When is it best to do a profit share compared to giving away some equity in the business?

This was a question Jennifer came to us with and it is always a hard one to answer.

Every business is different. Jennifer owned a professional services practice and that generally means it’s easier to succeed out than to sell. Which means taking on partners. Once you have business partners though, you don’t get to make the decisions by yourself because it’s not all your money anymore.

So, the first step is to thoroughly assess whether that person is going to be right for the business as a decision-making owner (an equity partner). Jennifer was concerned that her potential partner might end up leaving in the future so elected to go with a profit share arrangement until she was certain about giving up some ownership of her business. We set up KPIs around the profit share and her employee was energised by the new arrangement.