Ep. #1 [THEME NINE]
It's super easy to get on the same page with your partner(s) and leadership team, right!?
I don't think anyone argues how important it is to get ownership and leadership alignment. This topic is discussed a ton in entrepreneurial circles. EOS© / Traction even has their "same page meeting" baked into the system. However, if it is so important, and there are systems devoted to helping people achieve this alignment, why is it SO difficult to actually accomplish?
In this mini-series, I propose that one of the biggest reasons there is still so much conflict between partners, ownership groups, and leadership is a lack of clarity on the long-term equity valuation goal, the desired cash flow owners want along the way, and how to handle leadership roles and responsibilities.
Kicking off the mini-series today is Dan Grimsrud, a seasoned M&A Attorney with a background in accounting and finance. Dan does dozens of M&A transactions a year - and sees behind the curtain of all the conflict that we all know exists - and is willing to share what he sees works and doesn't work.
In our conversation, we cover the importance of operating agreements in creating ownership alignment and providing a roadmap for a company's governance, economics, exit strategies, and crisis response plans.
//WATCH THE INTERVIEW ON YOUTUBE: Intentional Growth™ Podcast
What You Will Learn
Operating agreements are crucial for establishing ownership alignment between parties and provide a roadmap for governance, economics, exit strategies, and crisis response plans.
The four key elements to address in an operating agreement are governance, economics, exit, and crisis response plan.
Involving tax advisors is essential to ensure proper handling of tax implications and make the agreement fair and legally sound.
Focus on the core elements of an operating agreement and have open conversations about priorities and concerns.
Regularly revisit and update operating agreements to ensure they remain relevant and useful.
Clearly define expectations, roles, and compensation structures in business partnerships, especially when one partner contributes capital and the other contributes expertise or labor.
Have separate agreements for ownership and management roles in a partnership.
Consider different tranches of compensation to balance the needs of both partners as the business evolves.
Establish voting rights, employment agreements, and bonus structures to create alignment between owners and key executives.
Different businesses require different approaches for buyouts and valuations, depending on their stage in the life cycle.
Plan for various exit scenarios, including external sales, the death of an owner, and voluntary departures.
Set parameters for determining valuation and be prepared to revisit and revise agreements as needed.
Insurance, specifically life insurance, can provide a funding mechanism for buyouts in the event of an owner's death.
Hire an attorney who listens to your concerns, asks the right questions, and helps you think through potential scenarios.
Regularly review and update operating agreements to ensure they remain relevant and effective.
// Sign up for the Intentional Growth
View all episodes
