Here's another truism I learned starting a new company: a lot of people will say they want in on it and want to help, but when it comes down to actually quitting their job, or putting up money, they'll back off.
Actually I already knew that, because all the books talk about it, but I didn't really expect it in my case for some reason. But sure, people have different levels of risk they're willing to take, some a little, some a lot. So when it came down to it, no, my coworker couldn't quit and work with me for free for a year for a big chunk of the company if we hit it off, because he didn't want to spend his savings and 401K until we had income. Too risky for him and that was totally understandable.
What wasn't so understandable and was disappointing to me, was over the next several years as I took all the risk, finished the product, hit the road selling it, fretted over meeting delivery schedules, took out loans to pay for the equipment and hoped the customer would pay on time, after all that he finally wanted to join. Specifically after I told him I had finally landed a $4 million, multi-year contract with a large government contractor and was really ready now to expand and make it happen.
So being his friend and former coworker, having had lots of lunches together talking about how "someday" we would work together in our own thing and how great it would be with no dress code, work from home sometimes, work from the beach, flex time, no asshole bosses, all those good pipe dreams -- here I was able to actually offer that. I offered him a really nice salary (50% higher than the market), all those benefits, a nice bonus if we do well (and I'm generous with bonuses), and a year severance if it didn't work out. Little risk to him, either -- I had the cash flow and the contracts, no problem meeting payroll, and great momentum with new business opportunities. And we were friends and really worked well together. I really couldn't see how he could decline.
I was surprised though at his lukewarm reception. He seemed disappointed and finally said he expected he'd get a share of the company "since I'm one of the first employees." I asked how much were you thinking? He replied "I don't know, 30, 40 percent maybe."
Okay, if this were a startup with no product, no income, just some people willing to work hard for a payoff in the end, sure. Those were sort of the numbers we had talked about way before. But now? With a $4 million contract and already (by then) $700K a year in sales -- and an established, completed product able to win contracts that size -- surely he'd realize my company had probably what, a million or two in value? And he wants to just come in and I hand him 30 or 40 percent of that? Here you go, here's $500K just to join my company, on top of earning $150K a year salary and another $300K a year profit sharing?
And for what? He's a competent engineer, all-around good guy, dependable and trustworthy. But is that worth $500K a year in this world? Did he really think it was?
I was stunned by his request. I wasn't being greedy, I was being realistic. Paying someone effectively $500K signing bonus, plus $500K a year compensation all for a $100K a year job was just business stupidity. I pointed out how much compensation that would be, and sort of stammered a question asking how he might bring that much value to the business, and his reponse was simply "Well, you'll be making even more on this contract, so we both win!"
I realized then that there are highly intelligent, sane, well-educated people who still just don't... how to say this... "get it." Get business, I mean. I just sort of assumed everyone knew the idea of higher risk, higher reward, knew the idea of bringing value to a company or a project or a relationship and compensation would basically be proportional to that value. And prices and company income is proportional to the value you give to the customer so it all balances out and you don't get "something for nothing" in life. But some people just don't realize that and think -- apparently -- that sometimes people just give you stuff for free.
I wonder if that mistaken belief occurs because of the culture and idea (in the U.S. anyway) that you always have to be ready for an "opportunity" and seize it when it happens. But "opportunity" doesn't mean someone will be holding out free money for you and you just have to grab it when it happens. Come on!
No, opportunity I think means at some point in your scoping the business world you'll find a market ripe for a better product (as in my case), or opportunity means a family friend who runs a highly profitable restaurant is retiring and offering to sell it to you because he likes you and knows you'll work hard to keep it going, or opportunity means a friend of a friend knows this guy who just got a patent on some awesome product idea and is looking for help to build a prototype for free in return for a share of royalties if he sells it. All of those opportunities mean you have to do work and take risks in return for the reward. Opportunity is not "here's some free money for nothing." Again, some people apparently just don't get that.
I was saddened at this possible loss of a friend because of our wide disconnect, and told him his expectations were just too unworkable for me and maybe I really was just looking for someone to do a simple job for a simple salary. But maybe in the future we might still be able to team up "on something." He agreed and we parted amicably.
The next day he called up though and apologized for seeming greedy, that he really wasn't trying to get "something for nothing" but wanted to do it more "as an opportunity than just a job." To me, he still didn't get it. It was an opportunity when I invited him to partner when I first started out, when I had no sales and no money and he'd take the risk of the company failing and getting nothing, in return for the chance at a much higher reward. Now though there wasn't that risk, so it was just a job. I dunno though, I didn't want to lecture him on that. Maybe it was me, maybe I really was being an asshole about it, I thought. But my gut said no, it's just bad business and I went with that.
Today we remain sort of friends, although it's still a little strained.
But that was my lesson learned: some people simply understand "business," and some people simply don't. Not that one's better than the other -- there's a lot less stress just being a worker bee, for example, and maybe life overall is better that way -- but just don't expect everyone to understand business or have the same "common sense" as you. That concept though was new to me, and a little disappointing.