If you are reading this on Monday, September 28, 2009, you are probably asking yourself how I could possibly have written this while I was in temple for the Jewish holiday of Yom Kippur. Well, you got me– no, I did not bring my Blackberry into temple. The secret is this… I pre-write these emails, usually a few days in advance. Thus, it is really Wednesday night, September 23, 2009, at 8:31pm… But do me a favor and don’t tell anyone. I like it if people think that I get up Monday mornings before dawn to write these emails.
Ok, now to the real stuff… Part 2 is called “DO NOT GIVE UP OWNERSHIP”
Sorry, no pop culture insight this week but something that I am reminded of constantly and something that might actually be of some benefit to you, especially since many of you are trusted advisors to business owners.
Imagine that you are an entrepreneur with a great idea, a superb business model, but no start-up capital, or at least not enough to take flight with your business. You go to your parents, your wife/husband, your wife’s/husband’s parents, brothers, sisters, friends… could you spare some change? In return, you offer them something as a symbol of your gratitude and something that will pay huge dividends later when your idea takes off and the big-money suitors come knocking: ownership in your business.
Next thing you know:
CONGRATULATIONS! The large publicly-traded company wants to acquire you. Your hard work has paid off. They want to write you a check for $3,000,000. All you have to do is cross your “t”s and dot your “i”s and the deal is done. In order to do so, your attorney tells you to have a meeting, take a vote, and make sure all of the other owners are on board.
Of course, since you formed your business, you had some lean years and you rewarded your loyal employees with… ownership. You now have 10 other co-owners, all of whom are entitled to vote on the proposal. Oh, did I mention that in conjunction with the acquisition by the publicly-traded company you will have to move all of your operations to Ohio? Did I also forget to mention that since that time, you and your spouse went through a messy divorce, but your ex-father in law and ex-brother in law are still owners?
So you have this meeting and everyone attends. Uh oh… some people are not so keen on the idea of moving to Ohio. Others (your ex-father in law and ex-brother in law) see the dollar signs and know that they can make life very difficult for you if they refuse to go along with the acquisition. So they all hold out… forcing you to take a drastic measure. Time to re-acquire the ownership from everyone, bring it all back home, so to speak. Since the publicly-traded company is going to infuse $3,000,000, even the owners with smaller percentages have valuable holdings.
Can you figure out the rest? Fast-forward: the deal is done and all of the other owners have consented; especially since you had to purchase the ownership interests from all of the dissenting owners to make sure that the vote passed.
I tried to keep this relatively short and did not give you all of the details, but the moral of the story is this: Do Not Give Up Ownership. I constantly am advising my new business owners of this.
Ownership is your key. It is the symbol of your own hardwork and your own passion. The more ownership you give up, the more your responsibilities to the other owners, the more say “outsiders” have in your business…
I am reminded of something a wifs prophet said (I think it was a prophet): Keep It Simple Stupid.
Don’t make life more complicated for yourself. If at all possible, avoid giving away ownership… unless you have a really strong Buy-Sell Agreement. 🙂