Once a year around March, I have breakfast with the owner of Mag::net cafe and spend the morning trading war stories and sharing interesting anecdotes about our respective businesses. We talk about our personal philosophies and our ideas on various industries, and a dozen other little things. It’s fun because there’s no pressure to say something smart or memorable; it’s just two guys having coffee after all.
Last year, he said something to me that turned out to be fairly prescient. He said, “I can’t trust a businessman who has never made at least One Major Mistake.” At the time I was a hotshot freelancer making PhP90 to 100k a month, and I remember wondering how I would handle it if and when my turn at the chopping block came around. Well, six months later, and the answer was staring me right in the face (but that’s another story altogether). Suffice to say that my partners and I are all still reeling from that One Major Mistake, but we’re still around, and at the very least I can say that we definitely learned something from it. (Also, I think I needed a nice hard slap in the face to set my priorities straight.)
This year, the nugget of wisdom came from me, pertaining to the subject of ownership and the notion selling off bits of your company to investors: “I’d rather own 1% of SM than 100% of my sari-sari store.”
Business owners, especially those in startups like us, tend to be really tight-fisted when it comes to accepting outside investment because it means diluting your control of the company. At some point though, you have to decide whether you want to stay where you are (in terms of profit), or try to take it to the next level. The former means you’ll own your business 100%, the latter means you’ll have to share it. The thing is though, that kind of decision should be a no-brainer: you should always be trying to take it to the next level. In the long run, all businesses will fail if they don’t try to expand or enter new markets or otherwise improve their offering. It’s like money itself: if you had $1,000,000.00 in 1967 and you sat on it for 40 years, it would only be worth $250,000.00 today.* The only way to protect it would be to spend it on stuff that would grow in value, i.e., businesses, land, gold, astronaut spider-monkeys, etc.
* Assuming an average annual inflation rate of 3.5%. Note also that your $1 million doesn’t magically transform into $250,000; it just buys 75% less stuff in 2007 than it did in 1967.