Contact theSOPAbout theSOPSupport theSOPWritersEditorsManaging Editors
theSOP logo
Published:December 5th, 2007 00:56 EST
Three Parties in the Deal

Three Parties in the Deal

By Joel G. Block (Mentor/Columnist)

There are always three parties involved in any entrepreneurial deal, and I`m careful to advise my clients that these parties each need to be attended to. As an advisor to a variety of businesses, I can work for any of the three parties that ask for assistance.

Who are these parties? The first is the entrepreneur " the person who has put his or her blood, sweat and tears into the venture. In any deal involving an entrepreneurial venture, one has to make sure the entrepreneur gets what`s coming to him or her. The second party is the investors " the people who put money into the entrepreneur`s business. Investors can be lenders, equity participants, shareholders or any other stakeholder who stands to benefit as the company grows and expands. These people need advocates, and that advocacy frequently comes from the attorneys who represent their interests.

The third party to the deal is the deal itself. When the deal itself is properly attended to, the other parties benefit dramatically. There`s a saying that "a rising tide lifts all ships." This is true in business deals so long as proper attention is paid to the quality of the deal. When the deal is structured, attention must be paid to the interests of both the entrepreneur and the investors.

Entrepreneurs must ensure that their interests are protected so that investors don`t gain in a manner that leaves the entrepreneurs behind. I`ve seen far too many instances in which the entrepreneur gets squeezed out of the deal just as the deal starts to get good. When this happens, the entrepreneur loses all interest in the business that he or she helped to create. This is not a situation that benefits investors, lenders or other participants because young, early-stage companies are highly dependent on the special skills, enthusiasm, motivation and support that the entrepreneur brings to the table.

Thus, it`s critical that investors and lenders know that by putting too much downward pressure on the entrepreneur, in the long run, they are hurting their own interests.

It`s not always easy to balance this triangular relationship. I`m currently involved in a situation in which the needs of the entrepreneur have been pitted directly against the needs and demands of his lender. The only way that the lender can be paid is if the entrepreneur`s business sees improvement and growth " but the entrepreneur periodically feels that the lender is slowing his growth by not advancing funds. Conversely, the lender worries that the entrepreneur is not doing enough to grow the business to merit the receipt of more funds.

In this particular situation, my role is to broker a compromise under which the business can receive funding by the lender so he can grow his business, and all of the parties involved can get what`s due to them. In other words, my role is to attend to the health and quality of the deal itself.

So, as you are working hard every day to build your company, or as you`re building your career, pay close attention to the three parties that are part of every deal. If you think too much about yourself as the entrepreneur, you`ll offend and potentially discourage potential investors or lenders from getting involved. This will hurt you and the deal in the long run. And investors and lenders, in turn, need to be mindful of the needs of the entrepreneur when the deal is structured. When the deal is right, all parties stand to benefit and take their money straight to the bank.

About Joel G. Block, President of Growth-Logic, Inc.

Often dubbed a "Growth Architect" by his clients, Joel Block advises companies on explosive growth strategies by driving revenue and sales. Well known in the capital markets, Joel is a successful entrepreneur, speaker and advisor. To bring Joel into your company, please visit www.joelblock.com or www.growth-logic.com.