Matthew MacQuarrie — December 21, 2016 Follow @MattMacQuarrie
My premium steak company, Fuego Diablo, has been running for a couple of years now, which means that I’m no longer being speculative in my forecasts and my predictions: I’ve got a couple of years of data on which to base my assessment of the company, and some facts and figures to back up the direction I’m moving in. Fuego has experienced enough sales growth, in fact, that I can now reasonably choose to move forward with the help of partners—but is that a wise choice for me to make?
Certainly, when any company is brand new, you let some people into your tent—mostly vendors and outsourced labor, people who can help you keep all your balls in the air. When the company grows, however, you find yourself with the option of potentially bringing in some partners—people with real equity in the company.
This is an important decision to make, because most entrepreneurs will only have the opportunity to make it once. Equity is a potentially impactful way to grow your company, and there are real benefits it can bring—I’ll say more about that in a moment. It’s also potentially dangerous, though: The more pieces of your company you sell, the more you surrender control over its ultimate shape and direction.
The first thing you should ask yourself when considering selling equity in your company is simply this: Is it something you really want to do? There is absolutely nothing wrong with keeping 100 percent control over your company, and if it’s already grown to a point you’re comfortable with, there may be no reason for you to consider selling equity.
If you do like the idea of selling equity, then your next question should be: What do you want to get out of it? A partner can potentially bring you capital, investment, expertise, ability, or access to a broader network of professionals… but before choosing your partner, it’s important to know exactly which of these values you hope to get out of it. And, ask yourself the related question: What are you willing to give up to get what you want?
Another important consideration is timing. Remember that the decision to sell equity is one that you’ll just get to make once—and when it’s done, it’s done. You want to make it count, in other words, which means making your business as valuable as possible before the sale. Have you grown it as much as you can without the help of partners? Or is there more work you can do on your own to make the business even more valuable and desirable?
These are the questions I’ve been wrestling with lately, and I hope they’ll be instructive to you as you consider this big step in the life of your business. Bringing in equity partners is something I urge my fellow entrepreneurs to consider—but make sure you’re considering it carefully.
Business & Finance Articles on Business 2 Community(51)
