12 Items You Should Never Forget To Include in a Partnership Agreement

Young Entrepreneur Council (YEC) is an invite-only organization comprised of the world’s most promising young entrepreneurs. In partnership with Citi, YEC recently launched BusinessCollective, a free virtual mentorship program that helps millions of entrepreneurs start and grow businesses.

What should you absolutely not forget to include in a business partnership agreement?

1. What Will Happen if it Doesn’t Work Out 

Sharam Fouladgar-MercerThis should be a given, but let’s talk about it for the sake of reiterating its importance. Any business partnership agreement should clearly outline what steps will be taken should the partnership go astray. People despise discussing this, but the reality is that we live in a world where disagreement happens and it’s best to have a plan in place in case it does occur.

– Sharam Fouladgar-MercerAirPR 


2. Equity Valuation and Buy-Sells 

Chris SmithNames, ownership equity, and how the business is going to be operated are always must-haves. However, most problems arise when there’s not a clear method for valuing the equity down the road, or when there’s no buy-sell agreement included. Always know how equity is valued should it need to be sold to or purchased by another partner, and don’t forget to properly fund your buy-sell agreement.

– Chris SmithSuperius Ventures, LLC and Smith Simmons, PLLC 


3. Legal Inclusions 

Peggy ShellWhile it’s important to include standard legal items, such as non-solicitation of your employees, confidentiality, and ownership of work product, one important thing to never forget is clarifying the business relationship. The Department of Labor errs against employers in situations where a business partner might be considered an employee, so including clarifying language is key.

– Peggy ShellCreative Alignments 


4. A Vesting Schedule 

Chris BrissonOne of the biggest mistakes I made in my company early on was the fact that my partners and I vested immediately. The was a problem after one year when my partner decided to stop working and took another job. I was left holding the bag to grow the company while he still had shares in the business. A typical vesting schedule has a four-year cliff. Be sure to set this up in the beginning.

– Chris BrissonCall Loop 


5. How a Buy-Out Will Be Paid 

Elle KaplanIn the event that a partner splits, it’s vital to determine how they’ll receive their fair share of the business. If this isn’t in writing, they could request all of their payout at once, and feasibly bankrupt the business. By determining a payout structure, you can ensure a clean, positive break-up.

– Elle KaplanLexION Capital 


6. Roles and Responsibilities 

Murray NewlandsRoles and responsibilities should be clearly delineated from the beginning and in writing so there is no confusion, and to minimize or even eliminate conflict. It keeps everyone on the same page from the start and lets each partner go out and get done what they need to without question.

– Murray NewlandsDue.com 


7. Operating Agreements 

Tommy MelloThis is the foundation of the business that handles everything from A to Z. In most agreements, you should discuss what happens if one partner has health issues or wants out. Also, take consideration of voting rights and who is on the hook for what. All the key elements should be discussed and documented in the operating agreement. This is the prenuptial agreement for business partners.

– Tommy MelloA1 Garage Door Service 


8. Expectations for Hours, Vacation and Company Budget 

James McDonoughEveryone has very different expectations for how many hours they should put in, how much vacation, and generally on what and where the precious company budget should be spent. Sit down with your partner and draw out what a year would look like for all expenses and time commitment with best/worst case scenarios. You will uncover some interesting discussion areas.

– James McDonoughSEE Forge creators of FAT FINGER 


9. How Costs Will Be Shared 

Cody McLainMost individuals enter into partnerships based on the fact that there could be a high return in the form of equity. Equity is fantastic, but the reality in accounting terms is that the individual who shoulders the most costs will in effect be the one with the greater equity. Cost sharing is an important part of equity sharing, and it informs how the pendulum of equity will swing over time.

– Cody McLainSupportNinja 


10. What if a Partner Is Injured or Dies? 

Cassandra BaileyYou have to think about a business partnership agreement as if it’s a prenuptial agreement. Even if you hope nothing bad will happen, you still have to prepare for the worst. Have steps in place in case an acquisition or a merger occurs. If a partner is injured or if the partner dies, there needs to be a solution in the agreement.

– Cassandra BaileySlice Communications 


11. Non-Compete / Non-Disparagement Clauses 

Kristopher JonesUnfortunately, business partnerships don’t always work out. In fact, sometimes business partnerships can go wrong and a former partner can abruptly quit only to start a competing business. The partner may also say nasty things about you or your business. Therefore, it’s very important to include a non-compete and non-disparagement clause in a partnership agreement to eliminate issues later.

– Kristopher JonesLSEO.com 


12. General Expectations 

Ismael WrixenUnexpressed expectations are equal to premeditated resentment. Although you can include conduct and expectations in a separate document, it should be a part of your partnership agreement. Otherwise, you could end up resenting your partner, and that’s not good for business. You need to be on the same page in terms of the goals you’re trying to achieve, even if you have your differences.

– Ismael WrixenFE International 

The Differences Between Silent Partners and Investors

Young Entrepreneur Council (YEC) is an invite-only organization comprised of the world’s most promising young entrepreneurs. In partnership with Citi, YEC recently launched BusinessCollective, a free virtual mentorship program that helps millions of entrepreneurs start and grow businesses.

How is a silent partner different from an investor and when should you consider one vs. an investor?


1. An Investor Helps Directly With Operations 

Angela McCroryAn investor is someone who not only invests in a company but also plays a role in the daily operations and management decisions. A silent partner usually invests a large sum of money but prefers not to be involved in the daily operations. If you are looking for advice and help, you want an investor. If you need a cash infusion to grow, but already have a plan outlined, go for a silent partner.

– Angela McCroryRukkus 


2. A Silent Partner Adds Funding While Minimizing Feedback 

Hongwei LiuActive investors want (and expect) to be helpful. Silent partners want to invest in your company but trust in existing management and active investors to make the decisions. A company should take silent partners if the goal is to add funding while minimizing feedback. Active investors should be sought after to lead funding as they provide valuable insight to help you get to the next milestone.
– Hongwei Liumappedin 


3. The “Silent” Partner Comes With Ups and Downs 

Kenneth CucchiaMy initial investor was silent (usually pre-seed/seed). As a 22-year-old kid with a fat check, I was happy as could be. I would have done some things differently knowing what I know today, but that’s the beauty of entrepreneurship. It’s the game that never ends and there’s no rule book. My advice now would be to get an initial investor who can guide you instead of letting you think you know it all.

