Tuesday, August 7, 2007

How to structure... [The big chief]

Regardless of the idea, products and services, employees and all the other aspects of a business, one of the key areas is how to structure it. With a large number of possibilities around, this can also be a creative part of the business and deserves some decent thought.

I'd like to have a brief look at some of the possible structures in the never-ending quest to find the best.

Since we live in an economy where informal businesses are quite prevalent, its only appropriate to start with probably the most common structure... what I like to call "The big chief". Yep, you guessed it ->

Our business mogul to be owns 100% of his business - "It's all mine" he thinks as he sweats through the startup process, smiles through the growth phase, relaxes during the maturity phase...
... and sweats again when he needs to sell the business.

Where to now?

This, to me, is the glaring weakness in this business model. And this is on a best case basis. It assumes that he is somehow able to attract and retain top talent in today's environment [lets face it, without any long-term incentive, nowadays every man and his dog is willing to jump ship for a slightly bigger remuneration package]. In fact, not being able to get or keep top people may just sink this ship before it even gets out of the harbour.

So on the scales then...
Pro -> If you can make it work, and successfully find a buyer at the end, you'll be stinking rich [more so than sharing it with anyone else].
Con -> Chances are quite good you can't, you won't and it won't work.

I'm sure there are a lot of people out there who would disagree with me. Fine - that's your opinion. If greed ["he who dies with the most toys wins"?] and infinite selfish wealth accumulation is the object of the game, count me out.

My view - I'd rather have 10% of something than 100% of nothing [plus how awesome it would be to see the others with the remaining 90% enjoying theirs]. 'nuff said.

1 comment:

Darren said...

Here's a fascinating take on this story from a [US] Venture Capitalists point of view -> http://www.gobignetwork.com/wil/2007/8/9/how-much-is-100-percent-of-a-company-with-no-value-worth/10183/view.aspx. The gentlemen makes some good points.