Cofounder · Equity

How do you share equity with a sales partner?

Anonymous

April 10th, 2016

We are just getting started. I have been the sole developer in the product and have a MVP ready. I've now found a sales specialist who's willing to help pitch the product to potential clients. What terms should I offer this person to keep them interested and active?

Don Rector

April 10th, 2016

It sounds like you don't consider this person a partner. If you feel this person is an early employee then compensate them as just that, but maybe you either need a different person or a different view of what it takes to launch a product. Don Rector Pls excuse my typos this was tapped one character a a time on my iPhone

Bill Lennan Red Rope Social

April 10th, 2016

I'm in a similar situation. 
Service launched, first customers in, realizing I need to learn a lot about sales. 
I've talked with a few potential sales people - so far only one has been a good fit. 
He will be paid for sales and training other sales people. 
He wants equity but also realizes he needs to earn that privilege. 
Wisely he has chosen to NOT talk about equity until after he proves the value he can bring to us. 
B-)

Phil Small Independent Consumer Goods Professional

April 10th, 2016

sales specialist? meaning what? that they read books on how to sell or they actual sell to make a living. terms to offer.....a commission based on actual sales and as an incentive....an override on subsequent repeat orders for a period of time that appeals to the sales person....a period of time that satisfies the capitalist in your newly acquired "sales specialist" another anonymous member

AJ Johnston Owner at Law Office of Ann E. Johnston

April 10th, 2016

I'd be very interested what you learn and what others have to say.  We're in a similar position.  How to find that person and how to compensate them?

Yongyan Wang Stay Hungry and stay foolish

April 10th, 2016

I am in a similar situation that I have been working for 3 years on a prototype and finally it getting there. Now I met a old colleague and he shows great passion about the product and like to be part of it. His expectation is 20 to 30%. How much should I share the equity? Should I setup some goal for each quarter? 


Mike Moyer

April 10th, 2016

SUPER EASY!

I love this question because I have the PERFECT solution. It's called Slicing Pie and it's a formula for determining a perfectly fair equity split for any bootstrapped company no matter what changes.

The concept is simple: a person's % share of the equity should always be equal to that person's % share of the risk. 

Risk is equal to the fair market value of the contributions made by each participant. Contributions include money, time, ideas, relationships, supplies, equipment or anything else. Everything has a fair market value.

Slicing Pie normalizes the fair market value of cash contributions and non-cash contributions (like time) by converting to a fictional unit called a "Slice"

So, at any given time, a person's share is equal to their slices divided by all the slices. It always stays perfectly fair!

Not only does it allow you to calculate a perfect split, but also it determines the fair buyout price, if any, when someone leaves. Slicing Pie is great, and it's used all over the world!

I've written several books on this topic and you may have one if you contact me through SlicingPie.com

Phil Small Independent Consumer Goods Professional

April 10th, 2016

your colleague wants 20-30% for just showing interest?? I am assuming your colleague is taking an equity position in your product....otherwise - once you establish or launch the product there are MANY sales agencies hungry to pickup a new line for far less than 30%. Unless your friend puts up $$ and you've positively tested the market setting milestones is premature

Eric Sullivan CEO at FoundationLab

April 11th, 2016

I would do some sort of 3 month trial with a potentially higher commission to compensate them. Then once you feel the relationship is a good fit if you feel like offering equity then make that transition and adjust the commission accordingly. Make sure to do some type of forecasting so the numbers make sense both for the business to have healthy growth and for the person to be fairly compensated.

Daniel Canales Investor

April 11th, 2016

I have found that equity sharing is best served when the specialist is willing to lead that task as a division. If your sales specialist is looking to work solo I would offer a draw commission structure. However, If he is a team builder and can train/manage the sales reps he could be worth up to 20% of your company. This would give him the financial freedom to recruit, hire, market(the product), and manage the reps and save you a lot of time. I guess the deciding factor would have more to do with how involved the specialist would like to be with your company. I hope this helps! Best Regards, Daniel Canales (512)203-9790 "As this day unfolds, this...collection of Gold, No one is bought, until I am sold!" -DC