Entrepreneurship is in your blood. It’s not something you were taught. You were programmed at birth, it’s DNA. You find crazy ways that feed your obsession. When you read a menu, you start thinking about better ways to market the restaurant…a new way to order, maybe an eye-tracking app that places your order without waiting for your server….you also hide this obsession as best you can, but guess what? Your friends and family know you well also. You can’t hide the power that entrepreneurs carry around.
But you can’t embody the American Dream by being an over-charged entrepreneur, because we also know that you could be diagnosed with A.D.D. or S.O.A., are you a Shiny Object Addict? Guard rails for your passion keep you and your company focused. Embrace the words ‘Governance’ and focus.
What is the prescription for this? A strong Operating Agreement. It’s more important than your idea or your ability to sell your idea. Most of the Operating Agreements that we are presented are very weak. They come from LLC templates that work in your State with little to no attention to what you’ll really need to succeed. Incorporating smart levels of Governance will create a deep rudder for your company. Help the company learn, navigate and decide how to spend your resources and energy. This is your company, it is your idea, but companies need teams to succeed. And an Operating Agreement is the tool to empower those talents for your benefit.
Already paid $39.99 for a operating agreement download and implemented it in your company? That’s okay (though count the $39.99 sunk). But if its time to scale your business, there are ways to implement new, powerful operating agreements to replace this template.
Things to consider including in your operating agreement:
- An Advisory Board. Meet several times a year, prompt with problems or questions that you want their input. High performing advice here can go a long way.
- A Board of Directors. This is primarily a fiduciary role, requiring your company to be very thoughtful about your use of funds and the strategies behind it.
- Separating Voting Units from other types. Not all stakeholders should be voting members. Only those with expertise that is up to speed with your market and operations. Multiple share classes, that are easy to understand, can be great.
- Executive Sessions. Let the Board talk about you and the company without your being there. This creates trust and power around the company.
- Annual Shareholder meetings and reports. Transparency goes a long way. These shareholders are your ambassadors, bake these reports and meetings into your Operating Agreement and they’ll better support you.
A great Operating Agreement is brief but complete. It is plain-speak but legally-sound. Your OA should have guardrails with a check and balance but without being oppressive or micro-managing your passion. You are the Entrepreneur and your energy will be fed by a great OA. Choosing the right people, well…that’s the special sauce and story for another day.
Build well.