17 min
Accepting equity as payment for agency services Agency Leadership Podcast
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- Marketing
Start-up clients may not have the funds to pay you, but still need service, so why not consider receiving equity as payment?
In this episode, Chip and Gini discuss the potential pitfalls of that approach. They caution against exotic payment schemes such as equity or pay for performance, emphasizing the risks and complexities involved.
They also highlight the importance of legal and tax considerations when entering into equity deals.
Key takeaways
* Chip Griffin: “There is often a real desire for people with businesses that don’t have a lot of money to try to come up with really exotic payment schemes, whether that’s equity, whether that’s pay for performance, however they’re able to postpone or delay giving up cash to you.”
* Gini Dietrich: “Something like 95 percent of startups fail. So why would you take that risk?”
* Chip Griffin: “Anyone who is willing to give up a portion of the ownership in their business to you has to be, by definition, relatively desperate.”
* Gini Dietrich: “I couldn’t take the risk of potentially never getting paid because I was not in control of whether or not they were going to sell this new product.”
Related
* ALP 14: Non-traditional agency revenue streams
* 9 ways to price your agency’s services
View Transcript
The following is a computer-generated transcript. Please listen to the audio to confirm accuracy.
Chip Griffin: Hello and welcome to another episode of the Agency Leadership Podcast. I’m Chip Griffin.
Gini Dietrich: And I’m Gini Dietrich.
Chip Griffin: And Gini, you know, I think we need to, I think we need to do an equity deal with somebody for this podcast. I think that’s really… that’s really the way we can make some money.
Gini Dietrich: Absolutely. Zero of zero is a really good idea.
Chip Griffin: Yeah, absolutely. I mean, you know, why not? I mean, it is something that a lot of, agencies encounter from time to time where you’ll be talking particularly with a startup or something like that. And they say, Hey, you know, wouldn’t it be great if you could do some PR work for us and we will pay you in equity.
We’ll give you shares of the business or we’ll give you options or something like that, that allows you to benefit from the upside because you’re coming with us from the ground floor, and we want to reward that kind of faith in what we’re building.
Gini Dietrich: Just a few months ago, I had a prospect say to me, We really want to work with you.
We really believe in your process. We really have a great chemistry with you and your team. Would you be willing to postpone payment until after we sell our first customer from the work that you do? And I was like, no, no. And I mean, he pushed me really hard. He’s like, okay, well what if we did this? What if? I was like, listen, I have a team, I have payroll to make.
They have other clients. If we can’t figure out some sort of way to do this, where you’re paying us for our work, then it’s not going to work. And it didn’t work. We had to walk away. because there’s, I can’t make payroll.
Start-up clients may not have the funds to pay you, but still need service, so why not consider receiving equity as payment?
In this episode, Chip and Gini discuss the potential pitfalls of that approach. They caution against exotic payment schemes such as equity or pay for performance, emphasizing the risks and complexities involved.
They also highlight the importance of legal and tax considerations when entering into equity deals.
Key takeaways
* Chip Griffin: “There is often a real desire for people with businesses that don’t have a lot of money to try to come up with really exotic payment schemes, whether that’s equity, whether that’s pay for performance, however they’re able to postpone or delay giving up cash to you.”
* Gini Dietrich: “Something like 95 percent of startups fail. So why would you take that risk?”
* Chip Griffin: “Anyone who is willing to give up a portion of the ownership in their business to you has to be, by definition, relatively desperate.”
* Gini Dietrich: “I couldn’t take the risk of potentially never getting paid because I was not in control of whether or not they were going to sell this new product.”
Related
* ALP 14: Non-traditional agency revenue streams
* 9 ways to price your agency’s services
View Transcript
The following is a computer-generated transcript. Please listen to the audio to confirm accuracy.
Chip Griffin: Hello and welcome to another episode of the Agency Leadership Podcast. I’m Chip Griffin.
Gini Dietrich: And I’m Gini Dietrich.
Chip Griffin: And Gini, you know, I think we need to, I think we need to do an equity deal with somebody for this podcast. I think that’s really… that’s really the way we can make some money.
Gini Dietrich: Absolutely. Zero of zero is a really good idea.
Chip Griffin: Yeah, absolutely. I mean, you know, why not? I mean, it is something that a lot of, agencies encounter from time to time where you’ll be talking particularly with a startup or something like that. And they say, Hey, you know, wouldn’t it be great if you could do some PR work for us and we will pay you in equity.
We’ll give you shares of the business or we’ll give you options or something like that, that allows you to benefit from the upside because you’re coming with us from the ground floor, and we want to reward that kind of faith in what we’re building.
Gini Dietrich: Just a few months ago, I had a prospect say to me, We really want to work with you.
We really believe in your process. We really have a great chemistry with you and your team. Would you be willing to postpone payment until after we sell our first customer from the work that you do? And I was like, no, no. And I mean, he pushed me really hard. He’s like, okay, well what if we did this? What if? I was like, listen, I have a team, I have payroll to make.
They have other clients. If we can’t figure out some sort of way to do this, where you’re paying us for our work, then it’s not going to work. And it didn’t work. We had to walk away. because there’s, I can’t make payroll.
17 min