

 Should Web Entrepreneurs Hang on to their Companies?  - BigStartups
http://www.bigstartups.com/wac6/blog/111/Should-Web-Entrepreneurs-Hang-on-to-their

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byoung2
_Diversification doesn’t mean stocks and bonds, it means owning and operating
several or many different businesses_

I don't see why you can't have it both ways - run several businesses and use
the profits to invest. A small-scale entrepreneur (like me) with a handful of
businesses earning a few thousand a month can use the supplemental income to
build up savings and a healthy investment portfolio without having to
liquidate the business. If you focus on long term investments and use
strategies like dollar cost averaging, the ups and downs of the market should
be on par with the risks of running several businesses.

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chubbard
I think a healthy industry eco system requires life long investing from
insiders. People starting and creating the business. The people shaping the
landscape are the insiders creating and investing in ideas they believe in.
This model was the way that was done in the past so why can't it be done
again. Especially when the alternatives don't look that good or aren't
available like they were.

I interpret the article saying if you don't have a profitable business then
you don't have a business. Work on getting real sustainable profits together
then apply this model.

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richardburton
I've recently decided that I want sell my company in two years' time if I can
get to the point where it is worth £x,xxx,xxx. Whether I _will_ or not is
another matter. However, what I've found is that since making this commitment
in my mind, I've started working a lot harder. I have a figure and a deadline
looming over me. In order to hit that figure I'm going to need 10 times the
amount of traffic and a 50% increase in conversions. Now that I have a figure
to shoot I'm hacking together systems to pull all my data together so I can
quickly see when I'm straying from the path.

Napoleon Hill's _Think & Grow Rich_ has a slightly suspect title - but the
content on this area is fantastic.

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pmjordan
I don't understand this advice at all: how is holding large stakes in a small
number of businesses less risky than holding small stakes in a large number of
businesses (i.e. stocks & shares)? When the economy tanks, surely there's a
serious risk that revenue and profits in your businesses will fall. Moreover,
if you're living off profits (dividends) the stock price is irrelevant anyway?
Spreading your stakes in companies should _reduce_ the risk, not increase it.

OK, if you built these businesses yourself, you might stand a better chance of
accurately estimating the risk, but at the same time you'll have to stay
involved with day-to-day operations, which has a cost too.

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byoung2
_how is holding large stakes in a small number of businesses less risky_

Good point, especially if your small businesses have a limited shelf life
(e.g. web based startup that can be replaced by the "next big thing").

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wac6
Yes, you have to build the shelf life of the company into this. One model I
have seen a Seattle investor use is to assume a shelf life of 12-15 years at
best. But if you can return invested capital every 2-4 years, you have a good
run. And if someone offers to take you out, you can measure your opportunity
cost against the offer, i.e. you can determine whether the buyout makes more
sense than running the company through its natural life cycle.

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tezza
Uurghh, not a very sensible article. High on principle but low on
practicality.

Think what you like about owning a company versus share investing as a good
way to build a nest-egg, this is not the crux.

    
    
       Shares and cash are exchangeable to other parties.
       A stake in your company is not exchangable
    

So that's the main difference, unless your pet company has lots of cash-at-
bank which you can draw on, you cannot easily liquidate a portion of your
company for cold hard assets.

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krschultz
This is great advice if you have a profitable company. But if your company is
not yet profitable and there is a risk it could be boom or bust, and someone
is offering you guaranteed money buying it out, sometimes you have to make the
sale.

