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Felix Dennis said to never ever give up a single share of your company. You have to listen to a guy that spent $100M on hookers and blow, and still died with $400M in the bank.
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Free registration at the forum removes this block.I don't want to just take the easy way out and get fast cash, if I bring someone on does that mean they absolutely need to be in the industry I'm in or at least have a service based trade they have been successful at?
Please send over any existing threads that relate to this topic if there is any out there. I'm considering bringing on an investor for my business and want to see the pros and cons there are for doing so. We are in need of certain equipment to continue growing, and I wouldn't like to blow half our savings and or deal with bank loans. Any insight/lessons here would be greatly appreciated.
Thanks,
Carter Jones
PROS: money, additional resources & knowledge, ability to grow quicker (assuming the right partner)
CONS: giving up equity and control (if you're giving equity), dealing with and answering to another person/partner, differences of opinions
I would not give up equity, rather structure their capital as an equipment loan if possible. This way you continue to run your business how you'd like without additional input.
This is, of course, if you're certain investing in the equipment will provide a good ROI and you'll be able to pay back that loan.
If you absolutely, positively need outside money, start by considering debt instead of equity. Borrow from a bank, get an SBA loan, get a loan against invoices or inventory, borrow from friends/family, etc. Debt is generally much cheaper (as long as your business is successful) it allows you to retain full control, which is generally more important than a solution to short-term cash flow issues.
The bigger question is whether you absolutely need outside money. First, do you need money at all? Can you continue to scale linearly at this point (use profits to fund growth)? Or is there some business event that is requiring you to scale in a step-function fashion right now?
If you absolutely need to scale quickly, the first choice should be using your own funds. You mention in another response that you have savings you could use -- if you're confident about the likely success of the business and the ability to repay the loan, I would recommend lending your business the money personally.
An investor brings money to the table but also, depending on the deal reached now has a say in what you're doing, and gets a slice of your pie. You lose some control, but gain money and likely experience. Banks want their repayments with interest but leave you alone. Savings can be saved up again. All avenues have pros and cons, you need to weigh them all up and see which path works best for you and your business.
I would say, without knowing the finer details that some industry knowledge would be very helpful, unless you know that this investor has a track record of working with and in a variety of industries, and has some runs on the board in terms of growing and expanding businesses.
But if your looking for help with growth along with the financial input, then industry knowledge could be just as important as they money they bring. If you have cash and/or can get it from the bank but need someone for a specific role, why not keep the equity you own in the business and just employ them as a senior manager or specific role?
Hey Carter, there is a search button...
However; as someone who has been there. I’ve turned down investors but I’ve brought in partners. There’s a big difference in the two and they both can cost you significantly if you choose wrong.
Access to cash is generally the worst reason to give up equity in your company. There are almost always going to be better and less expensive ways to finance growth if it's just about the money.
If you absolutely, positively need outside money, start by considering debt instead of equity. Borrow from a bank, get an SBA loan, get a loan against invoices or inventory, borrow from friends/family, etc. Debt is generally much cheaper (as long as your business is successful) it allows you to retain full control, which is generally more important than a solution to short-term cash flow issues.
The bigger question is whether you absolutely need outside money. First, do you need money at all? Can you continue to scale linearly at this point (use profits to fund growth)? Or is there some business event that is requiring you to scale in a step-function fashion right now?
If you absolutely need to scale quickly, the first choice should be using your own funds. You mention in another response that you have savings you could use -- if you're confident about the likely success of the business and the ability to repay the loan, I would recommend lending your business the money personally.
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