There are some critical questions startup co-founders should ask one another prior to partnering in a business venture. What is a partner? What am I lacking? What experiences have I yet to encounter? To own and operate this residential assisted living home, what skills are needed that I do not possess? These are questions wise, humble business owners ask themselves when embarking on a new entrepreneurial journey. These questions are vital to understanding what it will take to make a residential assisted living home a successful reality?
What Makes A Good Partner?
The choice of a partner or co-founder is as much a scientific analysis as it is artistic appreciation. Essentially, it is a matter of the right fit. Many entrepreneurs will share stories of having the nightmare partner or an absent partner, who only surfaced when distributions were disseminated. Therefore, examine yourself, your needs, and the goals of owning and operating a residential assisted living home. If a business partner or investor is needed, do not make that decision haphazardly. The following are some of the most important questions that should be resolved as early in the process as possible. In most cases, these issues only get more difficult over time. This is why it’s important to get off on the right foot by asking the right questions from the beginning.
Top 10 Questions To Ask A Co-Founder During Start-Up
1. How Should We Divide the Shares?
This is multifaceted. Shares of your residential assisted living home should rarely, if ever, be divided equally. In actuality, the work, often referred to as the sweat equity, should be a driving force in share division. However, sweat equity alone does not bring a business to fruition. Therefore, ensure sweat equity bears a heavy weight, but financial investment should be sensibly regarded for accumulating the necessary funds. So, be sure to allocate company shares in regard to all parties and negotiate to a consensus. Strong arming a partner will only result in brewing contention and a future fight between the parties.
2. How Will Decisions Get Made?
Who is making the final decision on important matters. Will the financial decisions be made by one party while the operating decisions are made by another? A small business’ decisions are often tied to the number of shares owned, but in many instances, it should hardly be tied to the number of shares one holds in the residential assisted living home. There are other options:
- You can have voting and non-voting shares.
- You can appoint a board for decisions about capitalization, executive hiring/firing, dilution, and other important operational decisions.
- You can also determine how certain decisions are made: operating versus economic investment.
3. What Happens If One of Us Leaves the Company?
Though it may seem like a bad idea to address this while forming your residential assisted living home, it is a subject that should be discussed. It is wise and sensible to consider how a thing will end as it is beginning. This ensures the continuance of the residential assisted living home. Staff, residents, and the families of each depend upon the owners/investors to solidify the overall management of the business.
4. Can Any of Us Be Fired? By Whom? For What Reasons?
Yes, that’s right. Even co-founders can be terminated. Too many people mix the notion of being a shareholder in a startup and having an operating role. These two things should be thought of as somewhat separate and distinct. The company should have a mechanism for gracefully terminating the operating role of a co-founder if that’s the right thing to do. This is often not fun but should be discussed up front. Leave nothing to the wind. Make sure people are well informed about what is and is not acceptable conduct on behalf of the residential assisted living home. If termination is necessary, it should be done professionally with the appropriate representatives. It should be done in a dignified manner, even if not received as such. Remember, this is your residential assisted living home, and above all else, residents and staff should have respect for the manner in which management handles all matters.
5. What Are Our Personal Goals for the Startup?
Though personal goals can change over time, it is helpful to at least get a sense of what each of the co-founders want for and from the residential assisted living business. While this is an empathetic industry, this is still a business. If you have one co-founder that wants to build a sustainable business that is spinning off cash and run it forever and another one wants to shoot for high growth and some type of liquidity, it’s better to get that out in the open early and talk it through. Pose the following questions:
- Can both of these objectives be achieved collaboratively?
- If not, what can be done? Is there a time period in which one goal can be met and the other sidelined?
- What is best for the residential assisted living home?
- Can we be flexible, possibly negotiate how our goals can be met?
Be sure to get this clearly outlined. Be sure the negotiation takes place. Be sure each member has an understanding of what the goals, and collective goals will be. Make this a formal, notarized document. Plans can always be amended later if needed, but having the plan in writing guarantees the absence of confusion in the future.
6. Will This Be the Primary Activity for Each of Us?
The separation and fluctuation of duties should support the successful operation of the residential assisted living homes. Most conflict arises from a misunderstanding pertaining to commitment.
- Will one of the co-founders be keeping their day job until the company gets off the ground?
- Will one be working on another sideline business?
- Will one or both be fully committed to the daily operation of the residential assisted living home?
- Will one be situated in the residential assisted living home while the other hardly set-a-foot in it?
Be clear about the separation of duties. Be sure to acknowledge that life itself can force a change in these duties and a contingency plan should be put in place to protect the residential assisted living home intact.
7. What Part of Our Plan Are We Each Unwilling to Change?
Everyone has non-negotiables. There are some things people refuse to sacrifice or compromise. This is not a negative unless it is unknown. To that end, residential assisted living homes that survive and succeed make necessary adjustments to the operating plan. Be sure, when these plans require adjustment, those non-negotiables are considered and help to guide the residential assisted living home through change. Remember, in this industry, what is best for residents and staff must be a guiding force in any changes made. This business is more than a real estate enterprise, it is a service business.
8. What Contractual Terms Will Each of Us Sign with The Company?
One of the best examples of this is a non-compete agreement. Will each of the co-founders be signing some sort of contract with the company (outside of the shareholder agreement)? If so, what will the terms of this be? This should be absolutely necessary for your residential assisted living home. Everything must be written, understood, agreed upon, and sealed with a signature.
9. Will Any of Us Be Investing Cash in The Company? If So, How Is This Treated?
It is very likely that one or more co-founders will be putting in some cash in the early stages of the company. It is critical to decide up front how this cash will be treated.
- Is the cash an investment?
- Is it debt to be paid? What are the terms of that payment?
- Is it a convertible debt?
- Does it buy a different class of shares?
Think about these things and make sure all investments are treated appropriately.
10. What Will We Pay Ourselves? Who Gets to Change This in The Future?
This can be a sensitive issue, but it is necessary to make this clear for the sake of the residential assisted living home. Risk tolerance varies by individual, and it is a good idea to factor this into determining the compensation plan for the founders of the residential assisted living home. If a founder/partner requires financial compensation, make sure it is negotiated and agreed upon early. If a founder/partner does not want financial compensation but prefers distribution allocation on a quarterly or bi-annual basis, then negotiate this and be clear about how that distribution will be calculated. Market conditions may force change pertaining to compensation. Be sure to discuss what to do if market conditions negatively affect the ability for the residential assisted living home to compensate a founder/partner. The formation of your residential assisted living home is a crucial step in its manifestation. Do not take it lightly or haphazardly.
Learn Everything You Need To Know About Starting Your Business
The success of your residential assisted living business starts with learning the right information from the right resource. The Residential Assisted Living Academy is a reputable and reliable source for starting and growing your new business. The 3-day training provides answers to everything from A-Z about owning and operating a residential assisted living home. Get reliable information here in order to get started on the right foot. These 10 professional tips about business partners is only the beginning. Get connected with the experts that will ensure the step-by-step success of your business.