The Essential Entrepreneur, 2nd Edition

CHAPTER 12Ownership and equity

This chapter addresses some more complex topics, but they're very important for when you bring on partners or investors in the business, so stay with me here.

What's the long-term vision of your business, and do you have all the skills necessary to complete that journey? Are you planning for your company to be self-funding, or will you need external finance to support the journey? Will that come from the bank or from external investors, or both, and do you want those potential investors to be actively involved in the running of the business?

These are the fundamental questions you'll need to ask yourself when contemplating partners and investment in your business. It's super important to hold as much equity as you can, but not to be foolish enough to limit your business and put it at risk of failing by not having the skills or the appropriate level of finance on board to navigate the journey ahead and achieve your goals.

There's always a fine balance when it comes time to raise money early in your business's life, as during the early validation period, while you're still testing potential products and services on customers, your business will be seen as a very risky venture for investors. The more risk involved, the more of your company they will want to own for less money, so only ever raise as much money as you need to get you through to the next milestone in your business plan. Demonstrate to your investors that you have successfully been able ...