Fast Cash vs. Slow Equity

One mistake I’ve made in entrepreneurship is not understanding the difference between “cash businesses” and “equity businesses.” A cash business is like an ATM. It spits out money reliably, often immediately, but may have limited long-term value. You might replace your salary quite quickly with a cash business, but it’s often easier to compete with so someone could come eat your lunch, and it might be hard to scale past a certain revenue number. An equity business is more like planting a tree. It often takes considerably longer to replace your salary, but once you do those earnings are more durable, and the business is often worth quite a bit on its own. The mistake I’ve made, and that you want to avoid, is expecting cash business payouts from an equity business, and expecting equity business growth from a cash business. I learned this distinction the hard way with my marketing agency Growth Machine. It was an incredible cash business, I managed to get it to over $1m a year with on ... Read full article.