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.

Answer:

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.

I’m sorry to be the first to break this to you but your small business ideas are worth diddlysquat.

I know that comes as a shock because you were relying on at least one of them to provide for your pension.

Everyone at some stage in life has at least one “great idea”.  Now let me see, the current global population is heading north of 6 billion so that’s……….a lot of great ideas.

It’s a bit like saying that your lottery ticket is worth millions.  Well, yes, it might be if all six numbers come up on Saturday night.  What are the chances of that! (1 in 15,890,700 actually.) At least your £1 lottery ticket is in the game. At the moment your idea is just floating around in the ether so we can safely assume that it is currently worth less than £1.

If you don’t believe me, try going to a potential investor now, tell them about your idea and ask them to make you an offer for it.

To elevate your brilliant small business ideas to something of value you will need the following:

1. cash
2. entrepreneurial flare
3. some facts (as opposed to fiction)
4. sweat and toil

Unless you are willing and able to back your idea with hard earned cash you will need to convince someone else to part with theirs.  Trust me, no-one will invest in your idea.  They will only consider investing in something that can demonstrate some level of commercial reality.  In other words, you need to bring to the table an opportunity, not just an idea.  This is where the facts come in.

It isn’t any good telling a potential investor that you only need to sell 2% of the total market for widgets to breakeven.  If the world’s population stood on the Isle of Wight and jumped up at the same time it would sink.  Why aren’t we all quaking in our boots at that prospect?  Probably because we have figured out that the chances of this happening are fairly slim.

You must therefore demonstrate that the chances of your widget selling 2% of the total market are not slim.  And to do this you need to “do the idea”.  In other words you must find a way of creating the product – albeit on a small scale – and run real tests in real outlets on real customers.

“I have to rely on market research, it would be too difficult and too expensive to run product trials at this stage”.

Rubbish.  I’ll bet you my shirt that you can.  In 1999 three university mates spent a few hundred pounds on some fruit, converted them into a range of smoothies and sold them at a jazz festival in a London park.  Today, Innocent Drinks turnover is in excess of £80m.

The bottom line is this: An idea is just an idea.  Small business ideas are two a penny. The value lies in risking time, cash, sweat and toil to produce real products supplied into real outlets and bought by real consumers.

Oh and by the way, when you have achieved all that, the chances are that the guy with the money will have the lion’s share of the profits………..but that’s another story.