Startup 101: Increase Incentive with Equity Sharing

Many startups plan to take the world by storm. Everybody involved wants to be productive and help build upon something they believe in. But, once everything is launched and up-and-running some of the formerly crucial employees begin to feel left out and not a part of the big picture anymore.

The reason for this is because they helped build the company and contributed to the success that it currently has, but now they are merely a behind the scenes busy body who doesn’t get to see their work flourish the way they had envisioned. Ultimately, this may cause them to produce less quality work or they may even leave the company because they feel so left out.

Offering Equity is a Sign of Trust

If you offer up a part of your company, albeit a small piece, it shows that you not only appreciate somebody for the work they have done but you are also placing great trust in their discretion as a business partner. Becoming a partner or junior partner isn’t just about the extra pay raise, it puts the individual on a new playing field where large decisions regarding growth and direction need to be made and they must be taken very seriously, otherwise there may be dire consequences to follow.

These sort of gestures signify that you want this specific individual employee to stick around for time to come because you already know they are capable of making the right decisions that will help your business grow. This in turn gives them the sign that they have security within the company and will have a much better piece of mind regarding their future employment, leading to better quality work and more production in general.

Shares in a Business Go Beyond Monetary Reward

This may be difficult for some to digest, but most people want more than a paycheck out of their job. No matter how many bonuses or pay raises you can throw at them they just aren’t satisfied unless they are a part of the core team that comprises the business.

Offering equity in your business to one of your all-star employees not only gives them a shot at earning more money (assuming your company is profitable, of course), but it also opens the doors greater things that money just can’t compete with. Owning part of a company gives people a feeling of great pride knowing that they helped build what is sitting in front of them, a feeling of accomplishment that they undertook a monumental task and completely it to fruition, a feeling that money generally doesn’t supply to most individuals.

If They’re Driven by Money, There’s More Reason to Succeed.

Not only does making somebody a partner within your business offer security but it also promotes great motivation for financial return as well. Somebody who is working the typical 9-5 grind may be less excited to come up with new ideas that could spur growth (and possibly translate into a raise or bonus) compared to somebody who is vested in the company and absorbs these extra profits directly.

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Author: Garrett Graff

Garrett is a qualified engineer, and when he’s not helping businesses grow as a consultant at Palladous, you can find him building hobby race cars, managing the family farming business or chilling out on the lake fishing.

Get in touch on Google+ or drop him a line by e-mail.

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