Granting stock options is only half the battle. To make equity a powerful motivator, leaders must constantly communicate a clear and believable narrative for a future liquidity event, such as an acquisition. This vision is what transforms paper ownership into a tangible and valuable incentive in the minds of employees.

While 8% of founders pay themselves nothing to maximize reinvestment for a future exit, this strategy is often regretted. Even among founders who achieved a multi-million dollar exit, many later wished they had paid themselves at least a small salary to improve their quality of life during the building phase.

Don't default to a 50/50 split on day one. Instead, agree to formally discuss equity only after reaching a predefined milestone, like $10,000 in revenue. This allows you to base the split on demonstrated contribution and commitment, avoiding the resentment from premature, misaligned agreements.

Believing the business would one day be his, the founder paid for hotels, tools, and other company expenses from his own pocket. This personal financial over-investment, without any formal ownership, is a red flag that you are acting like an owner without being compensated like one.

Founders should be wary of earn-out clauses. Acquirers can impose layers of pointless processes and overhead costs, tanking the profitability of a successful business and making it impossible for the founder to ever receive their earn-out payment.

To conserve cash, especially in a downturn, founders can pay key employees 10-30% below market rate in salary. The key is to compensate for this deficit by offering double or triple the industry standard in equity. This strategy attracts top talent aligned with long-term success while keeping the company's cash burn rate low.

The founder's partnership allowed him to build a company without shouldering the initial financial risk. This "halfsies on risk" structure meant he never had true control or ownership, ultimately capping his upside and leaving him with nothing. To get the full reward, you must take the full risk.

Kevin Bartlett's story shows how relying on a handshake deal with a trusted, older partner led to a complete loss of his expected multi-million dollar exit. Good intentions and personal relationships are not a substitute for formal contracts when business stakes are high.

Passion has a dark side in the workplace. Highly passionate individuals are often less likely to negotiate their salary because they worry that bringing up money will make others doubt the authenticity of their commitment. This can lead to them being underpaid and exploited.