Business Ownership Arrangements
Most business owners and leadership teams we encounter spend the majority of their time focused on the P&L and the associated commercial and operational challenges.
Business ownership arrangements - including the structure and allocation of shares and a Shareholders’ Agreement defining what will happen should the unexpected or an impasse arise, are often neglected in favour of more immediate concerns.
The results invariably compromise the agility of a business and can include:
- Unacknowledged frustrations or tensions that impede day to day working
- The creation of silos that undermine company culture or even create distinctly separate cultures in the same business
- Critical decisions being delayed or avoided
- Delays when seeking to raise funding
- Inappropriate conduct or governance of the company’s affairs; or worst of all
- Complete paralysis and value destruction
In these ways, ownership arrangements can constitute a hidden yet powerful and damaging brake on a business.
Ownership arrangements are one of the three layers at which you can make refinements to the way you manage your business. The other two layers are your Business Model and your Operating System.
These three layers together are highlighted at the core of our Growth Mapping coaching framework. This is because their alignment is critical to the success of your efforts to build a more agile business capable of accelerated growth.
Our clear message is this:
Before you try to make changes to either of your business model or operating system, you should first review your ownership arrangements and confirm they are fit for purpose.
The risk otherwise is that your efforts to refine your business model or operating system are hampered or even wasted, as the tensions referred to above impede collaboration and progress.
The Importance of Periodic Reviews
When you review your business ownership arrangements, bear in mind that you cannot know with certainty what lies ahead for the owners themselves, their immediate dependents, the business itself or the many more people who rely directly or indirectly on it. All can be materially affected by disputes or shocks arising from inattention at this layer.
Furthermore, this important exercise should be repeated periodically to take account of your evolving personal, team and business contexts.
This will ensure that you are developing your business on strong foundations, anticipating its future needs well in advance and affording yourselves the time to make considered adjustments to what can otherwise become a difficult or even a divisive issue.
By paying attention to the time interval between such reviews, you also lessen the likelihood of one or other party being surprised, for example, by updated business valuations or changes to the fiscal environment.
Act On Expert Advice
Providing formal advice and structuring solutions following such reviews is the domain of suitably qualified lawyers.
Flagging the importance that the reviews be conducted is one the firm recommendations of our Growth Mapping framework and a prerequisite for the successful development of a more agile business.
Download Your FREE Business Agility Toolkit!
Visit this page for more insight into the many different levers that affect your business agility, and to download your FREE Self-Assessment Business Agility Toolkit.