Equity shares. It’s what makes a business partnership a business partnership.
One of the toughest parts of a startup business relationship is determining how many shares to give a partner as well as defining what those shares require.
Imagine asking two people to be a part of your business. You give one 5% and one 20%. What does that imply? We humans tend to overvalue ourselves and when someone else quantifies us, sometimes the results are gut wrenching. No one wants to think, “I’m worth 5% to this company,” even if that 5% is a staggering amount of money.
Today I want to focus on a different but related scenario. The reaction to equity shares.
In my new venture, I offered the creative director of Web.Search.Social a percentage of the business to develop and manage the branding and identity. His reaction was first disbelief and then gratitude. I could have made the work a condition of his existing employment. I could have promised him a larger salary. I could have promised him a separate and distinct salary. Instead I gave him a vote and a position of steering the company, as well as benefiting financially from its success. His feeling was that he was grateful. My feeling is that after a decade, he’s more than earned it.
A friend of mine recently started a business of his own. He gave one of his employees a stake in that business. The percentage was the same as the one I gave my creative director, but the role was advisory only. My friend was met with an entirely different reaction. “Why so low?” “Why not more?” What followed were hurt feelings and a decline in productivity.
It goes to show that the entrepreneurial journey will always have the human element to contend with.
These are my 300 words for the day. I am Ralph M. Rivera.[line]