– Kenneth CucchiaDeals4Meals.com 


4. The Difference Is Trust 

Tyler HanwayA silent partner trusts you because of past experiences together and provides money to grow the business. He or she is not involved in the day-to-day operations and the relationship is less formal compared to investors. Although it may be easier to find investors, if you are able to find a silent partner in the early stages of your business, you’ll be able to spend more time building the company.

– Tyler HanwayConsumer Brands, LLC 


5. Truly Silent Partners Are Basically Investors 

Brennan WhiteSilent partners are basically investors with founder-level upside. Even investors are expected to help with advice, introductions, hiring, etc. If your partner is truly silent, the financial contribution has to be massive to make sense. Especially in today’s investing climate, it’s easy to find more traditional investors.

– Brennan WhiteCortex 


6. Silent Partners Have Limited Liability 

Nicolas GremionSilent partners may have a say in the overall operations of the business, but generally stay out of the daily affairs. One benefit is potentially being less liable in the event of legal actions. Silent partners can take a limited-liability partnership in the company. As such, they may have more influence on the overall business than an investor, while still being protected in case of a lawsuit.

– Nicolas GremionFree-eBooks.net


7. A Silent Partner Is Less Involved 

john ramptonA silent partner really isn’t a partner at all except to provide some money to fuel the startup’s growth. The silence can be nice to a certain degree, but I’ve always found it more helpful to have an investor that provides advice, counsel, contacts and more — or even, in some situations, rolls up their sleeves and pitches in. Going it alone can be scary and take even longer.

– John RamptonDuecom 


8. Their Role Depends Entirely on Your Agreements 

David MainieroThe distinction between taking on “outside” investors and starting with or bringing on “inside” (silent) partners entirely depends on how you’ve constructed your operating agreements or equity structure. You need to consider the role of your capital providers and what role you want them to play. Do you need their networks? Just their money? Their advice?

– David MainieroInGenius Prep 


9. Silent Partners Don’t Have as Much Control as Investors Do 

Vishal ShahSilent partners hold an equity position (just like angel investors) but do not have substantial control over the business any more than the founders do, as they hold the same class of common shares. It makes the most sense to have silent partners if you are only looking for capital infusion in exchange for equity, but do not wish to give up control of your business.

– Vishal ShahNoPaperForms 


10. The Difference Is in the Return 

Nicole MunozA silent partner is taking a risk investing with you, and they’ll usually expect a bigger return on their investment. On the flip side, an investor is someone who gives you money and relies completely on you to generate the return. There are key differences in the way the SEC classifies silent partners and investors, so do your research before you decide which route to take.

– Nicole MunozStart Ranking Now 


11. Silent Partners Don’t Exist Unless They Are Family 

Andre ChandraSilent partners are never silent, and rightfully so — it’s their money! The closest to a silent partner are family members, who may still love you no matter what happens to the money, but even this can vary from family to family. Rather than becoming a silent partner, I would much prefer a loan.

– Andre ChandraI Print N Mail 


12. A Silent Partner Is a Passive Participant 

Alfredo AtanacioA silent partner is an appropriate alternative when you’re not looking for someone to actively contribute to your business, share responsibilities or share in the company’s profits. You may want to seek out an investor if you are looking for more involvement in your company. Legally, bringing in an investor is complicated, so you need to be clear that it’s the right source of financing for you.

– Alfredo AtanacioUassist.ME 


13. Consider a Loan Before a Silent Partner 

Justin BlanchardInvestors typically bring value in addition to cash. Silent partners don’t contribute more than money — or they don’t unless they think you’re not maximizing the value of their investment. Silent partners may not stay silent. A loan gives you the cash infusion without risk of interference unless you default. Which you choose depends on your business’ needs, but talk to a lawyer regardless.

– Justin BlanchardServerMania Inc. 

Strategies for Bootstrapping When One Co-Founder Has Greater Financial Assets Than the Other

Young Entrepreneur Council (YEC) is an invite-only organization comprised of the world’s most promising young entrepreneurs. In partnership with Citi, YEC recently launched BusinessCollective, a free virtual mentorship program that helps millions of entrepreneurs start and grow businesses.

What is your best advice to startup co-founders who plan to bootstrap their business, but one has greater financial assets to contribute than the other?


1. Offset Cash Contributions With Additional Labor 

Charles MoscoeI’ve entered into founder agreements where different founders offer a different level of capital contribution, but that can be offset by additional responsibilities. For instance, for a startup that I am involved in now, I am financing the majority of the capital spend with the understanding that I will recoup my investment first, but my time commitment as a result is substantially less. – Charles MoscoeSkinCare.net 


2. Draft an Operating Agreement and Plan for the Worst 

jeff epsteinYou should draft an operating agreement that accounts for all the assets (and time plus energy) contributed to the business. The reality is many partnerships don’t last — planning for the worst (a breakup) will allow all parties to have full transparency on the range of outcomes and a full understanding of how to calculate the value of their contributions. – Jeff EpsteinAmbassador 


3. Keep It Equal 

Jared BrownIt doesn’t matter whether one founder has a million to invest and the other just has ,000. If the business can succeed with just ,000 from each founder, keep it equal. It makes things much simpler and is better for overall accountability. If the business needs more funding, the extra money should be considered a loan, not an investment. – Jared BrownHubstaff 


4. Distribute Equity Fairly, Not Equally 

Nicole MunozThis may be counterintuitive, but splitting equity 50/50 isn’t the best solution for co-founders. Because each founder brings a unique set of skills, resources and assets to the table, equity should be divided based on those attributes rather than equally. Careful consideration now about how to divide the company fairly will eliminate many headaches and unnecessary battles down the road. – Nicole MunozStart Ranking Now 


