Welcome back to Equiteq Edge. A new year brings new opportunities for a fresh start. So, as you return to work after an indulgent festive break, we thought we’d provide a quick summary of some of the important things we’ve learnt over the course of 2016 – and that you can apply in the year ahead.
By Jason Parks, Director – Strategic Advisory Services, Equiteq.
Equiteq hosted a webinar on why equity incentivizing your key employees can improve equity value. In this blog, we take a look at some of the questions asked by attendees.
I’d like to motivate my Managing Directors, but I’m nervous about giving too much away.
It’s a mistake to simply view equity schemes with key employees as good as giving away your business. When done correctly, they can help you grow your consulting firm faster, thus increasing your equity value. Think about it: it’s better to own 70% of a $10m business than 100% of $3m company.
Managing shareholder dilution is important, but I would encourage you to first consider how to get your key personnel aligned with the shareholders’ interests and objectives. That starts with having a clear plan in place.
Last week we looked at how it’s important to ensure that shareholders in the business are aligned before preparing for sale. This week we’re exploring why equity incentivizing your senior team can improve the equity value of the business.
The gold standard to successfully grow and realize maximum value in people dependent businesses requires a high degree of shareholder and management team alignment, as well as strong financial performance.
Awarding shares (or options) to the right people in the right proportions is one of the most powerful tools at the founding shareholders’ disposal. It’s not the only tool, but it is the most potent, which also makes it risky if applied badly.