Don't be stupid greedy

It is at the point of negotiation with an interested VC party that many entrepreneurs get stuck. The VC offer must acquire enough percentage ownership in the company to enable them to receive their minimum ROI based upon their risk assessment. Many entrepreneurs let the emotion of losing some of their baby get in the way of sound judgment. They would rather own 100 percent of a $3 million company than 40 percent of a $30 million company.

If you are pursuing angel or friend-family money, most will be satisfied with a reasonable return (10 percent-annum) based upon dividends and/or sale of the company. Depending upon your funding source your exit strategy could be:

· To pass the business to heirs with a dividend payout that satisfies investor and your retirement requirements

· Sale of the company, either private or IPO (Initial Public Offering)

· Recapitalization of the company to repatriate investor or founder stock.

To summarize, having a clear vision and understanding of your company's growth strategy, milestones by which you are willing to be judged, a risk assessment and management plan, and finally, an exit plan that includes rates of return on investment within your target investor's standards will stack the odds in your favor of obtaining the capital that you need to achieve your dreams.

Join me next week as I discuss the financials part of your business plan.

Rob Garibay is a local business owner and business coach with 30 plus years of business experience. Forward your business questions to 573-6537 or robgaribay@actioncoach.com.