After years of persistence, dedication, commitment, sacrifice, failure, and disappointments building a business, how do Entrepreneurs enjoy the success ("Tip of the Iceberg") and get paid for all their efforts?
After years of persistence, dedication, commitment, sacrifice, and failure (below the surface), most Entrepreneurs never get to reap what they desire “The Tip of the Iceberg”.
Entrepreneurs need to get through the messy middle (Struggle Zone), where the business really creates true value and success, in order to enjoy the “Tip of the Ice Iceberg”.
Private Equity firms seek out companies that have built the foundation (below the surface) so that they can disproportionately enjoy the “Tip of the Iceberg” rewards from the business.
The quicker Entrepreneurs want to get to the “Tip of the Iceberg” the more vulnerable they are to making mistakes and not enjoying the “Tip of the Iceberg”.
During a start up, the Entrepreneur puts in blood, sweat and tears to get the business off the ground. There is barely enough money and the founder does not get paid
In the struggle zone the Entrepreneur needs to leverage their personal financials to get bank support. Paying themselves little to support growth and not over leverage themselves.
Finally the Entrepreneur can get paid a decent salary, has built a nice business but is unable to liquidate the value in the equity.
Entrepreneur needs to reinvest or bring in dilutive PE into the company.
Entrepreneurs trade in their private company shares for shares in the aggregated holding company. The Entrepreneur can liquidate shares over time and get ongoing liquidity as desired.
Entrepreneurs can, in perpetuity, earn additional shares for each year their business exceeds the highest previous EBIT level. These shares motivate the Entrepreneur and team to continue to build the business.
The Entrepreneur continues to run and control their business in perpetuity. Maintaining the same brand, team, systems and culture, allows the company to maintain their Legacy business forever.