5. Put Together a Spreadsheet 

Andy KaruzaYou need to put together a spreadsheet that adds weight to each person’s contribution. We devised a spreadsheet that places weighted values on how much a founder brings to the company in terms of cash, hours, intangibles, ideas, resources and unique management processes/documentation created. Agree to the value of these inputs collectively; then use it to determine fair equity compensation. – Andy KaruzaFenSens 


6. Balance Equity 

john ramptonBalance equity and cash put into the business. If one person is putting in equal time but more money he should get more of the pie over the other person. Paul Graham put together a very simple equation for startup founders bootstrapping. 1/(1 – n). In the general case, if n is the fraction of the company you’re giving up, the deal is a good one if it makes the company worth more than 1/(1 – n). – John RamptonDue 


7. Think in the Opposite Direction 

Blair ThomasWhether one founder has more capital than the other shouldn’t matter as much as what does the business actually require? If a founder can invest 10 times more than another, that doesn’t mean they should. Find the lowest capital commitment required to get the business off the ground so that founders can garner equity equal to the expectations they had in place while bootstrapping the company. – Blair ThomasFirst American Merchant 


8. Differentiate Between Financial Capital and Sweat Equity 

Ross BeyelerWhen posed with a situation where one partner can contribute more (financially) than another, consider creating two classes of stock and treating financial investments in the company different than ‘sweat’ investments. Split the business as desired based on your partnership structure, and then treat whatever investment is made by one partner the same as you would an external investor. – Ross BeyelerGrowth Spark 


9. Hire a Lawyer 

Kristy SammisUse whatever extra assets one of you has to hire a very good lawyer. In all seriousness, expert legal guidance is critical and always worth it in the long run. No one ever said, “Gee, I wish our working agreement had been less clear.” Whatever arrangement you come to, it’s not enough to get an agreement in writing; get a fantastic, ironclad agreement in writing. – Kristy SammisClever Girls Collective, Inc. 


10. Allot 20 Percent to Each Area: Finance, Operations, Sales/Marketing, Founder and Product 

Erik HubermanSplit equity according to which aspect(s) each co-founder contributes. If you can’t have a fair conversation on equity, don’t go into business together. If one finances the entire thing, that 20 percent is his. Split the percent for Founder evenly. It comes down to why you’re partners. Who’s the “product person?” Who’s got sales? How do you divide the work? – Erik HubermanHawke Media 


11. Have Active and Passive Roles 

- Engelo RumoraOver the years I have seen (and been involved in myself) way too many business relationships that go south due to someone not pulling their weight. The best way to go about this is to always have one person doing all of the work and the other person being more passive but investing most if not all of the funds. This keeps things simple with everyone knowing what is needed from them. – Engelo RumoraList’n Sell Realty 


12. Deferr Payouts 

Dan GoldenIf you’re keen on keeping a 50-50 split amongst co-founders, consider a deferred payout for the co-founder with greater financial assets. This lets one of the co-founders take larger draws upfront, and then even out the payouts once the company has grown beyond the early bootstrapping days. Sure, there’s some risk, but startups need cash to hire and scale. – Dan GoldenBe Found Online 


13. Be Balanced and Fair 

Julian MillerJust because a contribution isn’t financial, doesn’t mean it isn’t valuable. I was at a well-paid corporate job and my co-founder was five years into a Ph.D. when we met. His contribution was potentially giving up five years of work to bet on our company. Because we aligned on what it meant to contribute from where we were, it was easy to build a solid, equitable base for our company. – Julian MillerLearnmetrics 


14. Have Skin in The Game 

Bryanne LawlessMake sure both partners have skin in the game, whatever it may be. If both partners aren’t equally invested into the company, where both need to be held accountable, the partnership will be uneven and the work-relationship could end poorly. – Bryanne LawlessBLND Public Relations 

12 Unique Ways Startups Can Improve Their Employee Onboarding Process

Young Entrepreneur Council (YEC) is an invite-only organization comprised of the world’s most promising young entrepreneurs. In partnership with Citi, YEC recently launched BusinessCollective, a free virtual mentorship program that helps millions of entrepreneurs start and grow businesses.

What’s one unique way startups can improve their employee onboarding process?


1. Have Weekly Check-In Meetings 

Rob BellenfantA lot of startups are so focused on hitting their acquisition goals they forget about employee satisfaction and retention. Don’t limit your view of onboarding to a stack of paperwork. Treat it as an ongoing process that follows the employee through their probationary period. At TechnologyAdvice, our talent manager holds weekly check-in meetings with each new hire for their first 90 days.  – Rob BellenfantTechnologyAdvice 


2. Have a Buddy System 

Doreen BlochAt the start of the onboarding process, assign the new team member a more experienced peer as a ‘buddy’ of whom they can ask questions and get feedback in their first few weeks on the job. It’s an easy thing to do but is often overlooked in the onboarding process. Having a buddy system for the new employee will enable them to ramp up faster. – Doreen BlochPoshly Inc. 


3. Give New Employees a Crash Course in Every Part of the Business 

Chris SavageGive new employees face-time with someone from every part of the business, including executives, sales, marketing, engineering, customer success, etc. There’s no such thing as too much context when it comes to employee onboarding. This crash-course method gets new employees thinking about how the business works together from a granular and a 10,000-foot perspective — both are crucial for success. – Chris SavageWistia 


4. Create Self-Service Processes 

Russell KommerTake the load of HR by creating automated forms that guide new employees through pertinent queues and requested material. You will alleviate bottlenecks in the onboarding process, and be able to scale without adding to your HR staff.  – Russell KommereSoftware Associates Inc 



5. Have an Onboarding Interview One Month In 

David CiccarelliThe best way to improve your employee onboarding process is to consult your most recent hires. You can do this by arranging a follow-up interview with every new hire and your HR department about one month into their employment with you. Ask about what your training schedule was like for them, what they enjoyed, what could be improved on for next time, etc. Your new hires are an untapped resource. – David CiccarelliVoices.com 


6. Create an “Onboarding Box” 

James SimpsonFor every new hire we create an “onboarding box” full of goodies tailored specifically to that person. It includes things like company swag, gift cards, and random knick knacks that they can appreciate. We bundle this with the employee handbook and have it waiting on their desk on their first day. – James SimpsonGoldFire Studios 



