Sweat equity, what is it? Where can I get some?

Search for a definition of ‘Sweat Equity’ and you’ll find “The term sweat equity refers to a person or company’s contribution toward a business venture or other project. Sweat equity is generally not monetary and, in most cases, comes in the form of physical labor, mental effort, and time.”1

This is a good summary, but in practice sweat equity is so much more. It ties people together with a common goal. It builds trust, commitment and a strong foundation to form a long lasting business relationship.
In this article, we’ll look at sweat equity from two perspectives:

  • the visionary with the business idea
  • the talent that joins the project to help make the idea happen

The visionary – where the idea originates

As visionaries (the project owner) we often don’t refer to our time as sweat equity. We spend our time (unpaid) developing an idea because we’re passionate about it, right? But let’s start thinking of your idea as a business entity. Your ‘sweat’ (all the time you invest in your idea, including those caffeine-fuelled late nights) accounts for a percentage of ownership in the business. This is your sweat equity.

So as the project owner, you’ve invested in the idea by dedicating your precious time in exchange for equity. You’re fully committed to developing your idea into a sustainable and profitable business. And you’re passionate about solving a problem or bringing joy to the world with your idea. Wouldn’t you want your long term business partners to share the same enthusiasm?

Sweat equity attracts your kind of people

It will take time for the idea to develop and the business to establish itself. You want people who are as committed to the project as you are. Giving equity attracts people who also believe in your idea. They have the same goal as you to make it a success. Sweat equity partners are fully invested because they share your vision, and are not being driven by immediate financial reward.

Sweat equity offsets the financial cost of building the right team

One of the top reasons for why businesses fail is the wrong team2. When it comes to finding investment for your startup, investors will want to see that your team consists of people with the relevant skill sets to move your business idea forward. Offering sweat equity share in your business means you get to bring onboard the right business partners from the get go, even when finances are at their most limited.

When does sweat equity make sense?

Sweat equity is best used to foster loyal, long lasting partnerships with people who have complementary skills to your own.

Complementary skills framework, Copyright © 2021 Sweqlink Ltd

Visionaries will need to wear many hats in the early days of starting a business. You might find it difficult to see where your strongest skills lie and what skills you should be looking for in potential team mates. If this is you, ask yourself:

  1. Where do I currently have clear gaps in my knowledge and experience for turning my idea into a business?
  2. Thinking to the future, where are my skills limitations when it comes to taking the business further or scaling up?

At Sweqlink, we use a framework based on an ideology that three critical skill sets are typically needed to turn an idea into a startup business. Using this framework, visionaries can establish which set of skills, ‘Makers’, ‘Movers’ and ‘Maintainers’ they need to bring onboard.

Find business partners who share your vision at sweqlink.com. Create your free profile and take your idea from napkin to startup.

The talent – who help make ideas happen

Why would you want to be paid in equity?

Imagine it’s 1994 and you have the option of an hourly wage or equity for your commitment and work to help an online bookshop launch from Mr. Bezos’s garage.

Under a typical salaried contract, you would be paid for your hours. It pays the bills but your deal ends there. You wouldn’t be eligible for any future gains as a result of your hard work and contribution during the early days of the startup.

If on the other hand, you had accepted just 0.5% equity in this particular startup called Amazon, your equity would now be worth $8.5 billion* – that’s a lot of payback for all your late nights and coffee!

* Based on Amazon’s stock value at time of writing

Potential reward of getting paid in equity v cash by the hour, Copyright © 2021 Sweqlink Ltd

Startups are risky. Why would you want to work for a startup?

Investing your time into a new startup can be very rewarding. It can help you achieve your career aspirations by broadening your skillset and network. It can provide a source of fulfilment alongside other ‘pays-the-bills’ jobs by offering new challenges, all while supporting a cause that you’re passionate about. You’re also more likely to have your voice heard and make a bigger impact working for a startup.

If you have aspirations to be your own boss or a C-Level executive but you don’t have your own idea, getting involved with startups at the formation stage can often give you this opportunity. Offering your time in return for equity in a new business idea might be just what you’re looking for.

When does sweat equity make sense?

As ideas take time to develop into financially stable businesses, investing sweat equity is a long-term commitment. For some startups, early returns on your investment may come in the form of job satisfaction. It could be the buzz from reaching each milestone such as the successful development of a working prototype, or positive feedback from early adopters. Real financial return could take years depending on the business model. In this common startup scenario, sweat equity only makes sense if you have other means to support yourself and your family.

