You’ve got a great niche idea and the business plan is done. You’ve lined up a crowdsourcing plan for start-up resources. The next step is identifying the people you will entrust with helping you to develop your new business.
As you form your initial compensation plan for new employees, don’t skip the step of creating an equity stock-option-plan for the people who will help your business succeed.
Forbes quotes PayPal founder Bill Harris as having said to entrepreneurs that stock options are “the most powerful tool at their disposal in building a successful business.” Harris believes that founders of startups need to seek out people who would want equity because, “You need people who are willing to take risks. And then you need to reward them.”
This is a win-win: your company doesn’t have any cash outlay and employes benefit from the stock’s rising prices while not having to worry about stock market dips. It’s a perfect employee incentive that usually kicks in after a year of employment. Better still, Harris says vesting in four years is the biggest opportunity: “By giving somebody four year options today and the company grows you’ve locked in today’s value for four years.”Harris’s bottom line is for the founder a stock option plan is the key to “recruit, retain and motivate.”
What type of plan is best?
The National Center for Employee Ownership (NCEO) reports, “Broad-based options remain the norm in high-technology companies and have become more widely used in other industries as well. Larger, publicly traded companies such as Starbucks, Southwest Airlines, and Cisco now give stock options to most or all of their employees. Many non-high tech, closely held companies are joining the ranks as well.”
NCEO outlines the key options for broad-based employee ownership:
- An employee stock ownership plan (ESOP)
- A type of tax-qualified employee benefit plan in which most or all of the assets are invested in stock of the employer
- A stock option plan which grants employees the right to buy company stock at a specified price during a specified period once the option has vested
- An employee stock purchase plan (ESPP) which gives employees the chance to buy stock, usually through payroll deductions over a 3- to 27-month "offering period"
- A several other forms of individual equity plans.
The Center adds, “options are still the currency of choice when it comes to attracting and retaining good employees; many high-tech workers won't take a job without options.”
And consider this caution….
NCEO wants to alert founders of startups to consider these points: “how much stock they are willing to make available, who will receive options, and how much employment will grow so that the right number of shares is granted each year.” If a founder grants numerous options too soon, future employees may be left without this incentive. However you approach your equity methods UFOstart AG is a crowdfunding and crowdsourcing platform ready to assist your venture. Get started now and check out how to start your venture and become an expert or investor in the world of startups. Interested in how you can leverage the power of the crowd for your startup? Like us on facebook and follow us on twitter for daily updates.
No comments:
Post a Comment