In it together: How to maintain harmony with your fellow shareholders

How to maintain harmony with your fellow shareholders

Co-owning a business with others can bring huge benefits. You share the responsibilities, make joint decisions and go through the highs and lows together – always with someone at your side.

However, as in any relationship, you must put the work in to make it last.

So, how do you keep shareholder relationships on track? Here are some tips…

Share your goals

You’re going into business together, so you’re all going to want it to succeed. However, at the start of a business journey it can be all too easy to forget about where you want to end up.

Agree on basics like whether you hoping to run a profitable lifestyle business that keeps you, your fellow shareholders and a small number of staff comfortably off – or if you have bigger ambitions for growth. Will growth come organically or by acquiring other similar businesses? Is the aim to sell the business and exit? What timescales do you have in mind?

It is also crucial to share these aims with your advisors to ensure the financial requirements underpinning your goals are achievable.

Understand each other and communicate!

Take time to communicate with fellow shareholders to ensure you fully understand each other’s motivation, working patterns, communication styles and personality type.

If a fellow shareholder is an analytical lover of detail, they’ll thrive on a clear, well thought out business plan but they may also get bogged down in the minutiae and need help to see the bigger picture. If you're the visionary, dominant leader type, you'll have to work out how to tone down any frustration you feel at this approach and embrace the detail to some extent at least! 

This is an over simplistic view of a few personality types, and if resources allow then check out something like Insights which is a useful tool to give you a view of the styles of each of your partners.

Be focused but flexible

It’s important to focus on your business plan but be open to change. If your fellow shareholders want to change the target market, or the marketing strategy, for instance, listen to what they have to say and be prepared to change tack.

Together, you will have to constantly review what you've achieved (and why) and where you're headed (and how and why). Be ready to tweak, overhaul and pivot.

Think about potential areas of conflict now.

Although you will be optimistic about the future of your business (and if you’re not, stop now!), it’s important to think about the 'what-ifs'.

It’s vital to have an idea of the issues that might arise and agree a method for attempting to solve them now. The very act of discussing them may mean they don't become conflicts in practice.

For example, what if a shareholder who is active in the business becomes ill and is unable to work for several months? If you'd not discussed this before, the other partners might feel put upon as they pick up tasks for their ailing colleague.

The benefit of having discussed it beforehand is that you've already identified the issues this might throw up, including the financial and practical impact on the business, the inequality of effort and how you might feel.

Be clear about how you will run and develop the business together

A helpful way to look at this is to break it down into two halves.

First comes the operational side of the business.

  • How will you develop the business plan and then implement it? Will you each take on different responsibilities?
  • How will you monitor achievements and challenges and keep each other accountable?
  • How will you make operational decisions? What decisions can be taken without reference to the other co-founders?
  • What happens if you don’t agree?

Then think of the business as an investor:

  • What does the ownership split look like?
  • What capital do you need, who is going to invest it and on what terms? If there’s an imbalance between cash equity and ‘sweat equity’ – a person’s work, time and effort – how do you value the latter?
  • What’s your approach to taking profits as dividends? What proportion of the profits should be re-invested in the business?
  • How do you make decisions as shareholders. should all decisions be based on unanimity, or a certain proportion of shares held?

Consider formalising all of this (and any outcomes from the ‘avoiding conflicts' conversations) in a shareholders’ agreement or at least document this in some way.

Look after your greatest asset – each other.

You’ll be flat out working on the business but don’t forget about what drew you to your fellow shareholders in the first place. Spend time with each other to check-in on a personal level. Think of this as a business version of ‘date night’!

Where shareholders fall out it usually comes down to a failure in communication somewhere along the line. Owning and running a business can be very challenging and requires a huge effort. Don't work so hard on the business that you forget to communicate. It really is good to talk!


comical lawyers at thrings

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