One of the absolute best ways to create massive amounts of wealth in a short period of time is utilizing your knowledge and expertise to gain equity in companies.
In today’s episode, we switch things up a little bit. Host Roland Frasier becomes the interviewee, while Ed O’Keefe sits in the interviewer’s chair. Ed is an absolute legend in the internet marketing space and has helped transform countless businesses and industries. One of Roland’s favorite topics, consulting for equity, has quickly become one of Ed’s as well. The two sit down to explore Roland’s journey through creating this path to wealth and lay out a vision for others who want to go down that path too.
Listen in to see if consulting for equity is something you might be qualified to do.
The 5 Levels of Compensation
As Roland sees it, there are a lot of ways you can be compensated for something. He explains them in levels that build on each other.
Level #1: Give free advice. People ask us questions, want our expertise, and because we’re good humans and want to help people, we share. Yes, you should share, but where do you draw the line so you’re not spending all of your time giving things away for free? There has to be a point at which you say, I’m willing to share, but in the context of a short exchange.
Level #2: Turn that knowledge into an actual, compensable skill. Roland did that for years as an attorney. But even if you can bill, say, $1000/hour and bill 2000 hours a year, you’re only making $2 million. That’s where you’re capped out. Roland calls this the Dancing Bear. As long as you dance, people throw money, but the minute you stop, no money. That’s the dollars-for hours-trap.
Level #3: Charge a flat fee. Maybe you could charge $1000 for something that doesn’t take you long to do. You’re making more than you would with an hourly rate, but you’re still really limited.
Level #4: Revenue share. Someone has a project you’re going to consult on. You’ll talk about it together, and you’ll make it happen for them. They know you’ll create a continuing value for them through that thing. Anything that comes through that effort you’ve made to create that intellectual property asset you own, you’re effectively licensing it to them and receiving some of the revenue from it.
Level #5: Consulting for equity. Over the years, Roland has helped people build a brand, then watched them sell their businesses over and over for multiples of what he received. Any time you’re a consultant, the rev share goes away at some point or doesn’t pan out like you thought. Or maybe it’s a campaign that only lasts for a year. How can you get compensated on a continuing basis for things you did? You become a part of the whole company. You get a piece of equity/ownership in the company in exchange for your knowledge and expertise. He started saying: “I’ll help you with this problem or challenge, but if I do, I want some ownership in the company.” And now he does that to scale.
Filtering Out People Who Aren’t Ready to Invest
When you help people for free, free has no value. People don’t have skin in the game, so they’re less likely to take action on the things you help them with. Roland had a friend who he had given free advice to over the years and nothing had changed. The friend called again recently and asked what he should do, and Roland said, “You need to hire me. If you don’t, you won’t take action.” With love, the best thing he can do is have them invest in themselves. This friend paid $25k for four hours on Roland’s couch.
Sometimes you offer free advice in the hopes that it will lead to a business partnership down the road. When someone asks, “Will you help me out?” you say, “What do you need help with?” Let them talk about the challenge they’ve got, then you can say it back to them and ask, “Why do you think that is?” Then this is the conversation you’ll have when you get retained. “I could think of 3-4 things that could help, but that’s going to take some deep discussion, 3-4 hours, and this is how I do that.” Everyone wants to feel heard and understood. So that helps.
The paid consult gives you something for your time, and it’s a filter for people who aren’t ready/willing to invest in themselves. You’re not building a dancing bear business. You’re getting paid to vet a client, understand their business, develop the relationship, and prove the value you can bring. You can’t solve all the problems in 4 hours. But you can present a strategy. 80% of the time, people who’ve invested in themselves will say, “How can I get you involved in my company?” They literally invite you into ownership. That’s an invention to equity.
Roland isn’t using that $25k upfront fee to make a living; he’s using it as a filter. So he can afford to be picky. He won’t take a client who isn’t interested in exiting their company at some point, or a client that doesn’t want to give him equity in their company. It needs to be a big enough business that he can have a transformational impact on the business. He’s usually looking for 10% to 50% equity in a company. The numbers need to make sense for him. He wants a business that has forward momentum and is ready to exponentially grow.
What Makes Consulting for Equity So Attractive
When you consult for equity, you’re leveraging your accumulated experience, knowledge, and contacts in a way that allows you to invest in exchange for ownership in other businesses. You have an unlimited checkbook in what you’re able to invest. You’re not constrained by dollars. Your equity is experience. That’s pretty magical right there.
People get in this “cash for equity” trap and think it’s the only way to do it. Businesses are looking for capital. It could be cash, but it could also be your brain, your connections, your intellectual property. Capital means “of value.” Cash isn’t the only asset of value in your pocket. You can leapfrog and time collapse things like sweat equity, because you’re not spending your relationship capital when you share it. You still have it. It’s not a liquidating resource.
Roland doesn’t know of any way to build wealth faster than to sell companies because the way we earn money is from the profit of the businesses we have. But businesses sell for multiples of those profits. The average private equity fund is paying 15x. The day the business sells, he gets paid in 1 day what he’d get in profits over 10 years. Take that money, reinvest half of it in a new business, sell that business three years from now, and it just keeps exponentially increasing. Roland is selling a business every quarter right now.
Who Should be Consulting for Equity?
If you have expertise, intellectual property, if you’re providing help to businesses and they’re paying you for a service or connections, you can consult for equity. A lot of people don’t realize that they already have lead flow and a pipeline. Are people asking to pick your brain? Each of them is a potential client. If you listed out 12 simple things to organically take your existing database or friend network and go one tier out of that, let people know what you’re doing, that could be enough to have a thriving consulting business.
There are a lot of misconceptions out there. People don’t think it’s possible. They think cash is the only way to get equity. The truth is that equity is available to anyone any time in any structure. Just show you have the value. People think it has to be super complicated. Roland has the benefit of being a recovering attorney. He says it’s not complicated; it’s simple. If you have something the company values enough, it’s just stating your case.
In the simplests of terms:
- Get clients
- Get paid
- Get paid ongoing
- Get equity
It’s truly life-changing when you have the breakthrough. You’re so excited at the possibility. A whole new curtain has been opened, and behind it is an unlimited opportunity. Do the first deal, the haze gets clear, and you realize you could do this again and again. Whatever you’ve ever wanted for you and your family, you can make it happen.
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