Launching a startup is really hard; keeping it alive is even harder. When a venture succeeds we soak up headlines. But for many, the reality of entrepreneurship involves running out of money, solving the wrong problem or poor execution.
The ‘post-mortems’ of failure tell the story well. But they don’t confront the number one reason for failure: co-founder conflict.
The major goal of each of these strategies is to facilitate an on-going and cooperative partnership that is built on transparency, open communication, fair expectations that have been previously discussed and agreed to, and genuine collaboration and support.
Define Role Responsibilities Early
It’s not uncommon for co-founders to clash over questions regarding who is responsible for what and when/where each person’s duties should/must be performed. Such disagreements can be made even more complicated by the fact that each one of us tends to view our role in very specific ways and to prefer particular spaces and times in which to work, innovate, and be creative.
For these reasons, it’s crucial that co-founders explicitly determine role responsibilities as early as possible
An effective way to do this is to write up in an Excel file all the roles that are likely to be involved in running your start-up, have you and your co-founder each choose in private the various roles you wish to have, and then compare your notes and collaboratively decide whether changes need to be made in terms of cases of overlap or disagreements.
Create and Sign a Founders’ Agreement
A founders’ agreement is a legal document that explicitly outlines a number of vital parameters amongst each of the founders of a company which is essential to ensuring consistency of vision, understanding of duties, and mutual acceptance of expectations amongst you and your partners.
Agree on Time Commitments
Another important strategy involves discussing and agreeing upon the amount of time that you and your various co-founders will spend working on your new business.
The question of whether this should be decided formally and explicitly or informally and indirectly is ultimately dependent on the nature of the relationship you have with your co-founder. Some start-ups might benefit from a very strict scheduling of time whereas others might be more naturally inclined to allow each of the co-founders to have some leeway in when they work.
Develop and Agree on an Exit Plan
What, exactly, do you intend to do with your start-up?
Is your goal to create a lifestyle business, one that you plan to run for as long as possible?
Alternatively, are you interested in creating a profitable company that you can build into something special for the next 5 years and then sell to the highest bidder?
What about your co-founders? What do they want to do with this company?
It’s imperative that you and your co-founders develop a very clear understanding of each person’s objectives and hopes for the near and not-so-near future as they relate to your start-up operations.
Do not assume anything: explicitly inquire into whether each of you wants the same thing. If this is so then great! If not then hammer out how, exactly, such differences can be managed and overcome.
Develop and Agree on a “What Do We Do If We Fail?” Plan
Nobody ever plans to create a failed start-up, to dedicate years of their lives to trying to build a company that ultimately flops. And yet, it happens all the time.
As awkward or demotivating as it can be to talk about, you and your co-founders must develop a clear grasp of 1) what it will take for you to decide that it is no longer worth the necessary time and money to keep running your company and 2) what, exactly, you will do once such a decision has been.
Do not leave these matters to chance. No, you don’t have to obsess about them, planning for every single contingency imaginable but you do have to put some serious forethought into the real possibility that things might not work out as you hope and that you will have to take important action if/when that occurs.
For instance: if we are not growing at a rate of x% every year by the 36th month of full-time operations then we will dissolve the company
While nobody can predict the future, we’ve seen that following the above steps can save you a lot of headache further down the line. At the outset of starting a business, it’s easy to get caught up in the excitement and forget how a lot of other co-founder stories pan out.