The Bootstrap Startup

Tmac

Adventurer
<Gaming Ghost>
7,858
13,194
85d 8h 48m
So, about a year ago I started getting more involved in my dad's business. I noticed that when business got slow, being a consultant, he would pick up the phone and make cold calls.

When I asked him why he did this, he told me that's just how the industry did it. I asked him what he thought about hiring someone to do that for him, so business would never get slow. He liked the idea, naturally, and gave me the green light to pursue the idea.

So, I found a college kid that seemed like a natural fit, created a few processes, developed a system for tracking calls, and gave him a script. In a little over two months we generated a little over $810,000 in sales from just one county in my state.

My dad took out an 8% commission for most of the jobs, so for an investment of about $4,000 (the student got a $100 commission) I generated about $65,000 for my dad's company. Holy shit, right?

Anyways, after discovering the success/need for what we were doing, me and the guy making phone calls decided to start our own company. I also began designing a new website for the company.

Meanwhile, the guy making phone calls was getting less motivated and focused more on being rich than actually trying to get there. Calls suffered. Business slowed down.

After a couple of months (October - November) I realized that without my dad there to grey beard over him, he wasn't effective. We had a few discussions and ultimately he tried to tell me that the phone calls just weren't working anymore (obviously, since no one was making calls) due to the market. I had already given him like half the company in exchange for an initial investment, so I was on the hook with him, even though he wasn't pulling his weight. He was simply waiting for me to finish the website so we could magically profit...

Luckily another month later he comes to me, about two days before I was going to come to him and ask that he relinquish his partnership, to tell me that he's going to go back to school and won't have time for the business. I offered to pay him back for whatever we had already spent ($2k lol) in exchange for his equity and he agreed.

By this time in January I'd finally finished the site and paid a friend of mine $400 to code it and put it in a WP theme. With a bit of advice from individuals on this forum (@checkyeah) I started ranking front page on google for a couple of keywords within about a month.

The industry I'm in is pretty archaic so there's a lot of opportunity to revolutionize their sales and marketing practice. One of the ways in pursuing this is through video.

The first video I made was through my neighbor who I worked with in high school. He consults a couple of high profile baseball players within the same industry, so I made a nice video with a friend of mine and got one of the baseball players to introduce it. I slapped this vid on the front of my site to validate it.

At this point we're entering into the end of January and hadn't made any new money, because no one was making phone calls, except for me in my spare time. So, I decided to hire another student. This guy was pretty green, but gave him all pur materials and got him started making calls.

He was super robotic and terrible, but I worked with him a little bit and didn't really stay on top of him very much, because I was busy trying to build industry relationships. Well, ultimately he sucked and went through two entire counties without making a single sale. I learned a lot of lessons here, but ultimately I hired him too quickly and fired him WAY too slowly.

Remember how I mentioned I started ranking for some keywords? Well, a big time client ended up finding my site and wanted to use us, and when everything came out in the was it ended up being a $330,000 deal.
 

Tmac

Adventurer
<Gaming Ghost>
7,858
13,194
85d 8h 48m
While all of this is going on, I continue us to beat the bushes and push the idea of the company to big name people in the industry.

Two months ago I sat down with the general manager vp in the largest company in my industry to discuss it. He liked it and gave me some names.

I've also been talking to lots of professors at the university here who are involved in the industry.

With every meeting I have, I generally leave with at least two additional names, sometimes more.

So, essentially, I'm at a place now where the national organization that represents the industry is going to feature my company in their magazine and a couple of other state organizations want to work with me.

I should mention that one of the biggest draws to my company is the content I put out.

Most clients in our industry are super unfamiliar with the processes involved in doing industry business, so they're not comfortable and they don't trust any of the companies.

Because I had no money, I started filming some of the processes on my iPhone and editing short 1-2 minute videos. As soon as I got money, I hired a buddy of mine to come shoot on a shoestring and then edit the much higher quality footage.

I'm heading out of town in a week to shoot my fourth professional video and I'm not even paying for it. The company doing the work is subsidizing my work
smile.png


So, even though I've only made one sale through the website a lot of people in the industry are seein the value of what I'm doing. So much so that I've been pursued by a well established site in a larger, similar industry for equity shares.

