Page 92 - The Bootstrapper Bible

ChangeThis One common approach is a shotgun clause. It says that at any point, Person A can offer to buy out Person B. Person B then has a few days either to take the money or to turn around and pay Person A exactly the amount proposed. Itʼs guaranteed to be fair, and itʼs quick. 4. MATCH COMPENSATION WITH PERFORMANCE. An approach thatʼs worked for a lot of bootstrappers is a performance-based split. Imagine that two partners start a business. They each own 5 percent with 90 percent in a mutually owned pool. Every six months, the 90 percent is allocated by a predetermined formula for hours invested in the business or sales made, or products developed. Two years later, all 90 percent is allocated, and the partner who made the biggest contribution clearly ends up with the biggest share. 5. NEVER, CONFUSE PROFIT PARTICIPATION WITH GOVERNANCE. The biggest problem with a 50/50 split is that no one is in charge. Someone has to be in charge. So divide control of the company differently than profit participation. Make sure that, especially in the early days, one person makes decisions. If you canʼt trust your partner enough to cede this to him, or vice versa, time to find another partner or try another business. RULE 7: ADVERTISE From the first day, allocate a percentage of your income to marketing. Do marketing before you take out money to pay yourself. Letters, phone calls, banner ads, space ads, even TV—theyʼre all cheaper than you think. And youʼve got to spend the money to get the money back. Here, letʼs repeat this paragraph, because itʼs that important: From the first day, allocate a percentage of your income to marketing. Do marketing before you take out money to pay yourself. Letters, phone calls, banner ads, space ads, even TV. They’re all cheaper than you think, and you’ve got to spend the money to get the money back. | iss. 6.01 | i | U | X | + | h 92/103 f