Sweat equity side hustle

Second income streams (also known as side hustles, or moonlighting if you’re from the 1980s) are increasingly common and practiced by more than 25% of the UK working population with figures set to rise3. There are a number of reasons why we are seeing this upward trend. Some of the rational motivations for pursuing a side project include additional income and building a nest egg for retirement. And more emotional motivations include the excitement of new challenges, sense of achievement and personal development otherwise not available in the ‘day job’.

At Sweqlink, you define how much time you can spare to join a project. This could be 5 days a week or just a few hours a week so you can find a project that works with your livelihood, not instead of it.

Building a business relationship based on sweat equity offers clear benefits for both visionaries and talent partners. Find your future business partners at the internet’s first sweat equity marketplace. Sign up for free at www.sweqlink.com

References:

1 https://www.investopedia.com/terms/s/sweatequity.asp

2 https://www.cbinsights.com/research/startup-failure-reasons-top/

3 https://assets.henley.ac.uk/defaultUploads/PDFs/news/Journalists-Regatta-Henley_Business_School_whitepaper_DIGITAL.pdf

Your new normal?

As the world takes stock and recovery begins from the year that everyone would like to forget, 2020, the question on everyone’s lips is “What should be the new normal?”

A luxury previously offered to mainly those in tech based or very senior roles, COVID-19 has presented many with the opportunity to work remotely. And while many businesses will encourage their workforce to return back to the office post pandemic, it is unlikely work life will return to the way it was pre-pandemic.

The sardine train by SweqLink

Global Workplace Analytics predicts that by the end of 2021, 25-30% of the workforce will be working from home multiple days of the week. And for many good reasons:

  • Demand for work-from-home from employees has been increasing over the past decade as employees seek work flexibility in where they work from and when. Employers who offer flexibility are better at retaining top talent. And if we are to encourage greater workplace diversity, flexibility must be on the table.
  • Cost saving opportunities of allowing employees to work from home have been given more awareness by the pandemic.
  • Disaster preparedness will be high on agendas for many businesses and their investors
  • Positive impact on our environment by cutting down daily commutes and business travel. The European Environment Agency (EEA) reported the largest reductions in greenhouse gases of up to 70 percent was seen in urban centres most affected by COVID-19.

The average daily commute time in the UK is almost an hour, almost always unpaid and often spent sardined between fellow commuters. Since the pandemic has forced us to WFH, 3 in 5 of us have used this extra time to redecorate and refurbish our homes, and 1 in 4 of all working adults in the UK admit to having an active side hustle.

If you’re looking for a better way to spend your spare time than donning overalls, or you’re thinking you need a plan B too, we have a community of budding entrepreneurs looking for help in all areas to get their startup idea off the ground. Find a startup project, trade your sweat for equity in a startup, and help make ideas happen. Create your free profile at www.sweqlink.com.

Opportunities come knocking – market disruption in 2021

2020, a year of global disruption and toilet roll shortage, polarised views and extreme business winners and losers. Many people and industries have been hit hard by the pandemic, regardless of talent, location or background. There has been no mercy or discrimination shown by COVID-19.

However, in among the news of crashing stock markets and collapsing economies, there have been pockets of opportunity across eCommerce, logistics, online entertainment, and medical supplies such as PPE. Many industries and businesses have learnt to adapt. From local coffee shops turning their hand to deliveries, to fitness trainers continuing to motivate their clients with online sessions.

Businesses have been forced to change their business models in order to survive under the ‘new normal’. COVID-19 has expedited the digital transformation for many businesses and organisations worldwide, and made boldly clear that the current level of market disruption favours new business ideas that:

  • Offer tangible, time, energy or effort saving solutions to existing and new problems.
  • Improves quality of life in any form and across the living ecosystem at home, work and everything in between.
  • Is fun, engaging and a welcome distraction. Not all ideas need be functional – our mental health and awareness is more important now than ever.
  • Gives people access to products and services previously not available, or easily available to them.
  • Aligns with underlying goals of society and governments, such as reducing emissions, fatalities and suffering.

With the digital age we live in, it has never been easier to grasp the opportunities that present themselves to us. 2021 will be the year for starting afresh, with new ideas and improvements to traditional ‘old world’ businesses around the globe.

Your next idea could be the game changer you’re looking for, that the world is looking for. Let 2021 be the year you make it happen. If you’re looking for real business partners who can help get your idea from sketch to startup business, create your free profile and project listing at www.sweqlink.com – exchange equity for talent to make ideas happen.