Existing and new business owners frequently look to hire key talent to spawn a new idea. My discussions with them in planning these ventures, we work through the financial plans, marketing ideas, goals and often incentives. At some point we typically discuss and debate corporate structure and the “partner.” Should the new key manager have equity, how much, and with what level of compensation? A recent Inc. Magazine article by Bill Murphy, Jr., 9 Key Things Successful Business Partners Always Do highlights some ideas to consider. I particularly like developing a successful history together. Too often I’ve seen equity given to a key manager, only to find out that the person does not work out as planned. Now there’s the difficult task of unwinding a minority equity position.
Also important is deciding on the “real” leader. New ventures require someone with drive and independence. Yet, minority partners may not be spending their own money, so there needs to be some type of oversight. Also, minority partners may not fully understand the passion driving the vision. In these cases some actions may not be consistent with the overall goals and may need to be re-directed.
All 9 points are important. And there are others such as having a good financial plan and benchmarks of success. Without these you may not understand if you are on track to be the next ZIPcar…good, bad or otherwise.