7. Use Virtual Reality 

Jared BrownUsing virtual reality to onboard employees may not be efficient (it’s costly and time-consuming to develop), but it is unique and has the potential to be highly effective in the future, especially in a remote team setting. New employees can simply slip on a headset and be guided through the different processes, introduced to the brand, and more. – Jared BrownHubstaff 


8. Plan for the Worst But Hope for the Best 

Lane CampbellGet the legal agreements done by a lawyer with experience and prepare a comprehensive checklist of everything the employee will need to access digitally, and be ready to revoke all of that when they leave the company. Make sure you own whatever they work on and that you can revoke access and secure your business when they leave. Don’t leave anything to chance.   – Lane CampbellfastAdvocate 


9. Use Camtasia for Training Videos 

Marcela DeVivoUse Camtasia to record training videos of tasks that will be performed by new employees. Every time you onboard a new employee, create a video and support that video with a document explaining processes. As you hire for new roles, you create new videos and store them all on a dropbox or folder to be used for future hires. With each new hire, invest the time in creating training materials. – Marcela De VivoBrilliance 


10. Invest in a Management System 

Joey KercherFind a system that can manage it. We currently use BambooHR, which helps with keeping all HR files in one place. It has a place to manage all tasks that need to be completed to get a new employee set up, which also includes training. This system will even help create a training system for each hire in each department. – Joey KercherAir Fresh Marketing 


11. Get Signed Company Culture Statements 

justinWe make every employee read and sign our company culture standards of excellence. Ensuring they are 100 percent on board with our teams’ commitment to one another and to our customers has built a significantly improved culture that starts with our hiring process.  – Justin SachsMotivational Press 



12. Introduce Them to Customers 

brandon bruceA lot of companies wait until after onboarding and training to let new hires talk to customers. We do it right away. There’s no better way to feel and be part of the team than to start serving customers. – Brandon BruceCirrus Insight 

9 Pros or Cons of Working With More Than One Angel Investor at a Time

Young Entrepreneur Council (YEC) is an invite-only organization comprised of the world’s most promising young entrepreneurs. In partnership with Citi, YEC recently launched BusinessCollective, a free virtual mentorship program that helps millions of entrepreneurs start and grow businesses.

What is one pro or con of working with more than one angel investor at a time?


1. Pro: Support and Vision

Jennifer MellonTrustify’s Angel Investors are an incredibly supportive group of individuals. They are motivated for us to succeed, understand our business, and trust our leadership. They provide us with key introductions, help us penetrate various verticals we want to explore and offer unwavering support of our vision. Working with multiple angel investors, who are all a good fit, can be incredibly beneficial. – Jennifer MellonTrustify 


2. Con: Not Agreeing With Each Other 

dave-nevogtWhen you have one angel investor, you can devote your time to working closely with that person, bouncing ideas back and forth, and turning your project into a collaboration. While this is possible with two or more angel investors, it’s less likely to happen because you will have two parties taking up a similar role, and collaboration will take more coordination/cooperation. – Dave NevogtHubstaff.com 


3. Pro: Access to Their Portfolio Companies

 Firas KittanehAngel investors are generous with their introductions and often invite you to tap the other entrepreneurs in their network. With multiple angels backing your business, you can leverage their collective influence and connections to grow your business. Even if one of your angels is unresponsive or declines to offer an intro, you can simply name drop them when requesting meetings with other founders. – Firas KittanehAmerisleep 


4. Con: Keeping Your Story Straight 

Kevin XuOne con is that you want to make sure your story delivers a congruent message to all investors. Most importantly, you want to make sure they all understand that message the same way. If they don’t, that can be a problem. – Kevin XuMebo International 



5. Pro: Access to Multiple Minds 
Chris BarrettFinding multiple strategic angels makes sense. This way, you can create your own mind trust of experts who believe in you and are financially invested in making sure you have the knowledge to succeed. Diversity is extremely important in all aspects of your startup. Attracting several angel investors from different backgrounds allows you to develop your business, with multiple safeguards in place. – Chris BarrettPRserve 


6. Con: Giving Away More of Your Business

Peter DaisymeEvery person you bring in as an investor will want a piece of your business. That means the more people that come on board, the larger chunk of your company you are no longer in control of. While you get more money, it also means you will have a larger amount of equity to give away when it’s time to pay them back. – Peter DaisymeDue Invoicing 


7. Pro: Expanding Your Business Network

Dustin CavanaughA pro to taking on multiple angel investors is the opportunity to expand your business network by acquiring new stakeholders who are incentivized by the positive performance of your business. The more investors you have, the larger your business network grows. – Dustin CavanaughRenewAge 



8. Pro: Increased Odds of Success 

Anthony PezzottiBy utilizing more than one angel investor, you’re bringing double the years of experience, advice and guidance to your venture and vastly increasing your chances to succeed. According to a study done at Harvard Business School, businesses funded by angel investors are much more inclined to remain in business longer, experience substantial growth, and see a larger rate of return. – Anthony PezzottiKnowzo.com 


9. Pro: Choosing One to Represent

Hongwei LiuAll  In my experience, angels can be active or passive, in that they want regular updates or are content with others actively managing the company. A pro I’ve found is having one lead angel who can speak for all others in a round, and who is interested and able to actively contribute in governance. They also must be credible and respected enough for other angels to take a back seat to them. – Hongwei Liumappedin 


11 Sabotaging Startup Mistakes New Founders Make When Managing Cash Flow

Young Entrepreneur Council (YEC) is an invite-only organization comprised of the world’s most promising young entrepreneurs. In partnership with Citi, YEC recently launched BusinessCollective, a free virtual mentorship program that helps millions of entrepreneurs start and grow businesses.

What is a common mistake new founders make when managing cash flow that can easily jeopardize the future of their startup?


