Small businesses are the lifeblood of the British economy. It can be the most extraordinary feeling in finally launching your own business and being in control of what you do. There are of course many challenges that a new business faces but there are steps that can be taken at the beginning that can stop problems emerging in the future.
I want to discuss one of these problems in this note. Many start up a company with a friend or another member of the family. Also, those who need capital for the company but have none and may get the money from a friend or someone introduced by their accountant. As a result of these three alternative ways of setting up, and indeed others, the shareholding may be split 50% / 50%. At this stage, everything may be very friendly with no expectation of future problems.
Unfortunately, this isn’t always the case. At some point down the road, problems develop between the friends or the members of the family. In the case of the external shareholder, as the company succeeds the person who sets up the company questions why the external owner still owns any shares since they don’t contribute and entrepreneur has created all of the value.
Over the last six months, I have seen this situation on three occasions and in each case they are explosive situations, capable of bringing on stress and related illnesses. In fact, they are quite capable of destroying the business to everyone’s detriment. And yet they could all have been avoided when setting up the company.
There are several actions available at the start that would avoid these problems later. Just one of these is to have a shareholders agreement at the beginning which anticipates problems in the future and how they would be resolved.
In my role as a small business coach and through my experience as a small business owner of three companies in the past it is feasible to deal with these issues upfront to the benefit of all participants. Even late in the day with no action taken at the beginning its still possible to find solutions which I have been able to help with.
Kenneth Andrew Executive Coach
If you are just starting up or you have a shareholder problem and would like to talk about this please give me a call on 077104 88282 or email me at kenneth@kennethandrew.co.uk.