"Should I Give My Employees Equity?" — Transcript

Full transcript

1. 0:00We sell paid ads and growth advisory to
2. 0:03eight and nine figure e-commerce brands.
3. 0:05>> Sweet.
4. 0:06>> We do three and a half.
5. 0:07>> Okay.
6. 0:08>> We'd like to be at 10 then 20.
7. 0:09>> Okay.
8. 0:11>> Feel super clear on our top priority
9. 0:13against our supply constraint.
10. 0:15>> Uh talent?
11. 0:16>> Yeah. Talent acquisition and first
12. 0:19getting LTGP on the talent.
13. 0:22>> Um something that's unclear is
14. 0:24we've just established this past 12
15. 0:25months our leadership team.
16. 0:27>> Okay.
17. 0:27>> two team leaders, head of growth, and
18. 0:29head of strategy.
19. 0:30>> Mhm.
20. 0:32>> They're all just on salary at the
21. 0:34moment, um but putting together or
22. 0:36building an incentive a great incentive
23. 0:39plan for them as a group to carry us as
24. 0:42we two and three x head count.
25. 0:45>> Um I would just go profit share pool
26. 0:4810 to 20% and then they get slices of
27. 0:50that slice. So it caps. So basically
28. 0:52it's like if you hit say like
29. 0:54simple math, $100 a year profit, $20 is
30. 0:57always going to be allocated or 20% is
31. 0:59always going to be allocated to all
32. 1:00leaders. Um and so they get slices of
33. 1:03that pool, but then you always have 80.
34. 1:06And then they think like you do, which
35. 1:08is like if we're going to bring this
36. 1:09leader in we got to give up some of this
37. 1:10pie,
38. 1:11but they should be able to grow the pie,
39. 1:13which is the exact same math that all of
40. 1:14us do when we bring someone in.
41. 1:16>> Yeah.
42. 1:16>> And so it gets them thinking more like
43. 1:17owners. That's the simplest way I could
44. 1:19break it down. Are you planning on
45. 1:20trying to sell the business anytime
46. 1:22soon?
47. 1:22>> Uh potentially. Yeah.
48. 1:23>> Okay.
49. 1:24>> Um
50. 1:24>> If you want you can include a profits
51. 1:26interest in the in the sale, which you
52. 1:27can have be proportional uh to their
53. 1:29interest.
54. 1:30>> Yeah.
55. 1:31>> And then if they leave, comes back to
56. 1:33you.
57. 1:35>> Yep. How would you apportion that
58. 1:37percentage split against those different
59. 1:39roles?
60. 1:41>> It's going to be
61. 1:42So first off, you're going to want to
62. 1:44leave probably 2/3 for future talent if
63. 1:46you want to go big. And so do not be
64. 1:49like, "Okay, I'm going to blow my whole
65. 1:50like
66. 1:52slice of pie on these people because the
67. 1:54best talent is in the future. It's not
68. 1:55right now. But I'll give you the the
69. 1:57pitch or the walk-through that I have
70. 1:59with um
71. 2:01with somebody who's in this in this
72. 2:02position
73. 2:04is that and this will probably apply to
74. 2:05half of you.
75. 2:07Um
76. 2:08who here has somebody that they were
77. 2:09considering tying into your business?
78. 2:11Okay, so I'll give you quick quick big
79. 2:13picture advice. Um
80. 2:15if you never want to sell the business,
81. 2:17don't give shares away.
82. 2:20The only thing that is guaranteed 10
83. 2:21years from now is that you will still be
84. 2:23in the business. That's it. Everything
85. 2:25else is not guaranteed, so I would not
86. 2:26encourage you to give real shares away.
87. 2:28Thing one. Thing two.
88. 2:30There are four things
89. 2:32that equity provides. One is cash flow.
90. 2:38The second is sale bonus,
91. 2:40sale dollars,
92. 2:41the third
93. 2:42is risk,
94. 2:44and the fourth is control.
95. 2:46And so, when I have a conversation like
96. 2:48this, I'd be like, "Okay, cool. So, do
97. 2:50you want any risk?" And they're like,
98. 2:52"No, I don't want any risk." And you're
99. 2:52like, "Okay, cool. So, we don't want
100. 2:53that." Uh I'm not going to give you
101. 2:55control, so that's off the table. So,
102. 2:58all we have left are cash flow and the
103. 2:59chance that we sell, and that's what
104. 3:01we're going to do. And so, um
105. 3:03I'm sure in Melbourne I don't know the
106. 3:04legal situation, but like there's a
107. 3:06version of we'll give you a profit
108. 3:08share, which comes off bottom line,
109. 3:10and
110. 3:11uh in the event of a sale,
111. 3:13you'll get a sale bonus. Now, the issue
112. 3:15with that is it's going to be taxed as
113. 3:16income, at least it is in the US if they
114. 3:18have a sale bonus, um rather than
115. 3:20capital gains, but there is no real
116. 3:22other alternative because either they
117. 3:24have to take on risk and not get control
118. 3:27and pay taxes
119. 3:29um on you gifting it to them or they
120. 3:30have to buy it and give you money. Most
121. 3:32people don't want to do either of those
122. 3:33things, and you have to agree on a
123. 3:34valuation. It's a whole [ __ ] mess.
