Putting a Value on Sweat Equity

What is Sweat Equity?

Sweat equity is the time and effort that shareholders and executives put into a company. While sweat equity isn’t determined by the money owners invest into their businesses, sweat equity does have value. The knowledge, time, and effort that a group or individual puts into a business represents sweat equity.

Sweat Equity Compensation

In some cases, businesses can lower their start-up costs by using sweat equity. Businesses can offer business service providers shares of their business stock instead of money. This is more commonly known as sweat equity compensation. This benefits those who provide services to the business because it allows them to obtain shares into the business. However, the majority of service providers prefer upfront money, so financing a business with sweat equity compensation can be difficult.

Understanding Sweat Equity