Equity sharing is just one of the tricky subjects discussed in today’s episode with Roland Frasier, and Ryan Deiss.
Today is the beginning of a new chapter for the Business Lunch Podcast, as we welcome our new co-host Ryan Deiss. If you’re a regular listener (or an entrepreneur in the marketing space), then you’ve heard of Ryan, and you know this is going to be fun! So, hold on to your seats, they like to chat, and they like to chat fast! So before we dive in, make sure you hit Subscribe or Follow on Apple Podcasts.
Today, Roland and Ryan discuss equity sharing, but before they get to that, they talk about a significant slump in sales across all of their businesses this past week. A serious dip! So if you’ve noticed a halt in your sales, you’ll be sort of happy to hear that they did too, and Ryan has a reassuring theory.
So, Did Your Sales Just Slump?
Here at the beginning of Summer in 2021, the world finds itself in a unique spot. Much of the west is ‘opening up again,’ and depending on what industry you’re in, you may be feeling the hit right now that others felt last year.
“We’ve got stuff, as you said, that’s been consistently performing the same for 12 plus months, and then it just stopped. That doesn’t mean that like, that headline stopped working, or that offered doesn’t work. I would caution people to be careful about throwing a bunch of babies out with the bathwater”. Ryan Deiss
• What to do (and what not to do).
• Where Roland and Ryan see opportunities this summer.
• The businesses they project will ‘feel the sting’ this summer.
• Quick pivots to make.
“What changed? Humanity changed. Right? So don’t panic, don’t overreact, but you probably should act. And the action should just be asking the question, What’s the countercyclical thing that we need to pivot to?” Ryan Deiss
And There’s More,
Equity Sharing. Should You Do it?
When it comes to employees, Roland and Ryan are in the camp of ‘Just say No.’
“As an owner, I don’t want a bunch of minority shareholders that have minority rights that might interfere with the plans that we have for the company and the things that we want to do. And equity is the most expensive thing you can ever give”. Roland Frasier.
So, if your employees (or potential employees) are asking for equity, it’s essential to understand this:
“I don’t think many people realize that very often when you give somebody equity in your company if you don’t do it right, what you’re really handing them is a big fat, giant tax bill, no matter what jurisdiction you’re in.” Ryan Deiss
As a ‘Recovering Attorney’, Roland explains why this is so that you can explain to those who want your equity!
“Giving equity or taking equity in a company is generally not a good idea. Unless you have some cash that’s going to allow you to pay the taxes, or it’s new enough that the value is so low that you’re okay doing that”. Roland Frasier
“I want you to make a lot of money! But I don’t necessarily want you as a business partner because I don’t know you yet.” Ryan Deiss.
So What Can You Offer High-Value Employees Instead?
“So I think the best thing to do, like what we’ve decided, is it’s easier to do variable comp and say, look, based on the profitability of the company, we have some benefits that will come to you in the form of income because we don’t plan to go public ever. We don’t know if we’re going to sell any of the companies that we’ve got. So it’s a dubious benefit to get equity versus getting income anyway.” Roland Frasier
When To Make An Exception (And ‘Give in’ to Equity Sharing).
- Scenario 1, When someone is genuinely investing (with their time, for example) and taking on risk.
- Scenario 2, If your company is publicly traded.
“If you don’t have to, don’t do it. If you can afford to acquire and attract the talent that you need to provide the product or service that you want, at the level of quality that you want, and you can do it without equity sharing, you should. Because it’s so expensive, and similarly, you should never sell equity to somebody else just to get money. Because once you do that, you have them forever”. Roland Frasier
Plus, Ryan and Roland Discuss,
- A Macro look at hiring dynamics and trends happening due to the turbulence of this last Pandemic-hit year.
“I think in terms of comp, that people maybe took a hit. Companies said, we’re lowering wages, or we’re lowering the headcount of people, and so people are being forced to take on more. And now I know that most of the businesses I’ve talked to are having a terrible time getting people back! Some are collecting unemployment at a higher rate than they were being compensated before. Or they don’t have to go out and about, or they’ve simply left for places that cost less to live because they feel they can work remotely. So there’s an interesting thing going on with all of that”. Roland Frasier
- Recent drama and uproar on Ryan’s Twitter feed.
Thank you for listening.
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Who Is Ryan Deiss?
Ryan Deiss is an entrepreneur, author, and investor, and according to Shark Tank star Daymond John, “His companies practically own the internet.” He’s the founder of Scalable https://scalable.co/ and Digital Marketer and one of Roland Frasier’s business partners. Love this episode? Check out episode 269 for some wisdom from Ryan on Work-Life Balance, and you can also go way back and hear Ryan’s story in this episode https://businesslunchpodcast.com/how-to-compete-when-there-is-nothing-new-under-the-sun-with-ryan-deiss/.
Listen to this show on Apple Podcasts or your preferred podcast platform.
Who is Roland Frasier?
He’s referred to as ‘the smartest guy in the room’ with much respect and affection from fellow entrepreneurs. We want to share his insight and expertise with you on your entrepreneurial journey. As the Co-founder or principal of 5 different Inc, Magazine’s fastest-growing companies (e-commerce, e-learning, SaaS + real estate), Roland is a serial entrepreneur who has built or sold over 30 businesses with adjusted sales ranging from $3 million to just under $4 billion. He’s a mentor and investor and an excellent podcaster too! Read more about Roland at https://www.rolandfrasier.com/.
Roland’s EPIC Challenge.
You may have heard about Roland’s EPIC challenge, which he moved online when the Pandemic hit. It focuses on Ethical Profits In Times of Crisis and dives into no-money out-of-pocket business acquisition strategies. If you’re interested in finding out more about this strategy, go to https://businesslunchpodcast.com/epic.
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Contact and Follow Ryan Deiss
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