Business shares, how I want to do and what you think about it

Congratulations!! you have decided to start a business. I may be confused about the difference between a business, a company and a startup … but well , this is another problem. What I am sure about is that all of them are businesses, created to make money at the end. Maybe you are going alone or with some partners … If we are talking about shares and that you are going alone, there is nothing to talk about: you own the business, in other words, you have 100% of it. But what if you have a great team ? Of course, the team owns the business but what each one of you? how many percent do you have? What if an investor comes in later with some cash … how do you share the cake with him ? Those are questions are better to answered at the beginning. Unfortunately, I have no experience about that and pardon me, but I did not make any research about “sharing the cake”. However, I have my little idea about how I could make it and I would like you, the reader, to give me some insight about what you will read. So, ready? Let’s go.


The founders and the employees

At the beginning of a business, you have the people who had the idea, started the business and set up everything, most of the time without a salary. For me, those one are the founders. Yes, the founders are not the one who had the idea, it is those who worked at the beginning to put the car on the road. After that everything is going well, you may be able to recruit one or more people. Recruiting means you have to pay them which makes them your employees. But you may also want to add someone in the team and ask this person some sacrifices, in case you are not able to pay this person. In my opinion, this person is also part of the founding team, but should have a lower level than the previous one. So my idea is to give a level to each founder and increment the level by 1 when a new founder is joining the team after at least 1 month of work. Let’s take an example: Raogo and Wendy are starting a new ecommerce and they are both software developpers. They develop the minimal website and start to operate in Banjul. Three months later, they feel like things are not going so well but meanwhile they had met Wassirey, a dynamic young marketer and sales graduate. They decide to add Wassirey in their team as a founder. In this case, Raogo and Wendy becomes founders level 2 and Wassirey, founder level 1. Nine months later, their business is booming and they need some help. They decide to recruit two people for their delivery service. So now, the business has 5 people involved, 3 founders and 3 employees. Pretty clear right?

Are the founders the only owners ?

In my mind, founders invest their time to implement an idea. But there are investors, who don’t really invest their time, but their resources instead, like financial resources. So for me, the owners of the business are the founders and the investors. Among the owners, you also have people who are both, right ? So let’s take our previous example, Raogo, Wendy and Wassirey own their business as founders. But Wendy is the one who bought the domain name, the cloud hosting and etc. She put 10000 Naira out of her pocket to make things work for their first three months, before Wassirey joins. Consequently, Wendy is also an investor. However, after 11 months of operation (nine months after Wassirey joins, remember ? ), a big Oga wants to put more money in order to help the business grow faster. The Oga would join the owner as an investor only, waiting for the business to make more money with the money he will bring in. So yes, this is the scenario, I am presenting to you. Let’s see how I propose to make it.

How do I share ?

The way I think is that time and money (or any other material resources) should be treated equal. Some businesses start with only time investment from their founder(s) (it may happen, who knows ?). In this case, I propose the share to be calculated as follow:

Individual share  = (Founder level / Total of levels) x 100

For example, for Titinga, Piingde and Zuma, who started a motorbike repair small store at home, it may be as follow: because they started together, they are founders level 1. And the total of levels is 1(Titinga) + 1(Piingde) + 1(Zuma) = 3. So each one of them has 1/3 of the business.

Some businesses start with money investment only(it can also happen, you know?). In this case, it is easier i think:

Individual share = (Individual money/ Total money) x 100

So, if a 100000 Naira business starts with 4 people and one of them is you investing 20000 Naira, your share is like (20000/100000) X 100 which is 20% of the business. Happy ?

But most of the business start with time and money investment. SO here is what I propose:

Individual share = (Founder level/Total of levels + Individual money/Total money) x 50

In this case, Raogo, Wendy and Wassirey, will all have different shares, knowing that Raogo and Wendy levels are 2 each and Wassirey’s is 1, and that Wendy put 10000 Naira on the table:

  Raogo share = (2/5 + 0/10000) x 50 = 20%
  Wendy share = (2/5 + 10000/10000) x 50 = 70%
  Wassirey share = (1/5 + 0/10000) x 50 = 10%

Looks fair, right? Now, let’s suppose, the Oga wants to add 100000 Naira and join the owners as an investor (better than going at a bank). The share would have to be re-calculated like this:

  Raogo share = (2/5 + 0/110000) x 50 = 20%
  Wendy share = (2/5 + 10000/110000) x 50 = 24.54%
  Wassirey share = (1/5 + 0/110000) x 50 =  10%
  the Oga share = (0/5 + 100000/110000) x 50 = 45.46%

Okay. Let’s admit that the Oga came in business really fast. But it’s still fair right? Bringing 100000 Naira in a business is a something that can boost it. And in this way, the original founders are protected from losing their business. They can sell their share if they want, but nothing will happen if they want it. Any new investor will share with the other investors, and any new founder will share with the other founders. This is what I propose.

What do you think now?

If this method exists already, please tell me now so that I can learn more about it. But as I said in the beginning, forgive my probable lack of experience and research. And accept that I made it from scratch with the hope of having the mistakes being corrected by any reader who come across this. So now, tell me, what do you think about it ?

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