An excellent post made the rounds recently containing a 100 tips in a startup cheat sheet. I pulled a few of the tips out for discussion in tonight’s post:
- 3) Should founders vest? Yes, over a period of four years. On any change of control the vesting speeds up.
- All of our profits interest unit vesting terms are over 4 years. This is standard.
- 7) How much equity should you give a partner? Divide things up into these categories: manage the company, raise the money, had the idea, brings in the revenues, built the product (or performs the services). Divide up in equal portions.
- Interesting to see the 5 categories deemed equally valuable.
- 19) What’s the best thing to do for a new client? Overdeliver for the first 100 days. Then you will never lose them.
- 31) Should I pay taxes? No. You should always reinvest your money and operate at a loss. 32) Should I pay dividends? See above. 33) What should the CEO salary be? No more than 2x your lowest employee if you are not profitable. This even assumes you are funded. If you are not funded your salary should be zero until your revenues can pay your salary last. Important RULE: the CEO salary is the last expense paid in every business.
- It can take several years before the revenues of the business flow into the CEO/founder’s pockets.
- 51) What is the only effective email marketing? Highly targeted email marketing written by professional copywriters and the email list is made up of people who have bought similar services in past six months. 51A) Corollary: If you have zero skills as a copywriter then everything you write will be boring.
- Have you ever used a professional copywriter? I haven’t, but am curious if others do this.
- 52) Should I give stuff for free? Maybe. But don’t expect free customers to turn into paying customers. Your free customers actually hate you and want everything from you for nothing so you better have a different business model.
- Interesting opinion on freemium.
- 86) I want to buy a franchise in X. Is that a good idea? Only buy a franchise if it’s underperforming and you can see how to improve it. Don’t buy on future hopes, only buy on past mistakes. 87) I want to buy a franchise in X. Is that a good idea? Rely on the three Ds: Death, Debt, Divorce. When someone dies, the heirs will sell a business cheap. When someone is in debt, they will sell a business cheap. When someone divorces, the couple usually have to sell a business cheap. IMPORTANT: even if the trends in the industry are in your favor, you CANNOT predict the future. But you can use the past to help you get a deal. Always get a deal.
- Interesting approach to making investments.
It’s always fun to read other people’s opinions on interesting startup topics.
What opinions do you have on the 100 items in this startup cheat sheet?