RULE 87: Don’t Surrender Equity

Ogun State Governor, Senator Ibikunle Amosun with City People Magazine Publisher, Dr. Seye Kehinde
This is a Rule
for anybody who runs a company, or who is a freelance and is thinking of
setting themselves up as a sole trader business. Essentially the point is not
to give away bits of you or your company.
The aim of the
exercise is to preserve wealth so don’t surrender equity (shares or a stake in
your company) or you’ll be paying someone a share of your hard work, time and
energy. Better to give them money, even if it is with interest, rather than a
share of you.

In a later Rule
on spending your money I’ll tell you to ask for equity, but that’s different –
that’s you as a lender of money. The shoe is on the other bank account then, so
different rules apply. There is a misconception that having total control of
one’s business is a bad thing and many business advisers will advocate giving
away equity as a good thing.

 “But I have noticed that the really successful
wealthy don’t do this. They hang on to every bit they’ve got. They may borrow
and take out loans and run up overdrafts but they don’t give away equity”.

But I have
noticed that the really successful wealthy don’t do this. They hang on to every
bit they’ve got. They may borrow and take out loans and run up overdrafts but
they don’t give away equity.         .
Advisers will
suggest steering clear of a bank loan because the bank can close down your
business so quickly. A business angel will lend money instead, but they will
demand equity.
If you do have
to surrender equity then make sure you swap it for:
• Business
skills and acumen
• Hands-on
directorships
• A
freedom-from-hassle agreement so you can run the business the way you want
• A realistic
percentage so you don’t give away too much
• A buy-back
clause so you can buy back the equity for cash at a later stage when you are
cash rich.
I run a company
and have some shareholders but the shares they hold don’t give them voting
rights. So, although they do get some equity, they don’t get control, and in
fact the shares were given as a reward for advice rather than money I borrowed.
 

Only take money into your business from people who
have experience of your business and understand its ebbs and flows and
industry-related problems and remember, never give voting shares away to
anyone. 
From The Book; The Rules of Wealth by
Richard Templar
(Read Rule
88
of Rule of Wealth tomorrow on Asabeafrika)

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