An advisor whom we trust, and who has been involved in our business since launch would like to buy into the business. We could make use of the cash injection, and we believe his experience would be beneficial to the business. His condition is that he occupies a board seat, and that we create an advisory board that he can also sit on. Should we do it? — Mvepho
If you trust the guy and need the money, do the deal. A board seat is fine. Voting should be based on shareholding, not hands raised. Don’t allow for any special minority rights like veto over budget or right to appoint CFO.
An advisory board for a start-up seems a tad overkill, but if he wants one, give it. He’s either going be an ass, or he won’t. Only one way to find out: Get into bed.
The key provisions of the shareholder agreement relate to divorce. How do you get out of relationship? There are three key parts to consider: Forced sale provisions (death, disability, prison, leave country, etc); Valuation formula for exit (5 x NPAT); Agree to arbitration being binding.
The simpler you keep things, the easier it will be to part ways if things don’t work out.
I need to attract customers away from their existing suppliers who offer a similar product to mine. My value proposition is convenience and quality. What other value should I consider? My main customers are restauranteurs and households (flats), and I provide the convenience by instant deliveries of food (chicken and eggs) to their doorstep. — Mam
Pick one differentiator. If one isn’t enough, your product isn’t good enough.
In this case maybe it’s convenience. Or maybe it’s speed of delivery (30 minutes from order). Or maybe it’s the best eggs in SA.
Whatever. Ask customers what the most important thing is, then focus on pushing that as your unique selling proposition.
That doesn’t mean you ignore the other inputs. It just means your pitch is predicated on one key selling point.
My partners and I have managed to get an investment opportunity for our app but now we have an issue about how we should spend that money.
I think we should first get some traction with users with a MVP even though we’re not delivering on our value proposition in the beginning i.e selling before we commit to building and iterating based on user feedback before adding new features.
My partners think that now that we have an investment opportunity, we should build the app with all the features because that’s what differentiates us in the market.
How would you handle a situation like this? — Tula
Start with MVP. Get feedback. Iterate.
Do not start with an app including all the bells and whistles. Firstly, it will take too long to make and get bogged in scope creep. Secondly, if you’re on the wrong track and you’ve already spent all your money, its game over. Insert coin.
Rather start small. It lets you course correct faster and keeps you in the game longer.
My waiter has contracted a chronic infectious disease (not HIV). He’s worked for me for seven years, but I can’t risk my staff/customers getting sick. What should I do? — Bob
The business comes before individuals. It can be painful losing a loyal long-time staff member, but you have to do it if he jeopardises your business survival. Exhaust all options, but if there is no medical solution then you have no choice. But you can’t just cut him loose. If you do that, all your other long-standing staff will look at you and think, “He doesn’t care for me.” Morale will go down, and your business may fail anyway.
If you are forced to lose a loyal staff member, you must go out of your way to ensure he/she is financially taken care of, either through a pension or a lump-sum payment.
It’s the right thing to do, and it will show your other staff that you have their backs through thick and thin.
Alan Knott-Craig’s latest book, 13 Rules for being an Entrepreneur is now available.
What it’s about
It’s easy to be an entrepreneur. It’s also easy to fail. What’s hard is being a successful entrepreneur.
For an entrepreneur, there is only one important metric of success: Money. But life is not only about making money. It’s about being happy.
This book is a collection of tips and wisdom that will help you make money without forgoing happiness.
Get it now
To download the free eBook or purchase a hard copy, go to www.13rules.co.za. To browse Alan’s other books, visit bigalmanack.com/books/
Do you have a burning start-up question?