1. Not Having a Line of Credit

Kenny NguyenIt’s great if you have sales that are going to be very profitable for your company. However, if you have to buy a lot of materials/time upfront to execute the sales or sell to companies that mainly have longer paying invoices, you may run into a cash flow problem. Getting a line of credit with a bank can make or break your business. I always tell founders to get one before they need it. – Kenny NguyenBig Fish Presentations 

2. Trying to Buy Growth

Jonathan ShokrianA lot of founders think of their bankroll as a never-ending gobstopper, that burning absurds amounts of cash to grow overnight is healthy, and funding is always available. However, it’s important to remember that growth doesn’t always equal a healthy business, and money can and will run out eventually. Building a brand takes time. Healthy businesses are grown organically and slowly. – Jonathan ShokrianMeUndies Inc 

3. Locking in Real Estate

Kim KaupeNew founders tend to get overly ambitious when it comes to building their company — they need employees, an office, furniture, the works! However, locking into a long-term office contract can create a huge hole for your cash to flow out of every month. Even worse, if the business isn’t churning out enough in profits, there is no way to extract yourself from the payments to your landlord. – Kim KaupeZinePak 


4. Not Reinvesting Back Into The Company

Anthony PezzottiMost business owners will start out by pocketing whatever the business earns, acknowledging any company profit to be their salary. However, if you don’t reinvest back into the business, you’re essentially starving the company’s growth. It can be bothersome to put your well-deserved dollars back into the company, but in the long run, your business will be better for it. – Anthony PezzottiKnowzo.com 


5. Not Having a Reserve

Elle KaplanOften, startup owners will operate on a thin margin and spend almost every dollar as soon as they get it. This “grow or die” mentality can be great during good periods of business, but can prove disastrous when you have unexpected expenses or a slow period. Similar to a personal emergency fund, startups should always have some money reserved for surprises, even when everything is going well. – Elle KaplanLexION Capital 

6. Letting Tax Time Be a Surprise

Laura RoederToo many business owners forget about taxes when looking at their profitability. It’s easy to just count the money in the bank, forgetting that a significant chunk of it is going to need to be handed to the government. Don’t just assume that you’ll have cash leftover when tax time comes. Budget for your yearly tax bill every month so that you can stay on top of your real cash flow situation. – Laura RoederMeetEdgar.com 

7. Mindless debt, Salaries and Spending

Alisha NavarroI come from a background of bootstrapping and grassroots. Mindful debt, well-planned out debt, debt that increases sales all are examples good debt. Thinking you should make a huge salary just because you are the CEO is dangerous. Think of your company as a long-term investment; you don’t want to take the money out before it matures. You want to reinvest generously. – Alisha Navarro2 Hounds Design 


8. Accepting Sales With Bad Payment Terms 

Chris GowardMost new entrepreneurs don’t realize they can negotiate terms and get access to much more cash than they imagined. Consider the difference between a typical Net 45 payment upon completion compared with a 50 percent up-front deposit and Net 15 on completion. The difference could mean thousands of dollars in saved interest. You can set the expectation for how soon and how often you’re paid. – Chris GowardWiderFunnel 

9. Not Keeping Updated Records or Books

Andrew O'ConnorBecause most founders lack the financial knowledge or accounting acumen, they may not realize the need to keep books and financial records as updated as possible to understand the current cash flow and what is still outstanding. A good automated accounting system can provide a way to avoid this mistake. – Andrew O’ConnorAmerican Addiction Centers 


10. Assuming One or Two Good Months Is the New Normal 

Adam SteeleIt’s great when things start to really pick up for your business, but it’s dangerous to assume that you’ve arrived because you met your goals for a short period. Make sure you’re on steady ground before you increase spending to match new levels of income. It may not last for very long. – Adam SteeleThe Magistrate 



11. Looking at Analytics Platforms Instead of Quickbooks

Carter ThomasFounders often look at the analytics platform being used inside their company to gauge success. They may see a certain number in Google Analytics E-Commerce data, but that doesn’t account for returns, credit card fees, chargebacks and failed payments. Your P&L statement, however, is the ultimate mirror for your financial health. – Carter ThomasBluecloud Solutions 

14 Ways of Splitting Equity With Co-Founders or Employees Without Giving the Company Away

Young Entrepreneur Council (YEC) is an invite-only organization comprised of the world’s most promising young entrepreneurs. In partnership with Citi, YEC recently launched BusinessCollective, a free virtual mentorship program that helps millions of entrepreneurs start and grow businesses.

1. Founder Vesting 

jeff epsteinIt’s imperative to have founder vesting with multiple co-founders. Founder vesting implies that the longer the founders work together, the more they earn (typically over 3-4 years). It’s a pretty standard practice and solves a lot of potential problems that may arise if one of the founders chooses to leave or is removed from the team. – Jeff EpsteinAmbassador 


2. Vesting Over Time 

John RoodEveryone should be on a vesting schedule, including co-founders. The worst situation is to have someone quit and walk away with a bunch of stock. Unfortunately, this happens all the time. Protect yourself by having everyone on a multi-year vesting schedule. – John RoodNext Step Test Preparation 



3. Grunt Fund 

Lane CampbellInstead of signing a static agreement with your co-founders, it makes more sense to use something like the Grunt Fund by Mike Moyer to allocate equity based on who is contributing to the business. It’ll help set the venture on the right path. – Lane CampbellCreately 



4. Performance Incentive-Based Equity 

Dustin CavanaughA great way to structure equity assignments for early stage founders and employees without giving away the farm is to establish set performance-based metrics. This motivates and incentivizes all stakeholders to reach their performance-based goals while simultaneously protecting the company from assigning equity where it is not earned or deserved. – Dustin CavanaughRenewAge 


5. Contracts 

Nicole MunozEquity often dictates who makes the decisions within your company. Decide who’s in charge first, and then develop contracts that make it clear who is responsible for what aspects of the business. You can easily justify a higher equity stake if you are also responsible, as CEO, for the difficult work of growing your company. –Nicole MunozStart Ranking Now 


6. Discount to Market 

Nicolas GremionRather than flat out giving out stock based on position or performance, sell shares to founders and employees at a steep discount (AKA the insider deal). Perhaps go as far as making it a rule that, for example, during their first year, everyone has to invest 10 percent of their salary back into the company. They’ll be motivated to see it grow while the company itself benefits from the extra cash infusion. – Nicolas GremionFree-eBooks.net 


