3. Business plans are mostly unnecessary.
My first two companies failed. Both were planned in detail on business plans. They were tech startups I tried to get funding for in the Valley back when I lived in Mountain View in 2001.
[pullquote]I never raised money, never got too complicated. I just hustled.[/pullquote]Yet Mindvalley (at first) had no plan and no vision beyond two years out. It was a simple idea scratched out on a napkin. It was about diving into the pit and selling. I never raised money, never got too complicated. I just hustled.
The goal was not millions, nor was my goal to build and flip. It was about figuring out a way to hack together a business that would make me the $4,000 a month I needed to survive so I could quit my day job, marry my girlfriend and then dream up bigger ideas while not having to hold down a 9-to-5. I now cringe every time someone asks me to explain my business plan.
Instead, every year on January 1st, I borrow my son’s color pencils and draw a 5-year diagram of where I want to take the company. I then share this vision with my team and we start hacking our way to it.
4. Control your equity.
I goofed early: I was too generous with equity and ended up giving up half my company. I was not confident and felt I needed a business partner to make things work. I was so dumb I gave up equity without asking for investment. If I had been smarter, I would have saved on equity and instead created a performance-based bonus scheme.
I also did not put in a vesting period nor create a shareholders agreement — mistakes that cost me close to $5 million dollars.
As I mentioned earlier, owning the majority of my company is important to me. Having total ownership means I’m not pressured by partners, boards or investors to deliver something that I’m not passionate about.
Here’s what you need to know about ownership:
- Never go 50/50. Always make a list of what each partner is bringing to the table and split accordingly. Fifty-fifty partnerships are done by amateurs.
- Always ask for an investment. Don’t just give away a part of your business to a friend just to have a company. Make them buy their stake and put their money on the line.
- Use a vesting period. This means that your partner commits to X number of years and only earns the equity upon completing those years. We go for a 5-year vesting period.
- Create a shareholders agreement. Have a shareholders agreement that stipulates exactly how much to buy back each share when the time comes to part ways (in more cases than not, this will happen). Typically 6x the last 12 month’s profit is fair.
5. Forge networks and learn to connect.
I join a lot of networking groups. Much of my inspiration comes from the people I’ve met in these networking groups. I’m amazed at how many entrepreneurs suggest that conferences or networking groups are useless. The trick is to get into the right ones.
I didn’t join my first group until 2008, five years after I started out. My business exploded as a result. It wasn’t just the contacts. It was seeing people already doing the things you dreamed of doing. It made your dreams seem so much easier easy and more possible.
I call this the Bannister Effect. Before British athlete, Roger Bannister ran the four-minute mile, few people thought it was possible. But after he finished, in that same year in the 1930s, dozens of people completed four-minute miles.
Whether this story is true or not is irrelevant — the point is that you can accelerate your business by meeting others who inspire you because they’ve already done the things you dream of.
Read more at Mindvalley Insights.
Vishen Lakhiani is the founder of Mindvalley. He builds and invests in businesses that are focused on education and personal growth.
Photo: Vishen Lakhiani
© YFS Magazine. All Rights Reserved. Copying prohibited. All material is protected by U.S. and international copyright laws. Unauthorized reproduction or distribution of this material is prohibited. Sharing of this material under Attribution-NonCommercial-NoDerivatives 4.0 International terms, listed here, is permitted.