“If you can get people to work for you for free, you must be really good.”
Founders should expect to work for free, without a salary, for an indefinite period of time, for something that has an 80 percent chance of failure.
That is why most people won’t do it.
Sure, some solopreneur founders will sacrifice their evenings and weekends for their dreams or business ownership, but getting others to sign on to this struggle is a bit of a challenge.
Between the present and the future you want is a collection of people. They will not get involved in your dreams without rewards. Those relationships are going to require constant exchange. You give up one thing to get another.
In fact, your entire life has been one of continuous exchange. You are giving up time to read this right now. You have given something for whatever you have, and others have too.
Equity is a common term in business, but generally, it refers to the difference between assets and liabilities. It is the “net worth” of the business. How much of that net worth do you own? That is your equity. Equity is commonly measured in shares. That is why stock quotes are referred to by financial media as “equities”.
“Stock”, “shares”, “equity”, and “net worth” are terms that are used interchangeably.
You can award equity to key partners in a business as a substitute for a lower salary or even a nonexistent salary. Of course, equity should be awarded incrementally; spread out over several years and vested. This is a vesting schedule; ensuring that the partner cannot quit after a short time and keep a large percent of the company. Generally, the equity is released little by little over the course of several years.
A famous example of a startup company awarding equity for talent instead of paying full price was Facebook paying an artist in stock for painting a mural .
If you have been awarded equity from a company that could go public, use Vested to determine the value of your equity.
Use Vested to calculate the value of a personal equity stake in any situation.
And finally, welcome to One Click Advisor! We would be remiss if we didn’t give you a brief tour of the site and what it can do for you. If you are looking to plan a business a little better or start one, we have a number of free things for you here. Your challenges and opportunities can be sorted into one of three areas.
Marketing, because it brings in the customers. Start or continue that plan here.
Operations, because it keeps your customers. Start or continue that plan here.
Finance, because it is the scoreboard. Change the “score” and explore financing here.
Equity is a great way to finance a startup team.