How Your Little Entrepreneur Stacks Up
Do you find that during your daughter’s highly successful teen years, she feels overwhelmed by the prospect of big life decisions, as she realizes how unprepared she is to make them?
While many parents get discouraged and say, “Enough,” there is a way to reverse that pattern. One sure way is by equipping a child with a pocketful of equity.
That small amount of equity will turn the business she’s started or may be starting later into the next great enterprise.
The most successful entrepreneurs – who will benefit the most from investing – are those who start out with an investment in their own idea. They become experts at pitching a great idea to the world, and find investors from all over the world who will invest in what they believe in and nurture that vision into successful businesses.
Equity means that your child now owns a place in a growing and successful enterprise. Although these are difficult times to start your own business, creating equity for a business that is still in its infancy is always a win-win.
However, many parents may think that they can’t afford to do this. Many parents fear that by giving their children equity, they will be giving them too much ownership and control over their income stream.
A lot of parents have access to this type of capital, and it’s more accessible now than ever. Consider this: most new startups (those below $5 million) are awarded convertible preferred stock (CCPS) at a discount of roughly 20 percent to the initial stock offering price, with a 6-year “lockup” period, and a co-founder stock option before the other, common stock options are even issued.
If, as a parent, you want to help your child start a business that will be successful in the future, make sure you use equity (CCPS or other forms of equity) when investing in your child’s business. By investing in equity, you will always have a piece of a growing business as long as it exists. You will also make a personal contribution to your child’s venture, as well as a gift of goods that your child can sell to help pay off or build the equity for their company.
Equity, like savings, doesn’t just help your child buy the t-shirt he or she wants; it can be used to build an entirely new product line, expand manufacturing capability, hire employees and market new products – all while expanding your family’s bottom line in the process.
This article originally appeared on Funding Options, a business resource for parents (https://fundingoptions.com/)