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• You can’t use company resources.
• You can’t demand equity. You can only ask for it.
• Your boss/company deserves the lion’s share of the equity, even though you did all the work.
• You have to pay a fair price for the equity—even if it’s only in the risk you take.
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• You must maintain the primary relationship, even if it means making some sacrifices. Keep in mind that the opportunity came from your company/boss. No matter how good you are or how hard you have worked on your project, without your boss’s consent and approval you’d have nothing.
One Million-Dollar Company Leads to Another
I have made at least a dozen deals like this in the past 15 years. The vast majority of them were very successful. Here’s a recent example:
Jeremy quit his accounting job to work for me. He had no marketing or sales skills at the time, so I mentored him. He was a quick and enthusiastic learner and worked productively for a business I ran for two years.
Then an opportunity came up—a joint-venture proposal from a colleague—that I had neither the time nor the inclination to pursue. I knew it was going to be a moneymaker, but I had other irons in the fire.
Instead of simply saying no, I offered the opportunity to Jeremy. He discussed it with his wife and accepted the job the next morning. The new position demanded not only solid marketing skills, which he had, but also the ability to attract clients with one-on-one salesmanship. This was something he had no experience with and it was something I wasn’t good at, either. I told him that if he wanted to develop this skill on his own, I’d give him a 25 percent stake in the company.
He did just that and—to make a seven-year story very short— developed it into a business that today is making almost a million dollars a year.
The story doesn’t end there.
About two years ago, while vacationing at a house I have in Nicaragua, he got together with his cousin and plotted out a new, unrelated business venture. Taking a note from my book, he told his cousin that he would fund the business if his cousin would run it. They agreed on a split on equity, and the cousin quit his job and went to work full-time to make their dream a reality.
Today, in less than three years, the business is growing and producing profits. Recently, the two cousins got back together again at my home to talk about the nice, new toys they would buy themselves (big toys, with motors and fenders) and how they would grow the business
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in the future. This second business, as successful as it is, requires only an hour or two per week of Jeremy’s time. It doesn’t interfere with his main business—the business I had an interest in—and yet it brings him a substantial additional income.
There are other wonderful stories I could tell you. But you get the point: In considering second incomes, think first about the business/person you are working for. Is there a way to leverage the relationship you have already established? Is there a chance that you can springboard your wealth-building plans by bouncing off the resources that are already at your fingertips?
Rule No. 1 for Starting a Home-Based Business
If your boss is not a likely partner, don’t despair. For every person who has made a fortune going into business with the company he or she worked for, there are tens or hundreds who have started profitable businesses on their own.
The classic business start-up occurs at the kitchen table. The first real business I began—the pool-installation business I talked about earlier—happened just that way. The great thing about starting a business from your home is that you don’t have to spend extra money on rent, furniture, and utilities. You use what you have at home and devote all of your time and money to other, more important matters.
Having recently entered my sixth decade, I have had the opportunity to have many, many conversations with friends and family about starting new, second-half-of-life careers. By and large, the people I speak to want to be in businesses they know nothing about.
• An engineer wants to start a commercial airline.
• A corporate lawyer wants to sell exotic travel vacations.
• A high school teacher wants to open a health spa.
Most of these fantasies are held by 40- and 50-year-olds who have been working in one area for many years and can’t stomach the idea of starting a business doing what they’ve been doing. “I’m through with that,” they tell me.
The old work bores them. They would much rather start something new and different, something that inspires them with romantic thoughts of fun, tranquility, excitement.
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This sort of escapist approach to business is understandable but inadvisable. Your chances of being successful are much, much better if
you start with what you know.
Successful start-up businesses depend primarily on knowledge— specifically knowledge of the customers and the products.
Knowledge of the customer includes knowing: