Forming a Corporation – Investors

You’ve come up with the best idea since sliced bread, figured out a business name and formed a corporation. There is, however, one small problem. You need money. Welcome to the world of investing.

Keywords:

forming corporation, investors

Article Body:

You’ve come up with the best idea since sliced bread, figured out a business name and formed a corporation. There is, however, one small problem. You need money. Welcome to the world of investing.

Business Funds

Unless Bill Gates is your friend, money is going to be a problem for every new business. Even the might Google had to hunt for cash with one of the founders of Sun Microsystems finally kicking down a much needed $100,000. Whether you decide to pimp your business plan to anyone breathing or beg your step-mother for funds, here are some issues to consider.

Investors are looking for the best deal, to wit, the most stock possible in an entity. If you are asking them for cash, they have the leverage. Don’t be so desperate that you give away the farm. All to often, I speak with individuals who started a business on a whim and have become disillusioned because they have lost equity in the business.

Assume I start a corporation and need funds. My neighbor agrees to kick in $20,000 for 20% of the stock. Things go great, but four months later I need another $50,000 for inventory and cash flow. My aunt agrees to kick in $50,000 for another 20% of the stock. Yikes, I am not even through the first year and I have given up 40% of the equity!

What happens in year two when I need a $100,000? I give up more stock and suddenly own less than 50% of the business. Inevitably, this leads to feelings of resentment and bitterness. “It was my idea, but now these blood suckers are going to get most of the money and they aren’t even working on the business.” This sentiment is so common that it would be laughable if it weren’t so depressing.

As a general rule, you should only sell ownership in a business as an absolute last resort. Instead, try to get loans from investors, banks, home equity lines and even credit cards.

If you must sell stock to raise funds, be very careful when valuing the stock. You should place a value on each share as though the company was already a raging success, not just starting out. Further, make sure you sell only small allotments of stock such as three to five percent. If you owned IBM, how much of the ownership would you sell for $20,000?

In Closing

When starting a corporation, guard equity as though it is the Holy Grail. If you don’t, you risk becoming a disillusioned shareholder down the road.

Five Questions to Ask Before Forming a Team

A project or challenge comes up and many people, without thinking, immediately form a team to research, solve the problem and implement the solution. Teams can be a very powerful way to solve problems and implement massive improvements. But teams aren’t the right answer to every situation.

Keywords:

team building, team success, project team, work team, teams, planning, starting teams

Article Body:

A project or challenge comes up and many people, without thinking, immediately form a team to research, solve the problem and implement the solution. Teams can be a very powerful way to solve problems and implement massive improvements. But teams aren’t the right answer to every situation.

To get the best possible results from the resources available, it is important that a leader answer a question they typically don’t ask - “Is a team the best way to address this situation?”

Unfortunately when they assume the answer to that first question they jump to “Who should I put on the team?” When they start there, they may have already doomed the organization to less than the perfect solution, before they even get started.

This article poses five questions designed to help you answer this important first question.

Is the goal clear? If the goal isn’t crystal clear yet, don’t form a team. A team can develop a problem statement and solve a problem, but they can’t work successfully (at least not quickly and efficiently) with a goal that isn’t clearly articulated. Once the goal is clear (you might want to meet with a couple of people in a one time meeting to get this clarity), you can continue on with the rest of the questions. Until then, don’t form a team!

Will the team have the resources they need to succeed? You may be the person who needs to provide those resources, or you may need to negotiate for them. Teams need to know what resources they have in terms of skills, budget, time, support and more. While a lack of resources will challenge people and teams to be creative, there is a limit to this! Teams will falter and struggle without the necessary resources to succeed. Proceed with out them and you risk massive frustration and low productivity.

Does this really require a team? This is perhaps the biggest of the questions. We all value collaboration and teamwork – but they don’t have to go together. Collaboration can be achieved without a team. Perhaps what you need to do is assign or find a person to run a project, and encourage others with valuable input and experience to collaborate and help as needed. Remember there is a big difference between putting people on a team and asking them to help on an as-needed basis. When you remember that you can foster collaboration without a team you allow yourself to really answer this question successfully.

What is the relative importance? Not all projects or problems are created equal. It is important to consider the relative importance of a situation before dedicating lots of resources to it. Think about your overall plan and your people resources. See where this fits into your big picture before you decide to form a team, versus assigning it to a single person to manage.

Is there time? It takes time to schedule, form, acclimate and help a team get a good start. Is there time for all that, relative to the need for a solution or answer? If not, get someone, get and decision and move on.

If you get yes answers to all of the questions above, congratulations! Form your team and help them succeed.

But if you get one or more no answers - do yourself and those you might put on a team – a favor. Think a bit longer before automatically forming a team.