How often have I spoken to entrepreneurs with a sound idea and a willing investor who spend too much time trying to get the best deal out of the investor, losing track on creating value from the good ideas that brought them together in the first place . This is a typical question:
I currently own 70% of Company X Ltd and have 20% against a loan note for about £3K. The other 10% can be brought back for £2.5K-£5K. I also own 50% of Company Y Ltd. The question goes on to explain the relationship between the two companies, then continues: I feel that if I could structure my situation better, I may be able to retain ownership and a larger slice of the pie. If you have any ideas on how I could structure my situation, that would be great.
At the moment you have no value. Everything exists as ideas or shell companies or partnership agreements or something else. Nothing is earning any money for you currently. Spending time trying to maximise your share of something with no value has little value either.
The harsh reality of life is that the guys with the money hold all the trump cards. Ideas are just ideas. Somebody generally has to inject cash to give an idea a chance of being worth something.
It is much harder to part with cash for a good idea than it is to have the good idea in the first place.
You have individuals who are prepared to do the hard bit – part with cash. Take it and spend your whole time and energy trying to convert their investment into something massive – ie create real value, create revenue earning businesses that other people will part with even more cash for.
You will then get your slice. OK, so the investor may get a bigger slice but who cares. And then, guess what, you’ve now got cash!
When you have your next idea you will have at your fingertips both the idea and the cash. How fantastic will that be. When you create real value for that idea then you can keep the lot. Then you can start investing in your next big idea, other people’s ideas or just having fun.
So don’t spend too much time trying to restructure what you’ve got – your investors will most likely sniff out if you have subtly removed the golden egg from your agreement so be straight, put everything on the table and look to reach a ‘reasonable’ solution. Don’t be afraid to haggle to a point but ultimately, even if you have to give away more than you think reasonable, go with it and get on with creating the value.
Always, always, always, focus on creating value from good ideas.
Tags: small business ideas
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