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Don’t Make A Bad Deal

What Seth Godin says about making a deal.

Here's what entrepreneurs and bizdev folks ought to remember before they do a deal:

First, doing a deal is a good thing. Despite my warnings below, you don't get anywhere if your idea is a secret. A leveraged idea is worth sharing.

That said, please remember that the idea isn't what is worth anything. It's the effort and the cash and persistence that pays off.

1. Don't do a deal where each side gets a fixed percentage. A 50/50 split of a company invented in a bar is always a bad idea. Even paying someone 5% for some sort of contribution can come back to haunt you. Instead, build the deal around a shifting percentage based on contributions over time. 2. Don't assume that the money you start with is going to be enough. Let's say you and a buddy each put in $5k and each take half the business. Then what? What happens when the money runs out and only one of you is willing to put in the next block of capital? 3. Think about taxes. If you build a Sub S company, and the company loses money, you both get a write off...

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Don’t Make A Bad Deal

What Seth Godin says about making a deal.

Here's what entrepreneurs and bizdev folks ought to remember before they do a deal:

First, doing a deal is a good thing. Despite my warnings below, you don't get anywhere if your idea is a secret. A leveraged idea is worth sharing.

That said, please remember that the idea isn't what is worth anything. It's the effort and the cash and persistence that pays off.

1. Don't do a deal where each side gets a fixed percentage. A 50/50 split of a company invented in a bar is always a bad idea. Even paying someone 5% for some sort of contribution can come back to haunt you. Instead, build the deal around a shifting percentage based on contributions over time. 2. Don't assume that the money you start with is going to be enough. Let's say you and a buddy each put in $5k and each take half the business. Then what? What happens when the money runs out and only one of you is willing to put in the next block of capital? 3. Think about taxes. If you build a Sub S company, and the company loses money, you both get a write off...

Read the rest of the story.

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