainably. While pursuing steady profits, the stability of team relationships is definitely the key to business operations. However, we have seen too many entrepreneurial teams fail to map out each other's rights and obligations, leading to overturning on the road to entrepreneurship, ranging from breaking up the partnership and disbanding the company, to serious cases even blaming each other and going to court. It is a pity.

The Importance of the Founder's Contract

Before starting a business with other co-founders, entrepreneurs should sit down and carefully discuss the entrepreneurial structure, from the simplest capital utilization planning, business development plan and short, medium and long-term goals (including End Game, the ultimate goal of development), to Team composition, types of resources (investment) provided, allocation of responsibilities, resolution methods, corresponding shareholding proportions and accompanying management rights, as well as exit mechanisms, etc., must be fully examined.

Everyone tried to come up with the entrepreneurial blueprint in their minds, communicated fully, turned it into a specific agreement, and even designed the company's articles of association accordingly. In this way, it was like paving a track for the entrepreneurial train to move forward steadily.

Before getting into the actual content of a founder's contract, let's share a common observation that entrepreneurs make when discussing startup structure. For the sake of face, entrepreneurs may feel that discussing business methods and exit mechanisms in detail before cooperation always gives people the impression that every penny has to be spent, and may even sound like bad-mouthing. However, we still recommend that when discussing the entrepreneurial structure, be sure to keep the following two principles in mind. :

1. Do it sooner rather than later

In many cases, the entrepreneurial team did not plan the distribution of rights and responsibilities in the early stage, and the operational issues were discussed. However, because there were no concrete results in the early stage of the startup, even if the members had differences, they might tolerate it and reassure themselves that the problem was not serious. Pass. But you may have heard a saying: "Do you want 100% of the shares of a loss-making company, or 1% of the shares of a profitable company?" This means that for a company that is losing money and making no money, it makes no sense to own more shares. .

But as the entrepreneurial results gradually emerge, more disputes will begin to arise. If there are no operating rules to control it, people will often resort to emotional confrontational attacks. The author has seen too many examples of people who can share the pain but cannot share the results.

2. More should not be less

Don't feel embarrassed to discuss these matters. In order to avoid sowing the seeds of subsequent worries, it is recommended that the entrepreneurial team (especially when the members and partners are of similar conditions) carefully discuss the joint operation method of the future business and put forward ideas with an open mind.

After all, if there is no way to communicate at the beginning, how can we expect this team to operate well in the future?

Of course, if consensus cannot be reached on detailed conditions and practices for the time being, at least a decision-making mechanism on the matter must be established first.

After confirming the co-founders, the subject of the founder's contract is also confirmed. Next comes the rights and obligations agreed between the founders and shareholders, that is, the rules of the game are listed one by one.

The structure to be confirmed at the beginning is the proportion of rights among the founders, most of which are also reflected in the company's equity distribution. Later, there are also shareholder rights such as earnings distribution that will be shown in the articles of association, as well as team shareholders that will not be shown in the articles of association. agreement between.

The fundamentals of distribution of rights and responsibilities: Equity Ratio

How much resources each founder provides and what proportion of equity they receive in exchange are the basis for the distribution of rights and responsibilities. From the perspective of entrepreneurs, we recommend that entrepreneurs obtain absolute control and avoid adopting a method of allocating equity equally to all founders. Otherwise, for new startups pursuing speed to enter the market, there is a hidden risk of sacrificing efficiency and leaving no one to make the final decision. etc. risks.

The equity ratio can be considered from the perspective of subsequent work together. The following are some points that should be paid special attention to:

Leader

You need a leader in a team, and certainly in running a company. For new startups, the multi-headed carriage will divert valuable time resources and even leave employees at a loss. Therefore, in entrepreneurial teams with a majority of co-founders, it is still recommended that the leader's shareholding ratio be different.

Cost Input

In addition to the cash or resources each invests, there are other startup costs that need to be considered.

Entrepreneurs themselves should devote themselves to a new business full-time (at least to convince the outside world that starting a business is serious and they are optimistic about my career). As for other co-founders, it is also ideal to devote themselves full-time to the new business as much as possible.

The reason is that resources are scarce in the early stages of starting a business, and the team needs to work hard to polish the product, but the energy invested is difficult to quantify. If the team members spend the same time (full-time), at least the benchmark of time and human resources will be consistent, and the subsequent distribution of results will There will also be one less point of contention.

Of course, a variable here is whether members need to receive salary or remuneration, which also requires case-by-case discussion by the team (it is still recommended to receive it).

But be reminded: if you want to receive a comparable salary, the member's shareholding ratio or rights in the company must be adjusted accordingly as a check and balance. At the same time, it should be noted that if a co-founder pays full-time employment in exchange for the most favorable initial stock subscription conditions, he or she can also arrange for other co-founders to be replaced if the co-founder leaves the company before the set period is reached. People have the right to buy back their shares and even devise corresponding penalties and effects.

Contribution to the Company

Who created the product and designed it? Who has relevant experience in this industry or market? Who has greater influence on the direction of the company and products? Who will be the key players in raising funds and introducing resources for the company in the future? These contributions to the company and products from the past to the future should be examined.