Entrepreneurship: basic tips when partnering | INCAE

Entrepreneurship: basic tips when partnering

February 12 2018
INCAE Masters
I already have my idea, now to execute it ...

If you've already defined your value proposition, you've established your business model And you found that your idea is in sufficient demand to be sustainable, it's time to take it to the next level.

Perhaps you are at the point where you want to grow your business and are considering partnering. For many, finding partners is the way to go; Because in this way there is a distribution of responsibilities, skills are complemented and can generate a higher level of capital.

But getting a business to survive the innovation stage and become sustainable is a huge challenge. It is not enough to bring together family or close friends that make up the company, the decision must be thought through carefully and take certain precautions. Following these basic tips can save you money, legal trouble, and headaches:

1. Constitute a legal person: In Costa Rica, for example, the public limited company is one of the most used, as this is how personal assets are protected. The type of person will depend on the nature of the business and what works best in a given country. Having a company gives the company formalism and allows you to have shares that you can distribute or sell, as it suits you.

2. Draft a shareholders agreement or partner agreement: It consists of a document that serves as a private contract between the partners of the venture. It is advisable to hire a specialist lawyer to write it and adapt it as the company grows in size and complexity.

Two key clauses should be included: establishing the procedure for accepting new shareholders and determining the process for valuing the shares. Normally the price of the share varies year after year, it is not advisable to set a specific value, but to establish that, in the event that a partner wants to sell their share, an expert will be hired who will determine that value based on books and cash flows. .

3. Create a board of directors or corporate governance: By law, the constitution of a legal entity and a partnership agreement imply the creation of this entity. It is important that its members ensure the well-being of the company and are professionals who really bring experience and contacts.

Don't make the mistake of including family or friends on the board of directors, just because you know them well. If they really don't have the necessary experience or skills, it's best to discard them and leave the role to someone else.

4. Hire to succeed: the value of having a talented team affects all phases of entrepreneurship. Initially, the team will shape the corporate culture and complement the skills and experiences of the founder. It may be the case of an introverted entrepreneur who does not feel comfortable presenting his product or service to others, there it is valuable to have an extroverted person with sales experience who strengthens the business.

In more advanced stages, the venture must have a team of executives and members of the board of directors who have an important trajectory, since they will be a support to make difficult decisions.

So, do you always have to partner to undertake? No! It must be clear that the path to success does not always involve associating, in many cases it makes more sense to undertake alone. But that is a very personal decision, which will depend on the motivations of each person and the nature of the business.  

To learn more about the advantages of starting alone or partnering, you can watch our free webinar: Undertaking: alone or accompanied?, by the expert, Francisco Pérez.

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