7. Equity Calculator 

Ajay YadavThe simplest way to do split equity is to use the co-founder equity calculator tool on foundrs.com. I recommend not splitting equity 50/50 because it will help prevent delays and conflicts in decisionmaking, allowing you to move the company forward more quickly and under a unified vision. – Ajay YadavRoomi 



8. Equally 

David CiccarelliMy partner and I are in a unique position because, not only did we found the company together, we’re also married. Since marriage is an equal union, we took the approach that equality should apply in the company as well. Our first agreement was a 50 percent split when we established the first legal structure, a partnership. When we incorporated, we kept the same 50/50 split. – David CiccarelliVoices.com 


9. Standard 10-15 Percent Stock Option Plan

Kristopher JonesAllocating equity to key employees assumes – in the future – you intend to raise capital, sell your company or take your company public. Therefore, it’s critical to align your personal interests with those of your team. Based on experience raising capital, as well as buying and selling multiple companies, I recommend that you implement a standard 10-15 percent equity pool in the form of stock options. –Kristopher JonesLSEO.com 


10. Four Years With One Year Cliff 

Hongwei LiuAs every founder knows, the challenges a startup faces are completely different every six months. It’s hard to know if someone, be it a founder or early employee, is going to grow with the company, if their skills on Day 1 will be as valuable on Day 1,000. Somake sure everyone is vesting (four years with one year cliff is standard). And don’t be afraid to have an annual heart-to-heart between founders. – Hongwei Liumappedin 


11. Hybrid System 

Joshua LeeWith co-founders, I like to split the company evenly. This aligns us because it’s in each of our best interest to apply 100 percent effort and creativity to the company’s success. For early employees, I like to award ”phantom shares” that vest based on timelines and reaching agreed on performance milestones. Chobani yogurt CEO, Hamdi Ulukaya, followed a similar path with his employees.  – Joshua LeeStandOut Authority 


12. Milestone-Based 

Raoul DavisDivvying up equity to team members can dilute the valuation of the company.  The best way to justify the equity that was shared to an investor is by tying it to performance.  If team members earned equity based on completing significant milestones, it becomes much more digestible. – Raoul DavisAscendant Group 



13. Deferred Rewards 

Brandon StapperYou can assign bonuses that are redeemable at any schedule you like. Shares can be non-redeemable until retirement, for example. On the other hand, you don’t want to give away too much fluff. Employees deserve to enjoy their compensation as they see fit. – Brandon Stapper858 Graphics 



14. Revenue Sharing Rather Than Equity 

Blair ThomasCo-founders should always have skin in the game, but early employees that are seeking wealth beyond their normal salaries can be incentivized with revenue sharing rather than with raw equity. This gives them the motivation they need to operate at high capacity and push the business forward without robbing the company of much-needed equity come time for investment or exit. – Blair ThomasFirst American Merchant 

15 Mistakes Entrepreneurs Make When Deciding on an Exit Strategy

Young Entrepreneur Council (YEC) is an invite-only organization comprised of the world’s most promising young entrepreneurs. In partnership with Citi, YEC recently launched BusinessCollective, a free virtual mentorship program that helps millions of entrepreneurs start and grow businesses.


1. Trying to Exit as Fast as Possible 

Kim KaupeEntrepreneurs can get so excited about how quickly they can exit that they fail to look at the big picture. The mantra of start it, pour gas on it, and sell it fast isn’t always the best strategy. If Mark Zuckerberg had taken the first offer he received for Facebook, he wouldn’t have nearly as many zeros in his net worth. Take time to look at the big, long-term picture before selling fast. – Kim KaupeZinePak 


2. Not Understanding Cash Up Front Versus Earnout 

Nick ChasinovA buyer will often need the entrepreneur to stay on after the sale, which will dictate the payment terms, typically in the form of a performance-based earnout with future upside. Committing to an earnout with performance-based triggers that are out of your control can be catastrophic. Once you relinquish ownership you are not in charge, so it is critical to negotiate the cash up front. – Nick ChasinovTeknicks


3. Issuing the Wrong Types of Shares 

john ramptonEarly on in business you will decide on the types of shares that are issued. This can ultimately sink or swim your business into an exit strategy. Make sure you’re issuing the correct types of shares to founders, employees, investors, advisers and anyone else getting shares so that you don’t screw yourself out of an exit strategy. – John RamptonDue 


4. Giving Into Pressure From Others, Like Investors 

Peter DaisymeWhile investors do have a say in your exit strategy, it’s a mistake to just give into pressure from others when deciding on an exit strategy. Often, those pressuring for the exit are just looking for that fast return and not considering the health or benefit for the business. Waiting a bit longer for a better offer could even yield more return. – Peter DaisymeDue 


5. Taking the First Offer 

Murray NewlandsThe first offer may not be the best offer for your business. It’s easy to get excited and just say yes to the first bidder. A “wait and see” strategy is better as word gets around that someone is interested in your company. This may generate better offers and drive up the demand. This also gives you time to further study the offer. – Murray NewlandsDue.com 


6. Looking Only at the Money on the Table 

Andrew ThomasThere’s more to an acquisition than just the check you receive. This acquirer will now have control over your product, customers and brand. There’s also a great chance that you’ll be working for them the next couple of years. Avoid the mistakeof just selling for the money. Consider your mission and ask if this company will help you enhance your ability to reach the goals you set for yourself. – Andrew ThomasSkyBell Doorbell 


7. Not Understanding What Drives Value 

Mark DaoustI see many entrepreneurs spend a lot of time and energy building their companies in ways that add little to no value to their business. Worse yet, many plan for an exit but implement strategies that actually hurt their value. When planning your exit, keep in mind four principles: reduce potential risk, demonstrate growth prospects, make it easy to transfer and make it easily verifiable. – Mark DaoustQuiet Light Brokerage, Inc. 


