SWEAT EQUITY MARKETING VS. MARKETING FIRMS – WHICH IS BETTER?

Sweat Equity Marketing is a model in which the marketing firm does not charge fees for its services, but takes shares in the company. It is a form of investing in a business where instead of financial capital, resources are contributed in the form of knowledge, experience, and tools.

HOW DOES SWEAT EQUITY MARKETING WORK?

The Sweat Equity firm acts as an investor, but instead of financial capital, it provides specific services and know-how. Unlike traditional marketing firms, which charge fees regardless of results, here the compensation depends on the jointly achieved results. The goal is to maximize the value of the company or its profit.

SETTLEMENT IN SWEAT EQUITY

Marketing companies operating in the standard model charge fees for services, regardless of their results. Some offer performance-based compensation, but they focus on quick returns on investment and mainly choose e-commerce businesses, where gains can be immediate. Sweat Equity works differently – instead of one-time results, it focuses on long-term growth in the company's value.

Sweat Equity does not charge fees for services, and settlements are based on the company's revenue or income. There are also cases where this element is eliminated – this model is mainly used where the prospect of increasing the company's value is so significant that the shareholder earns only at the time of selling shares or stocks. Such an approach is often seen in technology startups and innovative companies, where the potential for market value growth is high.

THE ROLE OF SWEAT EQUITY IN DECISION-MAKING

In the Sweat Equity model, the marketing partner may, but does not have to, actively participate in shaping the company's strategy. By holding shares or stocks, they have the opportunity to influence the direction of company development, which can mean not only providing value in the form of services, but also real business support.

Collaboration in Sweat Equity can take various forms. In some cases, partners limit themselves solely to operational activities in marketing, while others also serve an advisory and business function. In the case of Profitova Group, in addition to executing marketing activities, we support partners in business strategy. However, the final vision of the company belongs to the entrepreneur, who decides on the direction of development.

FOR WHOM IS SWEAT EQUITY AN APPROPRIATE MODEL?

Sweat Equity is not a solution for everyone. Large companies with their own marketing departments, or those that can afford to pay for the full range of marketing firm services, are unlikely to choose this model. Typically, their market position is already established and stable, which makes them prefer to maintain full control over business and marketing processes.

Sweat Equity is a solution for those who have a business idea and vision but do not have sufficient funds to hire specialists or pay a marketing firm. A full range of marketing activities can cost up to 50,000 PLN per month, which is beyond the reach of many startups and small businesses. In such cases, the entrepreneur has two options – to conduct marketing activities independently or to collaborate in the Sweat Equity model.

SWEAT EQUITY AND VENTURE CAPITAL INVESTMENTS

Sweat Equity operates similarly to venture capital funds. The marketing firm, instead of investing capital, brings its work and know-how to projects with the greatest growth potential.

An important issue is also the choice by the company providing the services. It is Sweat Equity that selects the projects it wants to engage in, based on their growth potential and prospects for long-term cooperation. If the business model does not show promise, Sweat Equity may decline to establish collaboration, just as venture capital investors decide about the allocation of their funds.