Milestone-Based Partner Equity
Work together to a real milestone before fixing the ownership split
- Difficulty
- Advanced
- Time to result
- ~months to results
- Steps
- 5
- Confidence
- 98%
Avoid defaulting to a permanent 50/50 split before the partners know how they work together. First develop enough entrepreneurial self-knowledge to understand whether each person starts, operates, sells, or finishes well. Then agree on a measurable business milestone—such as revenue, customers, or demonstrated product-market traction—and put the future equity conversation on the calendar. During the trial, observe actual time, cash, expertise, contacts, decision quality, and opportunity cost. At the milestone, use that evidence to negotiate ownership with qualified legal and tax advice. The framework also warns against waiting years to formalise the relationship; by then, growth or decline makes the conversation more adversarial. The useful window sits between first enthusiasm and entrenched value.
Origin
Extracted from The Diary of a CEO
Core principles
- 01Self-knowledge should precede partnership
- 02Equal ownership rarely means equal future contribution
- 03Real work reveals value better than brunch assumptions
- 04Equity should be discussed neither immediately nor indefinitely
- 05A measurable milestone creates a decision point
How to run it
- 1
Learn your own operating profile
Build or run enough independently to identify your strengths, weaknesses, and preferred role.
Pro tip Use evidence from completed work, not aspirational self-description.
- 2
Map expected contributions
Discuss time, money, expertise, relationships, responsibilities, and life constraints explicitly.
Pro tip Name contributions that may create disproportionate value without taking equal hours.
Watch out Do not assume friendship predicts business compatibility.
- 3
Set a traction milestone
Choose an objective point such as revenue or customer count that is large enough to expose how the partnership works.
Pro tip Schedule the review date or trigger immediately.
Watch out A vague 'see how it goes' period invites incompatible expectations.
- 4
Protect the interim
Use professional legal advice to document ownership, authority, intellectual property, expenses, and exit rights during the trial.
Watch out Do not rely on a podcast framework as legal or tax advice.
- 5
Allocate from evidence
At the milestone, compare actual contributions and negotiate the durable structure.
Pro tip Discuss resentment directly before it hardens.
Watch out Hours alone may badly understate expertise, capital, or a decisive relationship.
In the wild
Koerner proposes that an engineer and a salesperson work together until a defined result, such as $10,000 in revenue, then hold a pre-scheduled conversation about equity using what each person actually contributed.
→ The split is informed by observed value rather than an automatic 50/50 convention.
Common mistakes
Automatic 50/50 ownership
Equal numbers conceal likely differences in effort, capital, experience, and future development.
Waiting until value is entrenched
Delaying formalisation for years makes every adjustment financially and emotionally harder.
Counting only hours
One relationship or specialist decision may create more value than many hours of routine work.
Is it for you?
Best for
Prospective cofounders who can complete a bounded trial before committing long-term ownership.
Not ideal for
Arrangements where work begins only after ownership and legal rights must already be fixed.
From the transcript
“You've got to learn more about yourself before you partner with someone else.”
“You really have to set a defined metric around it.”
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