TDD FYI: When To Give Up Equity - 06 / 16 / 15

competition

When you put your heart into something, as well as plenty of blood, sweat, and tears, it’s hard to imagine ever parting ways with it.  Yet, for many entrepreneurs, somewhere along the way, they may have to consider the idea of giving up equity.

The question is: When do you give up equity in your business or your idea? After all, give in too soon and you may end up giving away too much. Then again, if you refuse to ever give up equity, your business or idea may never get the support it needs.

To help you better determine when the timing is right, here is some insight for when to give up equity in your business.

Be Swept Up Or Swept Away 

acquisitionThe moment that others catch on to your great idea, no matter what it is, it’s time to start the countdown until you have competitors who are trying to capitalize on your market. It’s very important that you evaluate this exchange closely. If, for example, you cannot keep up with demand, then you are likely to be swept away by your competition. However, if it’s the perfect time to consider equity for acquisition or services, then the added financial support may be what is needed to meet growing demands.

Do Other Burdens Occur While Raising Equity Assistance?

There have been a lot of companies that have put the cart far before the horse, and you should consider their stories and tread lightly in order to avoid your own demise. Considering equity brings in a lot of questions into an organization. If your company is going to be burdened by any sort of equity process, then the overall impact needs to be weighed against the expected benefits. Sometimes growth is inevitable and changes aren’t a problem. But if the organization is in a fragile state, then it’s important to tread lightly to avoid greater disruptions.

Know What Not To Give In On

Considering the exchange of equity for control is going to require managers, owners, and other leaders to make tough decisions. But that’s part of the job and something that should be prepared for the moment that you consider giving up equity. When that time comes, you will do yourself a favor by knowing what you will, and what you won’t, give in on. If, for example, the conditions are not favorable, then tough choices will have to be made. There’s no one-size-fits-all answer and each business is different. Consider yours carefully as you understand what you will, or won’t, give in on.

For many people, the idea of starting a business is a life-long dream that only comes true after invaluable amounts of effort and work. Unfortunately, effort and work may not be enough to get you through. If that happens, your only option may be to consider exchanging equity. Before you do that, make these considerations as you evaluate when to give up equity for your business. Though each business is different, the answers here will help you make a decision that’s best for you.

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