Being offered equity
Discussion
andy-xr said:
cashmax said:
Some very naive advice re equity on this thread.
Its difficult to provide advice given the lack of information about company, size, funding & current shareholders but assuming the business is private and unquoted -
Almost every business of a decent size uses equity to incentivise management teams.
And almost every wannabee business uses equity inplace of actually paying people what they're worth in pictures of the Queen. Its difficult to provide advice given the lack of information about company, size, funding & current shareholders but assuming the business is private and unquoted -
Almost every business of a decent size uses equity to incentivise management teams.
Equity should be the cherry on top, not the Victoria sponge that it's often used as
jonamv8 said:
andy-xr said:
cashmax said:
Some very naive advice re equity on this thread.
Its difficult to provide advice given the lack of information about company, size, funding & current shareholders but assuming the business is private and unquoted -
Almost every business of a decent size uses equity to incentivise management teams.
And almost every wannabee business uses equity inplace of actually paying people what they're worth in pictures of the Queen. Its difficult to provide advice given the lack of information about company, size, funding & current shareholders but assuming the business is private and unquoted -
Almost every business of a decent size uses equity to incentivise management teams.
Equity should be the cherry on top, not the Victoria sponge that it's often used as
cashmax said:
Having been one of those "wannabee" businesses, I can tell you there is a very simple and logical reason for that.
I'm sure you have your reasons. I have equity in 3 dotcoms, wish I'd taken a better salary as the bits of paper in my filing cabinet have stuck around longer than the companies I worked for
Not read beyond the OP but equity is the way to real wealth creation in a very tax efficient manner. It is very difficult to create material wealth through PAYE.
it is also the greatest way to align the interests of all shareholders and drive towards a common goal (an increase in shareholder value).
it is also the greatest way to align the interests of all shareholders and drive towards a common goal (an increase in shareholder value).
Calculator said:
Not read beyond the OP but equity is the way to real wealth creation in a very tax efficient manner. It is very difficult to create material wealth through PAYE.
it is also the greatest way to align the interests of all shareholders and drive towards a common goal (an increase in shareholder value).
Agree wholeheartedly with what you say.it is also the greatest way to align the interests of all shareholders and drive towards a common goal (an increase in shareholder value).
In an ideal world it is lovely.
The problem is most people in a position to offer equity also understand that most people feel like you do so they dangle it like a carrot. In the right business equity is everything. You just need to consider when somebody is dangling the carrot to get you to reduce your day rate
andy-xr said:
cashmax said:
Having been one of those "wannabee" businesses, I can tell you there is a very simple and logical reason for that.
I'm sure you have your reasons. I have equity in 3 dotcoms, wish I'd taken a better salary as the bits of paper in my filing cabinet have stuck around longer than the companies I worked for
Equity v salary has to be a balance, I for one would sacrifice some of my salary to get a significant amount of Jam tomorrow thrpough equity. The important thing would be judging how real the Jam tomorrow is, and exiting if I didn't feel it was a realisic proposition within a reasonable timescale.
This is a very personal choice, and I can understand once (or in your case 3 times!) bitten, twice shy
jonamv8 said:
Calculator said:
Not read beyond the OP but equity is the way to real wealth creation in a very tax efficient manner. It is very difficult to create material wealth through PAYE.
it is also the greatest way to align the interests of all shareholders and drive towards a common goal (an increase in shareholder value).
Agree wholeheartedly with what you say.it is also the greatest way to align the interests of all shareholders and drive towards a common goal (an increase in shareholder value).
In an ideal world it is lovely.
The problem is most people in a position to offer equity also understand that most people feel like you do so they dangle it like a carrot. In the right business equity is everything. You just need to consider when somebody is dangling the carrot to get you to reduce your day rate
I think what this thread demonstrates is that there is never any one definitive answer to these sorts of things and variables so numerous that without detail, it's impossible to determine the correct approach. Let me give you my example:
In 2010, an associate an I developed an initiative that would have driven considerable additional work to our respective businesses. As we developed this concept, it became apparent that it had the ability to exist as a standalone business, acquire considerable value that could then be accessed through cashing out in 6 to 10 years time. We'd retain our existing business that would benefit form the work the new one would generate.
Central to the new business was the need for a fairly unique, complex back-end website and IT structure. We got in some quotes and found this was going to cost around £40k but the system was so central to everything, the worry was that would a supplier be engaged enough to provide the level of support needed?
We then came across a company that was already using a very similar system in a highly complementary market. We originally spoke to them about white labelling what they had created but to cut a long story short, they ended up with 15% of of the new company on the basis that ownership=engagement=support.
For 18 months it worked fine, winning good contracts and gained a good position in the market with the business feeding a lot of work into each of the respective owner's businesses.
The 15% company then called an urgent meeting out of the blue., They explained that in order to fulfil their obligations to supporting the new entity, they had had to invest over £170k over the previous 12 months and would need to do the same again over the coming year. They demanded that either we contribute to that investment or hand our shares over to them but we would each continue to receive the work the new company generates.
They contravened every rule in the book and could (and certainly considered) throwing the law at them but ended up reluctantly handing the shares over as getting legal would have then denied us the work and thus income to repay our investment. We weren't in a position then to cut our noses off to spite our face.
There's a lot more subtext to this but the bottom line is that a relatively small shareholding company 'stole' our business....or at least hijacked it.
In 2010, an associate an I developed an initiative that would have driven considerable additional work to our respective businesses. As we developed this concept, it became apparent that it had the ability to exist as a standalone business, acquire considerable value that could then be accessed through cashing out in 6 to 10 years time. We'd retain our existing business that would benefit form the work the new one would generate.
Central to the new business was the need for a fairly unique, complex back-end website and IT structure. We got in some quotes and found this was going to cost around £40k but the system was so central to everything, the worry was that would a supplier be engaged enough to provide the level of support needed?
We then came across a company that was already using a very similar system in a highly complementary market. We originally spoke to them about white labelling what they had created but to cut a long story short, they ended up with 15% of of the new company on the basis that ownership=engagement=support.
For 18 months it worked fine, winning good contracts and gained a good position in the market with the business feeding a lot of work into each of the respective owner's businesses.
The 15% company then called an urgent meeting out of the blue., They explained that in order to fulfil their obligations to supporting the new entity, they had had to invest over £170k over the previous 12 months and would need to do the same again over the coming year. They demanded that either we contribute to that investment or hand our shares over to them but we would each continue to receive the work the new company generates.
They contravened every rule in the book and could (and certainly considered) throwing the law at them but ended up reluctantly handing the shares over as getting legal would have then denied us the work and thus income to repay our investment. We weren't in a position then to cut our noses off to spite our face.
There's a lot more subtext to this but the bottom line is that a relatively small shareholding company 'stole' our business....or at least hijacked it.
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