A few weeks ago Men’s Warehouse founder, George Zimmer was fired from the company he founded. It turned out he wasn’t the majority shareholder of the company. That led to his ouster.
No matter what kind of company you found, there are a few key points to ensure this doesn’t happen to you (unless you are just in it for a quick turnaround and flip, in which case that’s your exit strategy and what you strive for).
· When raising money, remember, the probability of having to give up more than 50% to get the money is very high. That means you’re giving up control. Often the founder is parachuted out with lots of cash. But if you want to build a company and maintain control, think carefully about the sources of your money. This is what is meant by “expensive” money.
· When taking on partners or starting out with partners, make sure there is a strong contractual agreement in place that covers who is in control of what and to what degree. Anything can happen, and the weird stuff often does – if your partner dies or gets divorced, you may wind up with an heir who knows or cares nothing about the business. Then your problems really begin, especially if they don’t want to be bought out (or you can’t afford to buy them out).
· Vision = Control as stated very clearly in the article link below. If you want to see your vision flourish, make sure you maintain control of your company.
· If your company has a Board of Directors, remember one of their main functions is to determine whether or not to fire you (and your management team). This is what happened at Men’s Warehouse. This is also why so many large corporations have a Board of Directors that is composed of cronies.