How to Get Equity in a Company

Hey dealmakers,

Welcome to the Better Business Brief, where I share takeaways from:

running a business I’m building to sell for millions
my consulting with business owners building to sell for millions
tips and tricks you can use to do the same

I’ve been learning a lot lately because we changed up the format of my consulting business. While I do still do some retainer-based consulting, we are moving more towards a consulting in exchange for equity position. There have been 6 key lessons I’ve learned about doing this that I’m going to share today. I think this can help 3 groups of people:

Those who want to get into this kind of consulting
Those who want to buy someone’s business
Those who want to understand what conditions may warrant giving up equity in their company

So today, in less than 5 minutes, I’ll give you:

📈 The 6 Lessons I’ve Learned about this Approach

How to Practically Apply Each

Why Each Helps You Get in the Door

There are many more than 6 things I’ve learned about doing this, but I boiled it down into a few of the key ones that I believe drive the most impact. Here they are:

1. Be an Investor, not a Consultant:

We make our initial approach with a business owner as an investor. This is for a few reasons. The first is that we genuinely may decide to figure out how to purchase their entire business outright if it makes sense as part of our overall plan. The second is that there are a number of things we might be using as a resource to justify earning a seat at the table. We may invest capital, connections, softwares, tools, people, etc. to help grow a business. The way to apply this one is simply to label yourself as an investor that’s interested in investing in their company, and we’ve found that approaching this way opens the door to the right kind of conversation you’re looking for if you are seeking equity.

2. Don’t Get Boxed in:

I was boxing myself in as a consultant for almost the first whole year of it. I saw myself as more of a coach in a certain sense rather than someone who could come in as a real partner to these businesses I was working with. The traditional retainer model I was using to collect payment encouraged this type of relationship. There’s nothing wrong with it, but I wanted to make more impact, so I simply started offering more. We now offer 3 models of how we’ll work with a company, that are basically: done with you, done for you, and done as a full partner. Offering full partnership gets you in the door because a business owner wants you to have skin in the game to really help.

3. Be Like Smoke and Make no Assumptions:

This is one I picked up from an Alex Hormozi interview about sales. I can’t really think of a more complex type of sale than that of an entire business. Because of this, it is important to approach these talks with a completely blank slate and make zero assumptions about the business, the owner, or what they’re looking for. What we’ve found is that if you start out by suggesting what you think should be done with the business, you will lose them fast. If you instead make no assumptions and offer no real concrete answer to EXACTLY what you’re there to do, what happens is that the business owner usually brings up exactly what they would LIKE help with. You can’t come in and push someone to do something they don’t think is right for their business, so it’s about meeting them where they’re at with a plan that they think is right. If they bring up something they want help with that you can actually help with, that’s your opportunity to become a partner to them.

4. Extract the goal:

This one build off of the last. The issue with most business owners is they struggle to find an answer for EXACTLY what they want. They might start out saying they want to sell their business, but eventually change their mind and decide they’d rather stay on. If you can expect this, you can take the approach of being a guide in their process of figuring out what they want. To pull this off, you need to become an incredibly good active listener and also ask deep and thought-provoking questions to get to the root of what they actually want. This is important because you can only carve out a path for a consulting relationship or partnership if you have a clear goal or set of goals together, so guide them to saying what that goal is. If a conversation about selling their business is happening, get them clear on 3 things: price, terms, and timeline.

5. Paint it done:

This one again builds off the last. This is a little exercise we do to help get even clearer on the goal. It goes a little something like this: “If we were to work with you on [this project], and you could paint it done, what would it look like once finished?”. What this does is gives you SPECIFIC details about exactly what they would expect out of a working partnership. What’s important here is that you be honest with yourself about whether or not it’s something you can realistically achieve. If it is, use these newfound details to reassure them that you’re confident you can get that result for them that they want. Another way to ask the question is “if you could wave a magic wand and have your ideal outcome, what would that look like?”

6. Think Like a Transitional Manager:

Ultimately, you’re the co-pilot for whatever plan your new partner has. Not the pilot, the CO-PILOT. Unless you buy the whole business or the majority of it, it is your job to continue guiding them down the path of the goal you’re working towards, and not to try to change everything on them. Building off of the last few tips, you have gathered details about the plan at hand, and that will involve a transition of some kind. Your job is simply to be a manager of that transition, making sure it goes smoothly. Taking this approach helps you CONSISTENTLY provide value during this partnership, which justifies either your fee or your equity.

There’s a lot more than this to learn, but these are the key things I’ve found. I hope this has been helpful for you in your journey. If you’d like to know what it would look like for these to be personalized to your business, I’d love to talk about it: Grab some time here and we’ll make sure your plan is on track.