124. 3:35And so, it's easier to say, "I'll give
125. 3:37you some money today, and if we sell,
126. 3:38you get money tomorrow, and if you
127. 3:39leave, you get neither."
128. 3:41>> Mhm.
129. 3:42And then that sale You might have just
130. 3:44said that. The sale number is that
131. 3:45predetermined?
132. 3:48>> There's a zillion ways to slice this,
133. 3:49but the simple way is like if you have a
134. 3:5110% profit share like for the whole
135. 3:54company, right? And somebody let's say
136. 3:55gets 10% of that. So they have 1% of the
137. 3:57profit. You could say
138. 4:00when we sell, you will get
139. 4:02a proportional amount relative to total
140. 4:05for that 1%. So they get 1% of the sale.
141. 4:07>> Sure.
142. 4:08Yeah.
143. 4:09>> And when you write that, make sure that
144. 4:10it's the percentage of cash, not
145. 4:12calculated on the total value of the
146. 4:14sale.
147. 4:14>> Yeah.
148. 4:15Sorry, I lost thing.
149. 4:16>> I got [ __ ] on that one before, so
150. 4:18there you go.
151. 4:19>> I'll start. Um
152. 4:21the head of growth is pretty much the
153. 4:24sole sales guy.
154. 4:25>> Uh-huh.
155. 4:26>> Um or our first sales guy on the founder
156. 4:28led.
157. 4:30He'd be at this table
158. 4:32commission on clip of sales plus this
159. 4:35percentage of profit share or it's one
160. 4:36of the other?
161. 4:37>> a founder?
162. 4:38>> No.
163. 4:39>> It just sounds like he's your sales guy.
164. 4:41>> Correct.
165. 4:42>> I don't think he should be.
166. 4:43>> us, yeah.
167. 4:43>> Well, he gets commission.
168. 4:45>> Yeah.
169. 4:45>> He already participates
170. 4:46>> table.
171. 4:47>> Uh-huh.
172. 4:48>> The other guys at the leadership table.
173. 4:49>> Does he do marketing?
174. 4:51>> He started to, yeah.
175. 4:53He's developing into his backfilling
176. 4:54that head of growth role.
177. 4:58>> Giving equity to sales guys like kind of
178. 4:59like one of those day one mistakes
179. 5:01that I'd prefer you avoid.
180. 5:02>> Yeah.
181. 5:03>> So I if that guy is like really
182. 5:05ambitious and really hungry and smart
183. 5:07and you think that he's going to be
184. 5:08there long term, I would say I want you
185. 5:10to the leadership table. I don't think
186. 5:11you're ready there yet. This is what I
187. 5:13would need to say. And just make it
188. 5:14quantifiable.
189. 5:15>> Yeah.
190. 5:15>> You need to get like you need to master
191. 5:17demand gen which creates five deals a
192. 5:19week, five deals a month. Whatever that
193. 5:20number is that you'd like if he actually
194. 5:21did this, you'd be like you earned it.
195. 5:24So whatever that is.
196. 5:26>> Sweet.
197. 5:27Thank you.
198. 5:28>> roll.
199. 5:28>> Yeah, you bet.
200. 5:29>> If you are a business owner and you are
201. 5:31not growing as fast as you'd like, I'd
202. 5:32like to give you a free gift. So my team
203. 5:35and I put together the $100 million
204. 5:36scaling road map which is basically 200
205. 5:38hours of us looking over all the
206. 5:39portfolio companies we've had and what
207. 5:42stages of growth they went through and
208. 5:44more importantly where they got stuck
209. 5:45and how they got past it. And so we
210. 5:47broke it in these 10 stages and we made
211. 5:49this little kind of quiz thing where if
212. 5:50you put in your business information,
213. 5:52it'll tell you where you're at and the
214. 5:53most important part for you, what to do
215. 5:55for each of functions of the business
216. 5:56across product, marketing, sales,
217. 5:57customer success, recruiting, IT, human
218. 6:00resources, and finance. And so no matter
219. 6:02what you're struggling with, someone
220. 6:03else has already struggled with it and
221. 6:05solved it. And so I'd like to give you
222. 6:07this thing absolutely free. You can go
223. 6:08to acquisition.com/roadmap,
224. 6:10plug in your business information, and
225. 6:11if you want us to actually help you
226. 6:14de-constrain the business and you're
227. 6:15trying to scale, we'd love to help you
228. 6:17out. All I want to thank you by the way
229. 6:18is book a call with my team and we will
230. 6:21look at the business, see if we can
231. 6:22help, and if we can, we'll invite you
232. 6:23out to Vegas and we'll do this in person
233. 6:25live.