If you’ve built a business from scratch and funded it with your own blood, sweat, tears, and bootstrapping efforts, the last thing you want to do is hand a chunk of it over to someone who happens to have a lot of money but no great ideas of his own.
This is how a lot of entrepreneurs feel about giving up equity, but many of them have still awarded equity to investors. They sometimes do this in hopes that a VC will do for them what he did for another company; they sometimes see this as a necessary evil to obtain the funds needed for the next big stage.
Giving up equity, however, is rarely the only way an entrepreneur can build his business. There are other routes business owners can take to improve upon the foundation they’ve already laid.
Find a fitting accelerator.
While some accelerators ask founders to give up equity to participate, others realize that taking too much equity hampers companies from obtaining financing in the future. Several accelerators ask for a basic fee in exchange for mentoring, resources, facilities, and an environment that fosters both community and competition.
It’s important to vet accelerators not just in terms of what you’re qualified for, but also in terms of what’s most valuable to your business. If you’re building a makeup subscription company, you may not be the strongest candidate for a tech accelerator. If you’re beyond the initial stage and looking to learn how to scale up from the middle range you’ve found yourself stuck in, you’re probably not looking for early-stage accelerators. Review the outcomes previous attendees have reported, and take a look at the resources offered, as well as the mentors who assist the participants.
EO Accelerator is one accelerator aimed at companies making between $250,000 and $1 million annually, with the goal of helping these companies push past the $1 million mark. With a simple participation fee and a competitive selection process — only 30 are selected to participate in each city EO Accelerator operates in — the program pledges to help business owners smooth out processes, overcome challenges, and become stronger leaders. It also helps them establish connections with successful entrepreneurs so they have long-term sounding boards and resources after the program is over.
Build up your advisory board.
One shortsighted choice many entrepreneurs make is establishing a board that’s comfortable or convenient, but not one that’s positioned to challenge them and make them stronger. Bringing on trusted, known advisors or keeping your board to a small list of three does make decision-making and agile movement possible in a company’s earliest stages, but it can hold the business back from successfully taking on more aggressive challenges.
Just like the accelerator option, advisors should be chosen carefully. It’s essential that the business is viewed through different lenses, so a diverse board is important. You’ll likely want to keep people around who saw the business at its leanest and meanest, but you’ll want to balance their perspective with advisors who have achieved the success you’re hoping to replicate.
It’s great to have industry experts on your board who can help you anticipate trends and problems within the market, but you’ll also want experts from other industries to weigh in on your blind spots. And diversity of personality is sometimes as important as diversity of experience: An aggressive advisor who swam with sharks will have very different advice to offer than one who’s won people over with smiles.
Humm Kombucha built a board that hit each of these criteria; the board included people as diverse as Gary Fish, a fellow beverage entrepreneur with Deschutes Brewery, and Bill Owens, a former 4-star general and chairman of CenturyLink. With its advisors’ help, the brand scaled to become the fastest-growing kombucha company in less than a decade of existence — no small feat in an industry estimated to be worth nearly $2 billion by 2020.
Pull your focus together.
When entrepreneurs have trouble scaling their businesses, it’s often because they’re too married to the “way we’ve always done it.” It’s easy to forget that what worked to get a business off the ground may not be the same thing that lets it fly.
Two areas that can pull your focus away from what you’re best at are processes that need automating and processes that need to be outsourced. Automation can address several issues: Are you using the cloud effectively? Are you using a CRM to automate your marketing and social media? Do you have your financials automated as much as possible, from payroll to bill pay? Are you still approaching every new hire with a completely new training experience? These are all things you can automate to cut down on the time your team devotes to them, giving them time for the things they truly need to focus on.
In the same vein, you may want to consider outsourcing areas that would be more cheaply and effectively handled by others. Big businesses can afford to hire in-house developers, copywriters, and the like, but the overhead and benefits associated with these internal roles can be crippling to growing businesses.
Consider whether you could hire a freelance graphic designer or use an external IT support company to help your team. For example, Screw The Cubicle relies on virtual assistants to handle replicable tasks that have been templated and trained via a screenshare. This saves the company from devoting time to straightforward tasks that could easily be carried out by someone who’s not an expert on the business itself.
Giving up equity is sometimes the right choice, but it’s certainly not the only one. There are several ways to build your business without giving up part of your company — you’ve simply got to figure out which will have the biggest impact on your company’s future. By building on the foundation you’ve already laid, you can ensure your company is still standing — and in your control — for years to come.