Thursday, June 27, 2013

Every Entrepreneur Can Learn from George Zimmer (and how he was fired!)

"You're going to like the way you look. I guarantee it." ~ George Zimmer

Over the last four decades, the founder of Men's Wearhouse has shined in the spotlight with his well priced men's fine clothing and deep bravado signature phrase...until last week when the Board of Directors fired him.

It can be emotional and disheartening to watch an icon of an industry dispelled by his own company. How could something like this happen? How can a brand built by a man who regularly embraces his image (Zimmer was forefront in most of the company's advertising) decide to fire their shining star.

This is where we - as fellow business owners - must take note. We are all striving for growth in our own endeavors. We want our company to be successful and earn recognition. Often one of the biggest struggles for start-ups is financial capital and so many of us are more than thrilled when the opportunity to gain investors appears. But just as there is reward...there is risk when you give away the control of your company. George Zimmer is feeling the pains of those risks now.

When someone becomes an investor or shareholder in your company - you are taking on a partner. With each additional investor - you give away a portion of your control of your company. While a founder may retain the largest portion of stock at first - this can soon become a weaker controlling interest when IPO's and investment growth occurs quickly.

Some suggestions to ensure you make the best decisions for your company:

  • Always, always, always ask an attorney about your options and possible outcomes. The more you know - the better informed you will be as you direct your company through growth phases.
  • Grow Slowly and operate within your means. This sounds a little like advise that a financial planner might give to a family but it remains true for a business. The more you control your assets and stay on top of your expenses - the less you will need from other investors.
  • Create dual classes of stocks. If you do need to offer shares, you can choose to create one set of stocks which have limited voting power (available to the public) and another for your founders, executives and family members which has the dominate controlling interest.

All of us started our businesses for a reason. Perhaps it was a dream - a vision that your idea could become a steady income for your family or even change the world. Or maybe you wanted to create a start-up that could gain popularity so that a bigger company could buy it. As long as you understand where your business is going and the risks along the way - you won't be blindsided. Learn from the mistakes of others (like George Zimmer) and protect your controlling interest to execute your business.

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