Handling the distribution of Equity is perhaps the most important facet of forming a business as an entrepreneur. Many small businesses could end before they even begin due to the errors made by management in the issuance of equity. Additionally, the equity conversation is seldom comfortable; some would rather take themselves out of the picture before the conversation is initiated, simply to avoid making waves.
Part of this sense of urgency surrounding equity distribution comes from our ability to see the big picture. No person can see into the future nor accurately predict every detail of a business’ growth; there are new unforeseen challenges for entrepreneurs every day. t’s not as simple as splitting equity 50-50 and deciding later – not only is equity set in stone from the beginning, but a 50-50 split leads to problems when the two equal owners disagree. For the owner, or the person who is responsible dividing up equity in the company, they know the most about the business and its potential, so decision on equity might seem easy. However, others may feel that they deserve a high stake as they have been there from the beginning.
For me, I know I work best with those who have a similar mindset and skillset. Some of the things I consider my strengths – communication skills, time management, dedication, and more – are qualities I look for in a business partner. Further, I look at the manner in which a potential partner of mine approaches their responsibilities. If their goal is to complete a task as quickly as possible giving no thought to the quality of their work, I wouldn’t want them on my team. I work best with the individuals who are not concerned about the time factor, but are concerned with getting the best possible outcome despite the amount of time it takes to get there. I also Finally, I also look for people who have some level of background knowledge related to the industry surrounding our business. Time-efficiency is important to me; wasting time to bring teammates up to speed regarding a topic that they should have already known or studied is a huge pet peeve of mine.
Listening to the podcast only validated my feelings about a potential business partner. The situation between Alex and Mike is a perfect example of how issues can arise from the division of equity. Differing opinions of just two individuals can make it hard to arrive at a compromise, let alone when there are more pieces of the pie to distribute. Alex’s feelings showed us that he valued keeping as much control of the company as he can. Considering he’s been there from the start, this is not unreasonable. However, his partner Mike (who also left his job to become part of Alex’s startup) felt his contributions garnered him a bigger stake than Alex felt comfortable agreeing to. Noting the interactions between the two made me consider how I would handle the situation myself – coming to a compromise is much easier when you are working with someone who shares your own mindset and work habits.
