This writing is about you and MONEY.
Thousands of new businesses are started in the US each month.
One of those looking to start a new business came to see me yesterday for advice.
Money is not the only decision on this owner’s radar, but it is the one I have chosen to write about this morning. After all, it is the number one reason that marriages end in divorce. Partnerships too.
So yeah, it is a pretty important topic when starting a new business.
Back to the client meeting—so this person has a decision to make on how they are going to fund their new venture: Bootstrap or sign the proposed investor agreement that they placed in front of me to review for them?
What does it mean to bootstrap your business venture?
Bootstrapping is what you do when you use your own funds and resources to fund your new business. This is what half the people do to start—maybe because they have no other choice and maybe also why most ventures fail within only five years. The ones that go huge do so because they have rock solid written plans that they check frequently throughout the day. In other words, these individuals spend more time snuggling with their written plan than they do checking their status on social media (huge time drain—so not 80/20!).
There are huge benefits to bootstrapping but that is a discussion that I will reserve for another day.
Now, back to the investor’s proposed written agreement option that the client asked me to review. By signing this agreement, the startup owner has to completely understand that they are surrendering ownership control in exchange for funding. In other words, the investor now has a “say so” on how you steer your startup. This is what the other half of the people do to start—maybe this is another reason why most ventures fail within only five years—the owner surrenders control to a group of investors that have absolutely no clue about the owner’s idea or vision. The investor simply wants their return—no questions asked and if the owner does not pony it up then that written agreement that was signed is included as “Exhibit #1” in the investor’s breach of contract complaint that is served on the once excited new business owner.
Like I said before, the business owner has a lot of different topics on the radar and the discussion reserved for this writing has been specific to just money, but what about the tricky language that appears on EVERY written agreement that the owner has to sign to just start (commercial lease, copier lease, partnership agreements, advertising, etc...).
Overwhelming, yeah tell me about it. However, I wanted to make you aware of things.
Be smart. Plan. Prepare. Ask before you bootstrap or sign.
Edgar J. Guzman