We've had three conversations and they essentially want me to figure out what % of the company I'm willing to let go of and what it will cost.

I have no idea what to do...
 

gogusrl

Lord Nagafen Raider
1,356
98
6d 8h 52m
This would be a lot more interesting if you told us what your company actually does.
 

Eorkern

Bronze Squire
1,090
5
0
I understand the need of privacy for something like RR but for the kind of question you're asking it's a bit of a problem i guess...
 

Tmac

Adventurer
<Gaming Ghost>
7,858
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85d 8h 48m
Generally speaking, you should decide whether control is important to you(and for most people it is).

For most people that's 51%, beyond that...I say give up any amount of equity you need to, in order to get off the ground. Don't give up more than you need to, but at the same time if someone is willing to invest and that capital is what's keeping you from expanding, don't get overly attached to that equity.
Is it not abnormal that they're wanting me to make an offer when they're the ones that want to be a part of the business?

They have access to tons of consumers via their own website and the expertise to grow my site quickly/effectively.

I just don't understand the strategy behind getting me to tell them what I want.

Should I just pick a number out of the air? "Ok guys. $100k for 35%!"
 

Dabamf_sl

shitlord
1,472
0
0
Maybe they are seeing if you will make some offer that is crazy low? That way they don't insult you by making a super low offer if you know what it should be worth, while still allowing the chance to get in cheap. If you go too high, they can always counter with a more realistic offer. I dunno
 

opiate82

Bronze Squire
3,078
5
0
This is where you need a solid business plan in place with estimates on potential income based on your demographic and industry research. I understand you are kind of going outside the box with your project here, but still, at any point you ever need to ask for money, whether it is from a bank or a potential investor, you need to have that business plan put together so you can put an exact number on these things.

Typically (and this is very general) you buy/sell a business for 3-4x annual cash flow (so in your case, where they want equity, you can use a percentage of that figure based on how much equity you want to relinquish). If you have a well put together business plan then you should be able to at the very least use whatever estimated cash-flow you put together in your plan (based on the research) to put come up with a number. Then you can back up that number with your research if they tried to low-ball you.
 

Springbok

Karen
<Gold Donor>
8,012
10,349
140d 1h 29m
Is it not abnormal that they're wanting me to make an offer when they're the ones that want to be a part of the business?

They have access to tons of consumers via their own website and the expertise to grow my site quickly/effectively.

I just don't understand the strategy behind getting me to tell them what I want.

Should I just pick a number out of the air? "Ok guys. $100k for 35%!"
No, you definitely shouldn't. They want a piece of the pie - they come up with a figure and perecentage. Period. You aren't going to negotiate against yourself. If they're serious, they will ALREADY HAVE A FAIR VALUATION - well before approaching you. For curiosities sake, aren't you in the oil and gas business? I only ask because I'm considering selling my entire mineral portfolio and doing something similar (consulting for private banks/equity firms/venture capitalists) - there doesn't seem to be a huge market for that, and I know from experience that there are very few people/groups doing it.
 

Tmac

Adventurer
<Gaming Ghost>
7,858
13,194
85d 8h 48m
For curiosities sake, aren't you in the oil and gas business? I only ask because I'm considering selling my entire mineral portfolio and doing something similar (consulting for private banks/equity firms/venture capitalists) - there doesn't seem to be a huge market for that, and I know from experience that there are very few people/groups doing it.
Nope. I'm in a different raw good industry.
 

Tmac

Adventurer
<Gaming Ghost>
7,858
13,194
85d 8h 48m
This is where you need a solid business plan in place with estimates on potential income based on your demographic and industry research. I understand you are kind of going outside the box with your project here, but still, at any point you ever need to ask for money, whether it is from a bank or a potential investor, you need to have that business plan put together so you can put an exact number on these things.
Errrr, I don't have a business plan.

Also, I didn't approach them, they approached me. They've been successful at building a business in the market above mine and would provide a pretty streamlined track to making me successful more quickly.

We talked on Tuesday and I put the ball back in their court. They're going to get back with me at the beginning of next week.