The Revenue Sharing Trap
The Appeal of Revenue Sharing
In nearly every community I’ve managed, the same question has inevitably come up: “What if we tried out a revenue-sharing model?” It’s occurred so frequently that I thought it would be best to write out my thoughts—not only for clarity but to answer the deeper question behind it.
Revenue sharing has become an increasingly popular compensation model in the community-building space. On the surface, it appears to align incentives: the founder doesn’t have to pay a large upfront cost (thus mitigating their risk) and the community builder is invested in the financial success of the community they’re building.
For founders, this can seem like a low-risk, win-win solution—"If the community succeeds, we all benefit!" And for community builders, it can feel like an exciting opportunity to grow alongside the business. But, despite its appeal, the model often falls short in practice. So, why is this arrangement tempting for both parties, and more importantly, why does it so often fail to deliver?
The Problems with Revenue Sharing in Practice
Though revenue sharing sounds promising, several key issues make it unsustainable, particularly in community building. While the rewards of revenue sharing may sound alluring, they simply don’t work as intended. Alfie Kohn suggested a long time ago that incentivized rewards often end up backfiring:
“Do rewards work? The answer depends on what we mean by ‘work.’ Research suggests that, by and large, rewards succeed at securing one thing only: temporary compliance... Once the rewards run out, people revert to their old behaviors.”
Alfie Kohn, Why Incentive Plans Cannot Work
Further, I’ve noted that revenue sharing can lead to (and has led to in many cases) the following negative outcomes in my own experience in community-building:
Misaligned Expectations: Community building takes time, and revenue doesn’t flow in right away. Unlike other forms of marketing like email marketing for instance, where results are more immediate, the ROI of community takes months for the results to be demonstrated. Digital marketing agencies don’t charge their clients after 6 months of work, so why put added pressure on community builders to prove themselves if it would be unfair to do this with SEO specialists or website developers?
Emotional Toll: Founders might think they’re offering the builder a great new revenue stream, but builders often feel underpaid for their effort. This disconnect leads to frustration on both sides, and if burnout sets in, builders may leave, leaving the community at risk of depreciating its worth or even worse, collapsing altogether.
Founder’s Responsibility: Some founders sadly view revenue sharing as a way to step back, assuming the builder will handle the bulk of the work. But community building requires the founder’s voice and presence. Without that involvement, the community lacks direction, and its long-term growth suffers.
Why Community-Building is Different from Other Forms of Marketing
Community building is not like running a digital ad campaign or launching a new website. It’s a long-term play that requires consistent nurturing, relationship-building, and a deep understanding of the community’s needs. Often, this work involves emotional labor—fostering connections, handling conflicts, and ensuring members feel seen and valued.
Much of this labor is invisible. Unlike traditional marketing, where you can quickly pull metrics, the success of a community is built over time, through interactions that don’t always immediately translate into revenue.
The Community Builder’s Role in Risk Management
That said, community builders do have an important responsibility to manage risk—just like any contractor or business owner. When entering an agreement with a founder, they should ensure expectations and deliverables are clear, especially regarding the value they promise to create.
The ideal promise from a community builder:
"I will create a one-of-a-kind space that delivers increasing value to your target audience. This value will continually align with your business’ larger goals and lead to measurable ROI in 6-12 months."
While the builder takes on most of the risk, there are ways to mitigate risk for both sides:
Collective User Research: Make sure the community’s concept resonates with the target audience before significant resources are invested. My first session with clients always audits the problems the business exists to solve, focusing on the kind of transformation the community can offer.
Core Group Validation: Start with a smaller group of dedicated members to validate ideas and community features before scaling. This ensures the community has a solid foundation and exists to solve the problem discovered above.
Value Expertise: While the business owner has created alternative ways (their own products/services) to solve the problem of their audience, the Community Builder needs to be well-aware of what would drive legitimate value for their ICP.
Discounted Service Trial: I like to offer prospective clients an opportunity to work with me at a discounted rate for a brief trial period – to make it a win-win for both parties. We each get a better picture of what it’s like to work together and there’s minimal risk involved for the business owner.
How to Create a Sustainable, Win-Win Model
So, how do you create an ideal partnership that works for both sides?
Aim for a Base Pay Structure: 90% of the time, this is the best move and the best place to start. Community builders ideally receive a monthly income for at least the first 6 months. This covers the immediate work and allows time for the community to grow. This investment proves the community’s value to both parties. It’s proof the business wants community in it’s larger business strategy and the builder will be compensated fairly for their work.
Milestone-Based Incentives: Another approach is once the community hits certain goals—like member growth, # of member posts in the forum, or # of events executed—additional compensation can kick in. Some founders want to see proof that their community manager has skin in the game. Let engagement demonstrate that, not total revenue generated.
Post-Stability-Equity or Longer-Term Revenue Sharing: Once the community is stable, equity or revenue sharing can be introduced as a longer-term incentive. Generosity is key—honor the previous and ongoing contributions from both sides.
Building a Fairer, More Effective Partnership
Revenue sharing might sound appealing, but it rarely works for either party. Instead, I strongly suggest starting with fair pay from day one, setting clear expectations, and introducing longer-term incentives only once the community is stable. This way, both founders and builders are set up for success—and the members of the community they’re building it for will benefit as a result over the long-term.
