Cash, Credit, or Relational Equity

When you build something with other folks you have to compensate them.

Compensation can come in many different forms, the more typical being cash, credit, or the more fluid (but just as important) relational equity.

Knowing the difference between the three and how you’re compensating (and how you, yourself is being compensated) is important.

Not only is it important but it demands that you be direct and that you communicate explicitly about these things.

Why? Because most folks do not naturally find financial alignment without actually talking brass tacks. In other words, no one can easily guess what another’s expectations are around compensation so it’s just better to have that conversation early (and often) instead of being completely in the dark.

The cost of not having those important conversations can mean life and death to the project. More startups and projects fold because of founder disagreements than lack of product / market fit.

The graveyard is thick and heavy with those types.

 

Over the years I’ve become much better at clearing the pathway around compensation with the folks that I work with than when I first started. In fact, I now use it as a measuring stick and signal as to whether I can functionally work with them!

If you can’t adequately and confidently hold a conversation about finances with your partners then what can you really talk about?


Also published on Medium.