8. Focusing on an Exit From the Start 

Jennifer MellonBuilding a company that is built to last, one you could still be running 40 years from now, is the greatest exit strategy you can implement. If you build a great company, the rest will fall into place. Focusing on an exit can lead to mistakes, sloppy processes and a faulty foundation. – Jennifer MellonTrustify 



9. Not Hiring a Banker 

Kristopher JonesThe key to getting multiple offers and the highest price for your business is to hire a banker. A banker or broker will have the requisite experience to prepare you for a road show, help you schedule dozens of meetings with prospective buyers and help you negotiate term sheets. Furthermore, once you decide on a buyer, the banker will help you through a successful due diligence process. – Kristopher JonesLSEO.com 


10. Over-Valuing the Business 

Nicole MunozIn order to earn the highest profit from the sale of your business, you need to directly correlate your valuation of the company to your book of business. When you prepare to sell, the buyer will not have the same emotional ties to your company that you do. Therefore, supporting the sale with excellent accounting records ensures you receive the full amount you expect for your business. – Nicole MunozStart Ranking Now 


11. Not Considering the Lifestyle Factor 

Jesse LearExit strategy plans are typically very money-centered and can fail to account for the possibility that you could end up loving what you do. Ask yourself why each potential exit strategy sounds attractive to you. For example, if your motivation behind pursuing acquisition is personal financial security, will you still be motivated to sell when you’re making a $1M/year salary? – Jesse LearV.I.P. Waste Services, LLC 


12. Being Afraid of Talking to “Competitors”

Andy KaruzaMany entrepreneurs are worried about getting close to competitors or even talking to them. In fact, these very same competitors could make for an easy acquisition. If you’re in the process of looking for an exit, start talking to the right people over at your competitor’s company. Don’t divulge critical details, but keep the discussion open at a high level until qualified interest is determined. – Andy KaruzaFenSens 


13. Not Thinking Two or Three Moves Ahead 

Doug BendRegardless of which exit strategy you pick, you are likely to go through a due diligence review. It is wise to work with an attorney to go through a mock due diligence process to make sure that all of your legal ducks are in a row before engaging with a potential exit partner, rather than having to scramble to get everything in order once you have found an ideal exit strategy. – Doug BendBend Law Group, PC 


14. Viewing the Value of Your Company Through Your Eyes Only 

Peter BonacIt is a mistake to view the value of your company through your eyes only. The true value of your company depends on the buyer, so it is best to view it from the buyer’s perspective. As every buyer will see different values in your business, ask yourself what areas of your company will add the greatest value to that particular buyer and grow those areas to make them more appealing. – Peter BonacBonac Innovation Corp. 


15. Not Adequately Training Key Team Members 

Andrew SchrageIf the company falls flat on its face after you leave, the person you’re handing it over to isn’t going to be very happy. Even worse, the transfer of the business may not happen at all if the other party sees this as a risk beforehand. – Andrew SchrageMoney Crashers Personal Finance 

The Pros and Cons of Marketing Automation for an Early-Stage Startup

Young Entrepreneur Council (YEC) is an invite-only organization comprised of the world’s most promising young entrepreneurs. In partnership with Citi, YEC recently launched BusinessCollective, a free virtual mentorship program that helps millions of entrepreneurs start and grow businesses.

What is one pro or con of marketing automation for an early-stage startup?


1. Pro: You Can Scale Quickly With Minimal Resources

Diana GoodwinMarketing automation can be a lifesaver for an early-stage startup that has to gain traction quickly because it allows a startup to quickly reach a large number of prospects with minimal manpower. Marketing automation has come a long way, and there are many hacks to ensure that yourcustomers still feel like they are getting a customized or personal message, despite the automation.

– Diana GoodwinAquaMobile Swim School


2. Pro: It Sets the Stage for Efficiency from the Start

Peter DaisymeWhile many stress that they don’t have enough hands to take care of all the work in a startup, it’s good to think lean and efficient from the start with as many marketing automation tasks as possible. This gives you more time to develop your messaging and personalization strategies as well as access greater amounts of data than if you had focused on manual marketing tasks.

– Peter DaisymeDue.com


3. Con: Automated Tasks Are Too Easy to Forget About

jared-brownWhen you’re starting out it’s important to save time and work efficiently. Marketing automation makes sense, but it also makes it easy for you to forget the process. Unless you’re automating menial marketing tasks like data entry, I recommend doing your marketing manually until you get a good understanding of the process and everyone involved.

– Jared BrownHubstaff


4. Con: You Don’t Know Who You Are Yet

Murray NewlandsSending out automated messages about your brand before it is fully formed is a mistake. During this time, who you are and what you offer could change. Without a personal touch, you might only confuse your audience. It’s better to wait until a later stage when this identity if more fully formed.

– Murray NewlandsDue.com


5. Con: You Don’t Get to Know Your Audience

Nicole MunozBrands that automate too soon may risk the advantage that comes with getting to know your audience on a deep, personal level. People buy from people. So to sell to your ideal customer, you have to understand every single thing that motivates them to buy from you over yourcompetitors. Engagement is the only way to do this. Be certain you know exactly who your buyers are before you automate.

– Nicole MunozStart Ranking Now


6. Pro: No Audience Is a Bad Audience

Andrew Namminga (1)Using automation to grow social accounts is great for early-stage startups. Whether the growth is targeted or not, having a following in itself encourages growth. Of course, engagement will be low, but it’s better to have a decent following with low engagement than it is to have no following with no engagement.

– Andrew NammingaAndesign


7. Con: You Can Lose Focus on the Main Objective

Zac JohnsonAutomation is great, but it can also lead to distraction and lack of focus. A good example of this would be if you were focusing on customer support and built a knowledge base to essentially “automate” any and all support questions. If you completely automate this process, you’d be lacking in support and missing out on the user experience. This same principle applies when starting a business.

– Zac JohnsonHow to Start a Blog


8. Pro: It Helps Startups Define Engaging Language

Nick EubanksWhile direct human interaction is critical in the early stages of learning about a company‘s ideal customer profile, automation can also provide big wins in helping define engaging language and offers. With a thoughtful and well-defined conversion funnel up front, startups get the advantage of quickly gaining insight into what offers drive responses.

