Your Roadmap to Great Wealth
By: Clinton Swaine
This is one of the greatest secrets of wealthy entrepreneurs, and comes from the book “How To Be A Billionaire” by Martin Fridson. In his book he talks about how the billionaires, such as Bill Gates, came to become billionaires. A large part of it is that, while they were growing their companies, they refused to give up their equity. They held it incredibly close and fought to keep every part of a percent. There is a natural instinct among smaller investors to want to give away part of their company to those assisting them in start up. Especially in the beginning, the idea of going into business, and by default, agreeing to a 50/50 equity split, must be fought against with vigor.
In 2003, when my partner and I were working on a project in Lake Las Vegas, we had to agree how the company was going to split up. As we bounced ideas back and forth, we shared what resources we could bring to the table and how realistic it was to make the project work. In the end I pushed for, and got, 66% of the company, and my partner got 34%. The fundamental reason was I had the ability to raise the $10 million for the project, which he did not. Without the correct financing, any project is just a dream (or a nightmare) to put together. Not only did I raise the capital cleanly, he ended up doing most of the work, using his skills in project management. The key skill was pulling the deal together.
Had I not pushed for that extra equity, then the bottom line profit would have gone from $2 million to $1.5 million. That means that conversation I had with my partner, for two hours, could have generated an extra $500,000 or $250,000 per hour.
If your company has the chance to be a high growth company, this point is even more critical. Equity given over early in the project, especially to Angel Investors or Venture Capital, will severely eat into the profit. When you look at Google, Yahoo, Amazon, Skype and other tech companies, what allowed the CEOs to become billionaires, is that they retained as much of the company as they could through the early growth phases. Others capitalized along the way, yet they fought to retain every bit.
Bill Gates is the richest man in the world because he and Paul Allen refused to share equity, and preferred to find a creative solution than take the short term answer of capital injections. When the tech boom was going on, Bill Gates was talked about as the world’s first Trillionaire. We may be far from that, at the moment, yet, for someone, it will happen—and it will happen because they fought and kept their equity and released only small amounts to the market place, which values it highly. Your equity is your lifeblood. Be very careful with whom you share it
Clinton Swaine is the creator of the game ‘The Millionaire’s Market’(R) which is designed to teach people about building passive residual income. For more information he can be contacted at 909 578 5824 or visit http://www.frontiertrainings.com or at clinton@financialfrontier.com