Intro to Equity Sharing – Best Practice for All Company Sizes

As a business professional, I have no doubt you have met a colleague or two that has told you all about the horrors of having business partners. I too have heard these stories, and they are vivid reminders about the weight these types of decisions should command. With that as my disclaimer, I want to share with you some of the benefits of having junior partners and go beyond the obvious potential benefits like collaboration, sharing work, infusion of capital, or synergies.

Specifically, I want to pay some lip service to the idea of sharing your equity with your employees. This isn’t just a business practice for the multi-million-dollar companies. As a small business, sharing equity can be done very simply (it can also be as complicated as you’d like to make it).

Many of my clients are the one-owner operations. This is how most companies start, so it makes sense. However, many of my clients are one-owner companies and they shouldn’t be. They have, or had, great talent internally, but are so focused on either building their business or fear losing control that they miss a huge opportunity to build the next generation up.

The consequences? Either you will have to pay above market average wages to keep your most talented employees or you’ll lose them to larger firms that can pay more or to competitors that have an ownership track.

Instead of waiting till you are ready to retire to transition ownership to the next generation, consider starting the process now. If you have a talented employee that you either want to retain or could see being a part of your succession plan, start small and build up from there. Explore using equity compensation or even selling a small part of the company to them and finance it on a promissory note. This is a great tool that allows you to begin getting your employees to think and act like owners.

Extended Reading: Leveraging Your Growth: Equity Compensation Strategies for Advisors

As part of your retirement plan, this will also allow the company to continue to grow while you eventually work less. But, it takes time to see the benefits, so don’t wait until the last minute to start sharing!

Explore more Entity and Employment content.

Share:

Table of Contents

Related Topics

Sign Up to Our Newsletter

Copyright

This resource provided by Succession Resource Group, Inc. (“Provider”) is intended solely for informational purposes and general guidance on a variety of situations and may not be suitable for all advisors. This resource is provided “AS IS” and “AS AVAILABLE,” without warranty of any kind, express or implied, and should not be relied upon as legal, tax, financial, investment, or other professional advice. This resource cannot and does not account for the unique circumstances of each specific situation and must be reviewed by your own independent attorney, CPA, and other relevant professional advisors prior to beginning any due diligence process or taking any action in reliance on this resource. You acknowledge that no attorney-client relationship is created through the provision or use of this resource. Succession Resource Group, Inc. makes no claims, promises, representations, or guarantees whatsoever, whether express or implied, regarding the accuracy, completeness, timeliness, reliability, suitability, adequacy, or fitness for any particular purpose of the information contained herein, and expressly disclaims all such warranties to the maximum extent permitted by applicable law. Nothing in this resource should be construed as a recommendation. By utilizing these materials, you: (i) assume full responsibility for any loss, damage, liability, cost, or expense (including reasonable attorneys’ fees and costs) resulting from or in any way connected to the use of, or inability to use, this resource; and (ii) release, defend, indemnify and hold harmless Succession Resource Group, Inc., its affiliates, officers, directors, employees, authors, contributors, agents, licensees, successors, and assigns from any and all known or unknown claims, demands, damages, losses, liabilities, costs, or causes of action that may arise, at any time, out of or relating to your use of or reliance upon this resource.