How to use your company’s ownership equity
James Shomar, Chief Growth Officer
Most entrepreneurs and business owners tend to think about equity in terms of a pie to be divided. Ownership is viewed as a reward system where pieces are given out very conservatively, usually for past performance. What I’d like to suggest is an alternative approach that can play a big role in turning your company into a growth-oriented organization.
What if instead of viewing equity simply as a means of distributing proceeds, we view it as a company asset that can be leveraged to drive growth? What if rather than giving away equity to someone as a reward for decades of hard work, we instead “invest” equity into people and organizations that can drive future growth and expand the size of the pie for everyone? What if instead of owning 100% of a stagnant $5MM asset you could own 75% of a $20MM growing asset? That’s the way owners need to think about equity. It’s not a reward for the past, it’s an incentive for the future. This isn’t about status and patriarchy, it’s about growth and prosperity.
So, let’s say you buy into this philosophy or are at least interested in learning more about how that works, how should you invest that equity? Generally, you invest that equity in people that can help you grow in ways that you otherwise wouldn’t. If you really do want to grow, this can even be a filter for who the right person to bring on is. If the person you’re looking to bring on your team is supposed to be there to help you grow and they are not motivated by having a fair equity stake, chances are that’s not the right person for the role. In my experience, there is essentially a 100% correlation between people who can drive growth and those interested in reaping some of the upside of that effort. Are they motivated by aligning incentives or not?
The same can be said of organizational partners including investors, joint ventures, and strategic partners. Are there organizations in your market that bring a platform you can leverage to accelerate growth? Many owners have not even asked that question before because they are not used to thinking about equity in this way. Embrace the liberation this offers and open your horizons to the possibilities. If you can use this strategy, what’s now possible? Do you see newfound potential for your company?
Send me an email at [email protected] if you experienced that “click”. This is one of many elements of having a “growth-mindset” and can set you on a new trajectory with new possibilities.
Join James for an upcoming Entrepreneur Speaker Series webinar on April 29 featuring Dr. Kimberly Townsend, President & CEO of Loretto. Click here to register.