I've been terrible about consistent blogging, so I apologize - it's been a busy 2 months! I do want to finish out this series on the worst business advice, though, and these two go hand-in-hand....how do you balance benevolence with making a living and making a profit on top of that?
Bad biz advice #17 - “Don’t Be Stingy with Equity”
“The worst advice I have received was to not be ‘stingy’ with the company equity. An advisor told me I should find a co-founder, give them 50%, find board members, give them 20%, create an employee stock pool (I actually do this), give 10%, and raise early seed funding even though I could afford to bootstrap my business. All in, he’d have me give away over 100% of my company!
What’s left to motivate me as a founder? Rather than telling me to not be stingy, it would have been more beneficial to encourage me to build my team creatively over time through performance bonuses. If you give up too much equity too early in order to build the team, a founder can quickly lose control. It’s a fine line founders need to walk between growth and long-term sustainability.”
– Timothy Hamilton, Founder of Rentlit.com.
Yeah…Timothy is dead-on here. Though I’ve never had more than 5 employees/contract workers at a time, nor have I had to deal with a board or a stock pool, I CAN add…and if you have more than 1 person on your board, this math just doesn’t add up.
When starting a business, think smart, not benevolent. As a business owner, your benevolence comes in the form of offering good jobs with good pay. Your employees and board members will appreciate you for your business savvy and ability to pay them the amount you promised WHEN you promised it. Most employees at a small start-up will expect no more. Now…as you start to grow and have more capital to work with, you should give pay raises and possibly a small percentage of the company to your top loyal employees, but loyalty is something that is shown over time…not right out the gate!
Now…that’s not to say that you SHOULDN’T be benevolent…as Christians, we give 10% of our profits to our local church, who then uses it to help our local community and help missionaries worldwide so that they can do good work for the neediest in THEIR community. We also give sporadically towards other worthy causes. I’m happy with the way we give and God has always blessed us, I believe, as a direct result of us being willing to give our time and money towards benevolent causes. I’m sure that, even if you’re not a Christian, you also find ways to give towards charities. BUT…priorities are important to keep in order. My first priority is to God and whatever HE wants us to do, then it’s my spouse, then my kids, then my job, then all others. So – provide for your family first, provide for any employees you have second, and make an effort to give some sort of small percentage away.
- “All Work is Good Work”
“I started my company a little over a year ago and got a lot of unsolicited advice. One of the worst recommendations I received was to, ‘Take all the work that comes your way to build up your portfolio.’
I found I was doing lots of jobs that were far from my niche, simply because I had the skills to make it happen. In turn, I got referrals for more clients looking for the same type of work—work I didn’t want to be doing in the first place.
Better advice would have been to, ‘Entertain all the work that comes your way but be sure it aligns with your company’s vision. The work will come when you have a good reputation and network.’”
– MaryBeth Hyland, Founder of SparkVision.
This actually goes hand-in-hand with the bad advice above. When we first started out, we took whatever business came at us simply because we really didn’t have a defined target market. We just knew we wanted to do video work for whoever needed it. At first, it was only weddings, bar-mitzvahs, and quinceaneras. But after 2008, wedding and family event jobs started dying down, so we started leaning more towards our few corporate clients, which lead to more and more of those, and here we are!
I do agree, though, that if you’re starting out with a focused target in mind, then most of your work should be that target market. I will make one suggestion, though….if you’re just fresh out of college or trade school and don’t have much experience – do the odd jobs to help shape your industry maturity through that experience. You don’t even have to include those odd jobs as part of your portfolio, but as a fresh new business owner, you DESPERATELY need experience – it’s what separates the men from the boys. So, if you are a new photographer fresh out of college and you really want to do mostly studio headshots, then first do a few freebies for family and friends and use those as samples to market and sell towards businesses who might need headshots. In the meantime, though, would it really kill you to accept a few wedding jobs? No…in fact you might find that you like them MORE than headshots and then you can change your business model to fit your newfound desire. Even if you still decide to stick with headshots, you’ll have gained some experience and a few extra bucks on the side. If you’re really ashamed of the type of work or the quality of that first wedding…no one has to see it! It’ll be our little secret!
If you want to learn more about how to manage your marketing using graphics, videos, internet presence or social media as a small business in Colorado, drop us a line to ask any questions you might have! We don’t bite, I swear. 😊