View equity as $ not %
Benjamin MacNevin, CFA
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At some point in your career, you might be offered equity.
Here’s what you must know before saying yes.
Being offered equity as a gift or as a buy-in is an exciting moment.
But before you rush in, it helps to appreciate this is a long-term decision.
I have personal and professional experience with this, so let’s break it down.
Equity is not a bonus. It's an investment.
You’re not just being “given” something.
You’re being invited to take a bet, one where the odds, the payout and the timeframe are all uncertain.
It MIGHT be worth it.
But only if you go in with full awareness of the investment profile.
Think in dollars, not percentages.
It’s easy to get distracted by the vanity metric of ownership percentage.
“I own 1% of the company.”
But 1% of what, exactly?
You can’t pay your rent with equity unless that equity becomes cash.
To figure out the real value of your stake, you need answers to:
Because with equity, most of the value doesn’t come from the ownership.
It comes from the exit.
And unless the investment is realised, your shares may just be decorative.
Be honest about dilution.
Unless you’re investing in a bootstrapped company, dilution is inevitable.
That 1% can quickly fall in future rounds if you don’t participate.
Plus, ownership structures can get VERY messy.
Sure, you may have 1% of the company now, but that’s also how big your seat is at the bargaining table.
Investors with much higher shares will always have precedence over you.
Not to mention the founders and key directors that want to hold control.
Understand the true cost.
Equity can come with a catch, in the form of a lower salary.
If you’re being paid below market “because you’re getting equity,” then you MUST do the maths:
If not, you’re underpaid. Plain and simple.
And unless the business exits in a BIG way, your career earnings will have an anchor.
Don’t ignore the non-financial costs.
Owning equity doesn’t always mean you’ve “made it”.
In fact, it can mean:
There’s also the opportunity cost.
Equity ties you to a single bet, when your time and skills might be better valued elsewhere.
So, should you accept equity?
Some of the best wealth in careers comes from equity.
But only when:
Make sense of it now, not later.
There’s risk in everything you do.
But when it comes to equity, the risk is often hidden behind glossy pitch decks and promises of upside.
It’s always amazing to be offered equity, but before you dive in you MUST ask yourself:
Does this actually stack up?
Not in percentages.
In acceptable potential dollars.
In acceptable potential timelines.
In acceptable potential outcomes.
The best deals are the ones where you fully understand the upside and downside, and choose with intention.
I coach Professionals and Executives in their 20s & 30s to advance their careers.
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About Your Coach: Benjamin MacNevin
Hi! I'm Ben, and for years I’ve coached Professionals and Executives in their 20s & 30s to get the most out of their careers.
My coaching will help you understand which actions you can take right now which will lead to the highest value and fulfilment in your career.
My clients work at: Macquarie • CommBank • Air New Zealand • Accenture • NSW Health • Reserve Bank of Australia • KPMG, plus many small-to-medium firms!
Find me on LinkedIn and visit the Quarter Life Academy website. I'd love to connect!