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Three Ways To Maintain Control Of Your Business Idea

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In the daily routine of entrepreneurship training and enterprise development, a common occurrence is the concern of budding entrepreneurs who are considering inviting co-investors to develop what they believe to be commercially viable ideas but worry about losing the business to the outside investors. What are the options available for start-up owners seeking ways to maintain control of their business ideas?

As the founder and prime mover of a business idea, your first option in the search for finance is your personal resources. Next is money you can raise from friends and family. When these are not enough, you can then consider inviting investors from outside your immediate circle.

This is where things get tricky, because you are beginning to move far afield, where you will have to deal with people you don’t know and who don’t know you. The only thing that is bringing you together is your business idea and the profit motive. In this situation, just as you are worried that the investors you are calling to the table may take the business from you, they too are concerned about the security of the money they are putting into the business. It is therefore clear that both sides need to be protected and prepared for the road ahead.

What to do? Here is a list of four critical corporate governance issues a founding team and external investors must settle in the process of procuring and injecting new money into the business.

1. Start With A Business Plan: A Business Plan is essential for a start-up. It is what the founders will use to market the business to potential investors. Whether it is a 100-page binder or a one-page plan, it ranks as a must-have, because the plan is the map for the journey. It is the layout of the terrain ahead, and outlines how the operation intends to move from where the idea is to the business it wants to become.

Specifically, the plan will serve the following purposes:

* Provide the reference points for investors to decide if there is a fit between the proposed idea and their profit motive

* Help the founders determine the amount they need to raise and how they will utilise it if they succeed in their funding efforts.

* Itemise expected expenses, estimate revenues and project profits.

The bottomline is that the business plan is the Founders’ primary fund-raising tool.

2.  A Shareholders’ Agreement: The shareholders’ agreement is the document executed between some or all of the shareholders that hold interests in the company being formed. It spells out who owns what shares and ow the company will be managed, with particular reference to the relationship between the shareholders.

The Shareholders Agreement should contain provisions that ensure the protection of the business from hostile investors and preserve the founders’ interests even where they are minority owners of the business.

3.  Work With Professionals. In formulating and presenting the business plan, in preparing and executing the Shareholders Agreement, it is important to seek professional advice. In this regard , tapping on the  expertise of  a  chartered accountant, a legal practitioner or experienced mentor will greatly facilitate the process and provide the required

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