– Nick EubanksI’m From The Future


9. Pro: You Improve Efficiency

Marcela DeVivoWith the limited resources usually associated with early-stage startups, it’s important to maximize efficiency from the beginning in order to accelerate growth. Startups that invest in marketing automation from the very beginning can do more with less. Reducing labor overhead is a massive savings for startups, who can then use savings to invest in sales and marketing.

– Marcela De VivoBrilliance


10. Con: You Don’t Know What a Good Lead Looks Like

Vik PatelGood marketing automation requires an understanding of leads and their behavior, which differs for every company. The major benefit of marketing automatization is the ability to send personalized marketing content. But, unless your business understands what a good lead looks like and which content is likely to increase conversion rates, it’s difficult to design effective automation processes.

– Vik PatelFuture Hosting


11. Con: It’s Easy to Make Mistakes

Myles VivesIt’s easy to spread yourself out too thinly as an early-stage startup. Marketing automation might sound great, but it takes time and expertise to set up properly. If you have no experience with automation or cannot hire an expert, you risk sending your customers the wrong emails at the wrong times. Your customers will know that software is really behind your email messages.

– Myles ViveseREACH


12. Pro: You Get Valuable Data for Later

Patrick BarnhillUsing marketing automation as an early stage startup is the immediate collection of data. By automating your marketing processes up front, you will get data collection early on without having to spend too many hours on marketing. This data will become more and more valuable as you growyour company.

– Patrick BarnhillSpecialist ID, Inc.

12 Ways to Gain Insight Into What Your Customers Are Thinking

Young Entrepreneur Council (YEC) is an invite-only organization comprised of the world’s most promising young entrepreneurs. In partnership with Citi, YEC recently launched BusinessCollective, a free virtual mentorship program that helps millions of entrepreneurs start and grow businesses.

What’s one unique way to gain insight into what your customers are thinking?


1. Launch a Chat Service on Your Site

Aaron SchwartzEvery time we make a major product change, we open a chat service on our site so fans can give us immediate feedback. Our preferred product is Olark, since it’s extremely easy to integrate and truly affordable. You can wait for folks to ask questions, or you can even interrupt them and ask, “How can we help?” The more you can ask for feedback in real time, the better.

– Aaron Schwartz, ModifyWatches.com


2. Use Heatmaps

Adam SteeleHeatmaps are one of the most interesting things to happen to e-commerce, in my opinion. Tracking the movements of people’s eyes hasn’t only told us how to arrange our web pages better, it’s also taught us things like which product angle attracts the most attention or which features customers read first. I think they give you more than a customer would even know how to tell you.

– Adam SteeleThe Magistrate


3. Ask Them

Elliot BohmPick up the phone and call a random sample of customers. You’d be surprised at the suggestions and comments you receive. There are survey and website tools, but phone calls can get the best response and show customers you care.

– Elliot BohmCardcash.com


4. Poll Them

Jonathan LongSend out a survey to your customer base using a platform like SurveyMonkey or a similar service. If you really want to trigger a high response rate, offer a discount or special offer as incentive. You will see a much higher completion percentage if you offer something of value. Even the smallest of “bribes” will result in a much larger data pool of feedback.

– Jonathan LongMarket Domination Media


5. Beta Test Your Product

Andrew ThomasBeta testing is a great way to learn about your customers before releasing your product. In our experience, beta testing gives us real user feedback that lets us challenge our assumptions instead of guessing how a customer will use our device. Make it clear in the beginning that you want their unbiased feedback. This gets them excited about being heard and contributing to the process.

– Andrew ThomasSkyBell Video Doorbell


6. Have Your Team Ask and Listen

Darrah BrusteinI’m in the business of events, so I have the fortune of being face-to-face with my customers. I tend to find I only get the extremes of feedback as the founder, so I utilize my team to talk with everyone else and get their real thoughts, praises and critiques. After each event, I have my team submit that feedback to me while it’s fresh so we can process it and do with it what is needed.

– Darrah BrusteinNetwork Under 40 / Finance Whiz Kids


7. Try Popup Chat Boxes and Surveys

A great way to learn about your audience (while also increasing conversions) is to implement a popup chat box or survey while users are live on your site. This is a great time to approach them with a simple popup that says “How can I help?” You’ll be amazed by how many different questions you’ll receive while also potentially seeing a nice jump in signup conversions.

– Zac JohnsonHow to Start a Blog


8. Try Usability Testing Videos

Marcela DeVivoPay for a service like usertesting.com to film your actual customers using your site. Having that kind of direct insight into different segments of your customer base can help you fine-tune your design, marketing materials, images, etc. It’s one thing to “think” about how they’ll use your site, and another to physically watch them doing it. There’s much to be gained!

– Marcela De VivoBrilliance


9. Start a Facebook Q&A Group

Joshua LeeWe follow our friend Ryan Levesque’s “ask method.” Attempting to mind read your customers is often as successful as throwing darts in a pitch black room with no dartboard on the walls. Start simple. Create an open company Facebook group dedicated to Q&A. Set a company representative to monitor the group and answer quickly during business hours. Publish those business hours to set expectations.

– Joshua LeeStandOut Authority


10. Get Feedback on Product Pages and Immediately After Checkout

Patrick BarnhillThe lack of human touch with e-commerce can make it hard to get valuable feedback. Try embedding a simple “Was this product description helpful” button after the content section of product pages. Also add a simple way to collect feedback right after a customer checks out.

– Patrick BarnhillSpecialist ID, Inc.


11. Learn From Those Who Didn’t Buy, Rather Than Only Talking to Customers Who Did

Jake DunalpWhen we talk about bridging the gap between sales and product, it’s important to make sure the product is talking to customers who didn’t buy as often as those that did buy. Gravitating only toward people who liked us makes us miss out on key learnings about why others didn’t. This is key for increasing conversions and reducing churn.

– Jake DunlapSkaled


12. Listen to Your People

Kevin ConnerYour sales and customer service teams know your customers better than anyone. But to get this information from them, you need to be intentional in gathering it. Schedule a time to meet with them about this. Prior, be sure to formulate great questions, such as: Who is our ideal customer? What do our customers love/hate about us? What do we not offer that our customers need or expect from us?

Kevin ConnerWireSeek