An interesting post:

Some guys—lots of guys, in fact—think that they have to hold on to all of a business. They do not understand that, with successful businesses, they have to share the wealth.

A guy I know, a real brainiac, in fact a man I was hoping to do a deal with, insisted that he hold on to at least 30% of a five million dollar business. He couldn’t do this project on his own, he needed me. His $5 mill project was a tough sell, but it was scalable—and I had the means to easily scale it up to a nine-figure project, by bringing in a few other parties, giving them pieces of the action, and making the project a reality.

So I went back to the brainiac, and proposed that he settle for 2.5% of the $115 million dollar project it would wind up being.

He turned me down. I went ahead and did the deal at $115 mill without the guy. At the end of the day, he wound up with 100% of nothing, while the 2.5% I had been willing to give him for his participation in the project wound up in my own pocket.

You tell me, what’s worth more: 30% of $5,000,000, or 2.5% of $115,000,000.

Go ahead, I’ll wait. Get your calculator if you need it.

Ahhh . . . you see? Percentages never ever matter—it’s the hard, absolute number that counts.

Incredibly, you will often find that very sharp, very smart, very educated people often miss this fact. The brainiac was an engineer trained at MIT, with a highly successful stint at a major computer company in their advanced materials division.

No slouch.

Yet in his desire to hold on to as much of a project as possible, he missed out on more money—in fact, he missed out on the whole business, because it went ahead without him, and he was no longer needed.

My point is, don’t worry about getting the biggest relative slice of the pie in any business deal you are involved with—worry instead about getting the biggest absolute slice of the pie that you can.

You’re getting 30% of $5 million? Good for you! Oh, now you’re getting 2.5%—of $115 million? Even better.

Lots of times, these miscalculations happen because someone thinks/hopes that the $5 mill project will eventually over the years grow into a $115 million business—and they’ll wind up with 30% of that. But that kind of growth doesn’t always happen. More to the point, often the $115 mill project balloons in short order (less than a year) to $500 million—as happened in the above example—while the $5 mill project grinds away.

Why does the big project grow so much faster than the small project? Because more people are invested in its success. More people want it to grow quick—and they have the means or the connections or both to pump up the project quickly. The partners who dilute the percentage of your share actually increase the absolute value of your share.

What’s 2.5% of $500 million? And which is better: 2.5% of $500 mill, or 30% of a potential (but unrealized) $115?

Or 100% of nothing. Because that’s what the Brainiac was left with, as of today: Nothing.

Hope can kill you. Hope can make you blind to the reality right in front of you. There’s nothing wrong with making a cool, calculated gamble on the future. But don’t blindly hope that your position will improve in the future—deal with the position you have in the here and now."

Original here