Boutique service firms that have dead equity on their cap tables are dead.

What is dead equity? Dead equity is equity held by people who no longer work for the firm.

Why is it a problem?

Acquirers do not want their growth equity to be used to buy out people who are no longer contributing to the growth of the firm.

The presence of dead equity prevents many founders of boutique professional service firms from exiting.

Fix?

Don’t give equity to people who are not helping you grow the firm.

And if you already have, buy it back before you try to sell your firm.