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When founders flounder: The importance of founders agreements and keeping your business on track?

The pandemic has brought with it inevitable stress, pressure and the need for sudden pivots in businesses. This is enough to force uncomfortable conversations at any level. But when these conversations take place between the people at the very heart of the business – the founders – the impact is often felt company-wide. Those challenging conversations may particularly arise where the founders’ contributions to the business have not been clearly delineated so apparently unequal input can be a cause for conflict. It is therefore more important than ever to ensure all parties articulate fully the value they bring in – and to agree how to measure that value.

Co-founders each bring their own value to the business. However problems can arise where there is an attempt to quantify that value. Those in more data driven roles may find it easier than do creatives to display their value by traditional methods –  spreadsheets and graphs may not do justice to the more abstract or conceptual, yet equally fundamental, contributions of the creative partner.

The most recent round table hosted by the Great British Entrepreneur Awards and our partner Russell-Cooke discusses the options available to those entrepreneurs who might have hit rock bottom not just in their business, but also in their relationships with each other, and how they can effectively demonstrate what they bring to the table.

Helping through hindrances

During the pandemic founders and entrepreneurs have had to face unprecedented business  pressures and pivots as well as personal challenges. These are exacerbated when there are co-founders involved. This level of additional pressure has exposed fault-lines in many partnerships, forcing difficult conversations between co-founders and requiring them to renew their commitment to the business or to each other. When asked about their own experiences, the round table attendees gave some helpful personal insights.

Kathryn Jonas of Wild & Stone has a founders agreement in place. She explains the commitment she and her co-founders feel to their business and the value of the founders agreement when they were defining those commitments during their full-time transition into the business. Whilst Kathryn managed a smooth transition from her previous employment to a more hands-on role with the business, her co-founder was still very involved with their previous job. This could have presented problems.

She explains that having a founders agreement in place allowed them both to set hardline terms and open up an avenue for discussion regarding their respective commitments to the business.

“It gave us the opportunity to say ‘there’s something here, but is it still possible for us both to put in fifty-fifty?’” says Kathryn.

“Ever since then, we’ve had very clear responsibilities – who’s in charge of what, who’s got what responsibility – it really helps.”

Katherine Pither of Yogi Bare adds her own experience. She agrees with Kathryn that a founders agreement can define the value of what each party brings to the business, which might otherwise be difficult to quantify: “What I bring to my business is community, creativity, marketing,” says Katherine, “they’re very hard to have numbers and figures for.”

“I’d suggest getting a founders agreement, role expectations and KPIS in place early,” she continues, suggesting that her role in the business may be under threat without a founders agreement in place.

The data vs the creator

Many entrepreneurs who, like Katherine, are the creative heart and soul of the business may struggle to demonstrate the true value they add. The group suggests that finding a vehicle to prove value can be especially important to founders at the more creative end of the spectrum.

“What I’ve found really useful to help demonstrate the value creatives are bringing to the business isn’t necessarily to put data behind it, but to put documentation behind it,” says Roei Samuel of Connectd.

“It’s useful to just have something to point at and say, I did this.”

Quantifying your value can be a difficult task as a creative contributor to your business. Specifically with new ways of working, such as the trend towards working from home driven by the pandemic, lack of consistent oversight can mean some founders could end up looking as if they contribute less than those with roles that are documented more on paper.

Quantifying the unquantifiable

What you want from your business can dictate how you measure what goes into it. Numbers and hard data are an important means of forwarding your goals in specific circumstances, but the nature of the business and your own personal goals can and should determine how data-driven you really are.

“If you look at data too much, you end up doing nothing,” says Alexander Allen of Aerotech Solutions, discussing his own experience with partners he’s working alongside who are creating management software.

Discussing the more technical side of software development, Alexander admits he “doesn’t have a clue,” his experience lying primarily in working with the software rather than creating it. Describing a  “guilt” he feels about that, Alexander reassures the roundtable: “as a creative, a good portion of what you do is in your head,” rather than being hard data on paper.

“You’re not going to sell anything if there’s nobody there that can actually sell it, or speak about it in a way that they really care about,” finishes Alexander.

“The creative side is the business at the end of the day,” says Lucky Nwosu of Rehoboth Property International, “you need that creativity in order to be able to grow that business.”

Lucky explains to the roundtable that a more tangible way to quantify your value as a creative could come under categories such as marketing and design. These categories may have some of the fruits of your labour drafted up and available to show to partners or colleagues that establish what you know already, that you bring value to the business and contribute to its growth.

Driven by data

It can be difficult to establish a balance between data and creativity in your business. Many entrepreneurs can get caught up in over-reliance on one aspect or another rather than ensuring a healthy union between the two. Such a marriage of opposites allows for a more successful business and more substantial growth.

“With data, what I’ve learned over the years is to look for what makes us unkillable,” says Soumyadip Rakshit of MysteryVibe, “Raising money to survive is the toughest thing,” he continues, explaining that his own perspective on data is taking the hard facts about what avenues are available to raise money and expand the business successfully.

“Rather than be driven by data, I use it to see what I need to do more of,” he concludes. Summarising his experience for the roundtable, Soumyadip identifies that the tunnel vision that can accompany a purely data-driven approach can actually be detrimental  to the growth of the business. In fact entrepreneurs should analyse how the data can ensure growth alongside a healthy dose of creativity through channels such as marketing and design.

Bridging the gap

Finally the roundtable approaches Joanna Howes of The Change Creators for her own expertise. Working alongside partners and founders, Joanna has experienced the divide between the creatives and the more data driven.

“It’s all about teaching them how to enter each other’s worlds,” says Joanna, “you have to make them understand each other’s language, each other’s cues.” Joanna’s experience isn’t just on a business level, but a personal one too. She herself, as a data driven individual married to a creative, has test-driven this approach in her personal life: “We’ve done it as a relationship, shown how to enter each other’s worlds through that method,” she says.

Giving some insight into the individual perspectives of two differently driven individuals, Joanna says: “the core thing for people who are data driven is to be right, whereas the more creative people inspire and motivate.”

Joanna sums up by explaining that many of the entrepreneurs and businesses she’s worked with attempt to find a healthy balance between the two archetypes, establishing a method to profile their applicants and potential talent to ensure that they’re building a “healthy map” of each type of person across the board, ensuring a harmonious balance of data and creator to positively impact their business.

Jonathan Thornton, partner at law firm Russell-Cooke who advises founders on governance and structure and who chaired the round table says: “In my years of experience advising business owners I have all too often seen relationships break down because of a lack of clarity and understanding at the heart of the business as to roles and contributions. Balancing what the number-crunchers and the creatives bring to a business is always tricky and is an inherent fault-line when pressure is applied. The GBEA round table participants provided some really useful real life examples of how getting the agreement mapped out early and defining how to measure the ‘apples and pears’ contributions equally can bring resilience to your business and the key relationships in it through the very darkest of days.”