For all of us it is all too easy to be focused on day to day activities. A properly designed employee share option scheme will require time and thought along with expert guidance from those who have practical experience of the alternatives. Here are the top 7 reasons to consider a share scheme for your business.
- Strategic thinking
Done properly, the design of an employee share option scheme will compel you to take the time to think strategically. You will want to consider carefully your own personal and business objectives and how these fit in with developing your key team members. This is critically important for you, your business and your team to make sure you are all going in the right direction.
Communication with your key people
Failure to recognise the contribution of your key people may lead them to feel unloved and unappreciated, and they may ultimately leave you. Open communication about your plans for the business and how the team will be part of that can be hugely beneficial in bringing a team together.
- Motivating you and your team
A well designed share scheme will give you the right focus for yourself and your business. It may be that you want to retire in 3-5 years, or perhaps a trade sale will be on the cards if you can just grow the business to the next level. By looking to the future, this can be a highly motivational tool for both you and those in your team.
- Fair Rewards for key contributors
It may be that the cash constraints of your business as you grow mean that salaries and cash bonuses cannot be as generous as you would like (or market forces demand). A share option with a focus on dividends and/or participation in capital growth can ensure fair rewards for your key team members and can keep them motivated while the business grows.
- Team building
A great business is always built on the foundation of a balanced and high performance team. As you design your share option scheme you should take the time to think about your crucially important team building and the dynamics of the individuals whom you rely upon.
- Aligning the Interests of Owners and the Team
Proper share scheme design starts with your end point objectives as the owner. Aligning the interests of you as the owner with your team is crucial.
If a trade sale is going to be difficult (because yours is a people business or dependent on one or two key customers) you may want to consider a vendor-funded MBO. These can be great ways to align interests and even become a stepping stone to a much higher value trade sale.
- Planning and Measuring Performance
You will want your share option scheme to include stretching goals. Once those goals have been set, you will have the framework in place to measure performance against your plan going forward, and the team members will know exactly what it is they need to achieve.
For further information on employee share schemes, please do not hesitate to contact an Everyman Legal Solicitor on 01993 893620 or email everyman@everymanlegal.com
