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Fast Cash vs. Slow Equity

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Re: Fast Cash vs. Slow Equity

#41

Post by turnsout »

shubhamjain wrote: post #26

The more apt framing of this article would be something along the lines, of "The Agency Trap." The author grew his marketing agency to $1M quickly. That might sound great for HNers here, but there are reasons why such businesses don't attract handsome valuations. You always have to keep grinding to keep the inflow of customers, you're never free, and growth is directly tied to the number of employees. Additionally, s…

Yes—lots of good examples of marketing agencies building themselves into product companies, most notably Moz, HubSpot and Semrush. This is the way.

In order to scale past $1M in profit, you need to professionalize the management of the agency and scale the workforce, probably using offshore/nearshore help. I've found that a lot of agency owners just don't want the hassle, and are fine taking home $1M/year (fair!)

Re: Fast Cash vs. Slow Equity

#42

Post by velcrovan »

bluGill wrote: post #28
shubhamjain wrote: post #26

The more apt framing of this article would be something along the lines, of "The Agency Trap." The author grew his marketing agency to $1M quickly. That might sound great for HNers here, but there are reasons why such businesses don't attract handsome valuations. You always have to keep grinding to keep the inflow of customers, you're never free, and growth is directly tied to the number of employees. Additionally, s…

If you run an "agency" business then you should always be promoting junior employees to full partner. They start our doing work that you find for them, but after a few years of training from you they are now bringing in their own work and should be treated like an independent business owner in your space that you agree not to compete with (which would be against monopoly laws if you were not the same company) and onc…

I think you make, in miniature, a good example of the case for why most businesses should be making most employees into equity stakeholders.

Re: Fast Cash vs. Slow Equity

#43

Post by mooreds »

shubhamjain wrote: post #26

The more apt framing of this article would be something along the lines, of "The Agency Trap." The author grew his marketing agency to $1M quickly. That might sound great for HNers here, but there are reasons why such businesses don't attract handsome valuations. You always have to keep grinding to keep the inflow of customers, you're never free, and growth is directly tied to the number of employees. Additionally, s…

> There's nothing wrong with the agency business, but it'd be a smart bet to use at least some of the proceeds into building something long-term. Some agencies, notably 37signals, have been quite successful doing that. Most, though, never do it.

I've been part of a few agencies that spent a lot of time and money trying to build products. It is a different focus and hard to pull off when you are used to the hustle of agency culture.

Two better options in my mind:

- selling a recurring service related to the agency's work (hosting for a webdev agency, for example)

- productized services related to your work that are more custom than a full product, but more scalable than typical agency work

Re: Fast Cash vs. Slow Equity

#44

Post by bluGill »

velcrovan wrote: post #42
bluGill wrote: post #28

Earlier quoted context omitted.

If you run an "agency" business then you should always be promoting junior employees to full partner. They start our doing work that you find for them, but after a few years of training from you they are now bringing in their own work and should be treated like an independent business owner in your space that you agree not to compete with (which would be against monopoly laws if you were not the same company) and onc…

I think you make, in miniature, a good example of the case for why most businesses should be making most employees into equity stakeholders.

Most employees don't generate anything that can be taken elsewhere.

overall emplopee owned companies are a bad idea because you get too invested personally in it. If the company goes bankrupt you are out not only your job but also your savings.

Re: Fast Cash vs. Slow Equity

#45

Post by [deleted] »

velcrovan wrote: post #42
bluGill wrote: post #28

Earlier quoted context omitted.

If you run an "agency" business then you should always be promoting junior employees to full partner. They start our doing work that you find for them, but after a few years of training from you they are now bringing in their own work and should be treated like an independent business owner in your space that you agree not to compete with (which would be against monopoly laws if you were not the same company) and onc…

I think you make, in miniature, a good example of the case for why most businesses should be making most employees into equity stakeholders.

[deleted]

Re: Fast Cash vs. Slow Equity

#46

Post by velcrovan »

bluGill wrote: post #44
velcrovan wrote: post #42

Earlier quoted context omitted.

I think you make, in miniature, a good example of the case for why most businesses should be making most employees into equity stakeholders.

Most employees don't generate anything that can be taken elsewhere. overall emplopee owned companies are a bad idea because you get too invested personally in it. If the company goes bankrupt you are out not only your job but also your savings.

I'm missing something, how does giving employees a path to equity prevent them from having other savings and investments?

Re: Fast Cash vs. Slow Equity

#47

Post by bluGill »

velcrovan wrote: post #46
bluGill wrote: post #44

Earlier quoted context omitted.

Most employees don't generate anything that can be taken elsewhere. overall emplopee owned companies are a bad idea because you get too invested personally in it. If the company goes bankrupt you are out not only your job but also your savings.

I'm missing something, how does giving employees a path to equity prevent them from having other savings and investments?

It doesn't stop it but it discourages it since so much wealth is in that one basket.

Re: Fast Cash vs. Slow Equity

#48

Post by nadermx »

bluGill wrote: post #47
velcrovan wrote: post #46

Earlier quoted context omitted.

I'm missing something, how does giving employees a path to equity prevent them from having other savings and investments?

It doesn't stop it but it discourages it since so much wealth is in that one basket.

Don't keep all your eggs in one basket, unless you control that basket

Re: Fast Cash vs. Slow Equity

#49

Post by bluGill »

nadermx wrote: post #48
bluGill wrote: post #47

Earlier quoted context omitted.

It doesn't stop it but it discourages it since so much wealth is in that one basket.

Don't keep all your eggs in one basket, unless you control that basket

In an employee owned company you don't control the basket. In a partnership you do.

Re: Fast Cash vs. Slow Equity

#50

Post by dzonga »

startshipbanana wrote: post #22
anovikov wrote: post #3

Equity business is thoroughly inaccessible to the vast majority of people, especially the IT people. It requires being an insider at least to a degree, and it requires apart from knowledge and skills, at least some luck. I've seen a lot of extremely bright, talented and hardworking people trying to play that game - all failed, some ruined their entire lives simply for refusing to give up for too long. While those who…

I don't understand why people are so opposed to starting a bootstrapped consulting company. You can start as a single man shop and then hire people and expand. I'm running a consultancy in a LCOL area. Last year we made 400k revenue, 150k profit and 40% growth. We already have verbal agreements for around 400k worth of sales for this year. We have the employees for 600k revenue and if we manage to bring in more sales…

which country is this btw ? I'm assumming UK ?
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