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What is the best way to charge a startup for a Cust Dev/Sales consulting job?

I am negotiating a consulting job for a Fintech startup (that is not making any money yet) focused on customer development and sales. The idea is to work for them 4 hours per week. So my question is:
- Should I charge as a regular consulting job ($X per hour) knowing they might run out of cash faster?
- Should I propose to work in exchange for equity?
- Should I consider another approach?

16 Replies

Brian McConnell
0
0
Brian McConnell Entrepreneur
Head of Localization at Medium.com
Odds are their stock will be completely worthless. Charge them for your services. If you really trust them, consider working for a reduced rate with an IOU that kicks in when they hit certain revenue targets (odds are they won't, so make sure the reduced rate is something you can live with).
Andrew Lockley
2
0
Andrew Lockley Advisor
Investor and strategy consultant
All of the above are reasonable. Sweat investment can be appropriate, but you may find it easier to build momentum with cash based consulting. I've done both types of deal in the circumstances you describe. Typically the cash deals are a lot less of a headache. What you don't want to do is commission based sales - because almost all your time will be spent on troubleshooting and capacity building, rather than actual sales. Andrewlockley.com
Asnee Fernando
1
0
Asnee Fernando Entrepreneur
Cause-integrated Innovator & Entrepreneur,Founder & CEO of Shoptaki
You should negotiate for vested equity especially if you believe you can make a big impact for the startup. I'm not sure what the job description is but Even if you are charged by the hour, they are paying you to make sure their company can be successful, not the sake of just paying you. Since getting into a start-up is risky not sure if they run out of cash or not , but rewarding if they are succeeding and you are getting incentivized for the success

Also if it's some type of sales then you can try to negotiate for commission



Graham Seel
0
0
Graham Seel Advisor
Founder and Principal Consultant at BankTech Consulting
Perhaps take a hybrid approach with a retainer at a level that gives you some income, and then an outcome-based component. If, for example, you're providing general sales and marketing services, it is appropriate that your income be tied to some degree to revenues. The key question is what value you are offering to the company, and quantifying that value, and then being compensated accordingly. If you think there is a significant likelihood they won't make any revenue then don't work for them.
Chris Nunes
1
0
Chris Nunes Entrepreneur • Advisor
Product & business management for solutions in Augmented Reality & Bitcoin
For a startup, where the product is (most likely) still in flux and/or potentially unproven, it's likely that all sales efforts are going to result in many customization requests, are likely going to be difficult to land, and potentially have a long lifecycle to close. So part of your decision needs to be based on the product maturity with working/workable customers. This will help determine if hourly/commission are better.
The other part of the equation is your understanding of and belief in the product solution and/or the exec team's industry connections that will make the product & company more or less likely to be successful. This will help inform you if an equity trade-off on part 1 is beneficial.
There is no one-size fits all answer.
But in any event 4 hours a week is a drop in the bucket. Unless you're making >$250/hr, that low level of commitment is almost always better to take equity, in my experience. At least then if you find yourself in a lengthy but important sale, you have upside protection against your extra hours that you're likely to work and not bill for.
Chris Kitze
1
0
Chris Kitze Entrepreneur
CEO at Safe Cash Payment Technologies, Inc.
4 hours a week? Really? Can you accomplish anything on 4 hours a week?

If they want to see if anyone is interested in the product/service, the founders should be doing that cold calling so they get the feedback. There are many things prospective customers can tell you that the founders need to hear for future product dev.

Why wouldn't they want to pay you some kind of commission, assuming the product is ready for sale? That's the best way to align incentives.


Thomas J. Kaled
1
0
Thomas J. Kaled Advisor
Business Development Consultant @ thomas.kaled@gmail.com
I never offer a discount if I intend to charge a customer.

If your charges alone (4hours/week) will cause your client to become cash strapped unless you are charging $10,000 an hour it is my guess they are going to run out of cash one way or the other. The question for you is do you need the potential negative goodwill such an experience may result in? You certainly will not be able to use them as a reference for other clients and if there last cash as used to pay you it is unlikely they will serve as a referent.

Conversion of fees to equity is always possible if that is the agreement up front but as @Brian McConnell posed 'what is the value of their equity if they have no cash to execute a business plan'?
michael burack
0
0
michael burack Entrepreneur
president
get both equity and cash unless you are wealthy...you need to hedge your bet and eat....
Brendan Smith
1
0
Brendan Smith Entrepreneur
Startup & Business Strategist
Rafael, Great question. Coming from the FinTech community myself, and also several startups, here are my thoughts: Customer Development can never be outsourced. If the founder(s) aren't spending time talking with customers and running their own tests, it will be hard for them to make fully informed decisions that may affect the vision of the company and the paths that they may take on the road to product/market fit -- and therefore, equity may never materialize and the business may never even become a business. If your role as a consultant is to help guide the CD process, that's great, then we're on the right path. Now, what type of comp should you receive? It seems that question is almost irrelevant at this point as they don't have a business model and are, as you stated, cash strapped. What they probably DO have is a great team and great vision for the company... and that's probably the reason you're interested in helping them out? If this is the case, it sounds that you're almost more like a mentor or angel, but not a consultant. Thus, here's what I'd propose: have them set aside equity for active advisors (advisory board) with a cliff. That way, you can advise actively and if things work out you'll get a piece of the pie early on... and if things really work out, maybe you can join them when the time is right. The cliff/pool option is a great tool that protects them from just dolling out equity and it incentivizes you to spend your time wisely and stick around if the opportunity is worth it to you. Good luck!
Bill Allen
0
0
Bill Allen Entrepreneur
Senior Vice President/ Team Leader Technology, Media & Telecom
Hi Rafael, My recommendation is to charge $/hour. If you don't get paid chalk it up to experience. Equity doesn't make sense. If you receive equity most likely its going to be common shares which unfortunately are not going to be worth anything. Hope this helps, Bill Sent from Surface
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