You should know: «Don’t be cheap on your equity»
10 January 2019
Lennie Moreno, Founder & CEO of Sofdesk
For Lennie Moreno, being CEO of Sofdesk is not his only objective. From the time he was young, his dream was to acquire enough credibility to inspire and help people with positive messages. Entrepreneurship seemed like the perfect way to reach a larger audience. Not only does he transfer his passion through his business, his foundation, Clean Out Your Closet, allows him to hold lectures, and visit detention centres, prisons, and schools. His passion also resonates through rap music, his preferred catalyst and method of therapy. “With every single thing I do, I try to simplify people’s lives, and find concrete solutions”, he explains. “It shouldn’t be complicated to choose a path and find happiness in the little things we do everyday .” His business provides key software solutions for the roofing and solar energy industries across Canada and the United States. With their most recent product, Roofgraf, and other tools currently being developed, Sofdesk is ready to approach new markets.
Onboarding an Associate: Reason or Passion?
Solutions from École des entrepreneurs du Québec
Bringing an associate on board is a major decision that can be very stressful, therefore should be treated with the same attention and diligence as finding a life-long mate. Located somewhere between reason and passion, here are the things you should consider to help you make the right choice.
A healthy network of contacts, financing, and expertise: the three most sought-after qualities to look for in a future business partner. But most often than not, a potential candidate doesn’t check all the boxes.
Collaborator or stakeholder?
Among the many potential candidates you will meet during this pursuit, it’s possible that you will find the person apt to fill your more pressing needs. You will imagine making this special candidate your associate and even dividing the shares of the business them.
It is logical to want to sell a part of the business to a stakeholder to help make up for one of your shortcomings or to accelerate start-up activities. But, be careful not to sell your soul in the process!
At this stage, it’s important to ask the right questions: is the investor bringing a capital gain? What are the funder’s expectations? Do his values match the ones of the business? What is the potential of collaborating in the mid-term? In certain cases, you look for a specific expertise to complement yours, one you can’t move forward without. Choosing an associate solely on the basis of skill, doesn’t guarantee a successful union.
Let’s look at this analogy: a romantic partner can have everything you are looking for on paper, but is there chemistry? Can you communicate, negotiate, and discuss with ease? You admire this person, you trust their judgment, but do you have fun together?
Take away: if it’s better to live with someone before you get married, it might also be wise to work with someone before committing.
Need a tool to help you during the recruitment process? The psychometric test allows you to analyse both your personalities in a professional setting, and predict compatibility. Today, quality tests are more affordable and accessible than ever, and are constructed in such a way where there is no right or wrong answer. Instead they provide an array of possible reactions linked to different personality types.
Once you’ve both decided to commit, you must determine the number of shares to be divided. A vast world of possibilities.
During negotiations, make sure to distinguish the salary the shares in action represent. Two elements that should be considered independently.
Being generous with their investment in the business makes your associate immensely valuable. But it’s not everything. A common vision and shared values are the two main motors of motivation and engagement. Because it’s not all about the money.
If an associate is onboarded once a business is already operational, you will have to know how much your business is worth. Certain professionals such as a Certified Public Accountant (CPA) or a Chartered Business Valuator (CBV) will help you establish the winning percentage of shares that should be allocated to both parties.
Plan for the worst
Don’t forget! Even if everything is great between you two in the present moment, you should still plan for the worst-case scenario. Whether your associates are your friends or your peers, a detailed stakeholder agreement will protect you in case of profesional divorce. May you live happily ever after (as associates)!