The Business Brief
October 2019
Employee Incentives for Growing Businesses
The Do’s and Don’ts of Equity Plans
As an owner of a budding business, it can be hard to gain the resources needed to be successful when you're first starting. This struggle has led some entrepreneurs to venture into equity plans for their employees for compensation and incentive. Without proper research, these plans can lead to a host of issues for your business. We recently had to help two brothers navigate through one of these very situations. The brothers had bought a business together, and, as they were starting to handle the day-to-day operations, they quickly realized they needed to hire a key employee. Unfortunately, they didn't have the necessary funds to take on additional help. To combat this, they offered the employee a 5% interest in the company. After a few weeks passed, the brothers soon realized the new employee was not a great fit in the company’s culture and wanted to let the employee go. Unfortunately, because the brothers had given the employee ownership interest in the company, the entire situation was much more complicated.
Due to the employee's ownership interest, she was part-owner so the brothers could not merely dissolve the relationship. The brothers inevitably had to buy her out of her share of the company. While it was a slight financial toll on them, they were lucky to get out of the situation as quickly as they did. If the employee refused to be bought out, it would have made running the business almost impossible. brothers, they would have to rely on the former employee with 5% of the company to be the deciding vote. Also, something the brothers did not realize is that giving someone an ownership interest is a taxable transaction. If you feel you're in a similar situation — lacking funding yet in need of staff to make your business a success — know you have options. Depending on your type of entity, there are two great options. Profit Interest Equity Plans This type of plan is perfect for any start- up organized as an LLC or partnership. Instead of giving an employee the current value of the business, you're giving them a future interest in the future profits of the company. Unlike standard company stock, a profit interest is based on the future value of the company, and it is not an immediate taxable transaction. An employee is For example, if there were a disagreement between the two
compensated by receiving a percentage of the future value of the company without having to contribute any of their capital. This makes it much easier to let go of an employee if you feel they aren't a perfect fit. Additionally, since your employee will share in the appreciation of the company, it is an incentive to make the company grow. start-up organization as a corporation, partnership, or LLC. Similar to profit interest plans, the company is still providing employees the benefit of stock ownership without actual ownership responsibilities. This incentivizes your employees to help the company grow without incorporating the complexities of bringing on a new owner. There are many ways to provide employees with incentive plans without diluting your ownership shares in your company. Before you give someone stock or equity interests in your company, you should talk to an experienced business attorney. They will ensure there aren't any underlying consequences of your decision before executing it. If you have any questions, give us a call anytime at 208-401-9300 or visit our website at GenLawGroup.com. Phantom Stock/Unit Plan This type of plan is perfect for any
–Matt Wolfe
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PUT YOUR BEST CARD FORWARD
A Woman’s Guide to Corporate Success
Business Card Etiquette in 3 Different Countries
While Mireille Guiliano is best known for “French Women Don’t Get Fat,” her book on healthy eating and balanced living, authorship is actually her second career. Before she took up the pen, Guiliano was president and CEO of the French Champagne brand Veuve Clicquot. She developed Veuve Clicquot’s reputation in America almost single- handedly over a 20-plus year career, and now she has chronicled that success in her 2010 bestseller “Women, Work & the Art of Savoir Faire: Business Sense & Sensibility” — a guide to climbing the corporate ladder geared specifically toward women. Just as “French Women Don’t Get Fat” upended the typical diet book format, “Women, Work & the Art of Savoir Faire” leaves the usual business book style behind almost immediately. As Guiliano writes in her introduction, “This isn’t another business book that tells you how to ‘succeed’ or ‘get the corner office.’ Yes, of course, you’ll find advice on getting ahead and getting promoted … but more than that, you’ll find advice on being happy and living a good life, even while you are making the biggest contribution you can to the workplace. That’s why I dare to talk about style, and clothes, and food, and wine, and entertaining, and LIFE in a business book. We don’t work in a vacuum.” Guiliano is true to her word. Between the covers, readers will find advice on topics as far-ranging as developing the perfect handshake, choosing catering for a business dinner, dressing for success, and putting together an effective presentation. Guiliano has plenty of experience to back up her counsel and shares amusing anecdotes about the food and beverage industry, French culture, and her own journey along the way. There are no easy three-step solutions here, only long-term goals and strategies. What really makes “Women, Work & the Art of Savoir Faire” unique is that it caters specifically to women in pursuit of high-powered CEO or CFO jobs. Guiliano covers circumventing prejudice right alongside choosing a dress and tips on being the perfect lunch date. Still, both men and women will come away from this book with ideas about how to achieve success without sacrificing the pleasures French women hold so dear.
The business card is a nearly ubiquitous way to give your name, position, company, and contact information to potential clients and business partners all over the world. And while the exchange of business cards in the United States does not come with a lot of pomp and circumstance, that is not the case in many other countries. If you find yourself in one of the following places, remember these tips about exchanging business cards. Japan Known in Japan as meishi , the exchange of business cards comes with a lot of ceremony. Present your card with both hands, as this gesture is seen as respectful. Japanese culture places a lot of value on hierarchy and status, so make sure your title is listed prominently. When receiving a card, take a minute to look it over and comment on it. Immediately putting it away is disrespectful, and once you’re done looking at it, put it in a cardholder, folder, or binder. and contact info in English on one side and in the local language on the other is good practice. Gold lettering is considered auspicious, and if your business is relatively old, make sure the year it was founded is on your card. The practice of giving and receiving cards is very similar to that of Japan. Finish the exchange with a bow as a way to thank your acquaintance for meeting with you. India Business cards are exchanged even in nonbusiness interactions in India. Much like hierarchy and status are valued in Japan, academic achievements are valued in India, so list your university, degrees, and honors along with your other information. When exchanging cards, always give and receive them with your right hand. This is also common practice in many Middle Eastern countries. Exchanging business cards the wrong way probably won’t be detrimental to your business deal, but learning the proper etiquette in the country you’re visiting can go a long way in starting a professional relationship on the right foot. China In China, as in many other countries, having your credentials
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Reignite Your Passion As entrepreneurs scale their businesses, there is a lot to focus on: hiring the right staff, creating the most effective marketing strategies, and setting up efficient operations. With so much to do, it’s easy to lose sight of your initial vision for your company. If you’re stuck in a rut, know that you’re not alone. Plenty of the most successful entrepreneurs have endured the same struggles and, with a little ambition and a lot of creativity, came out on top. Take Henry Ford, for example. Henry Ford made the automobile accessible and appealing for the common citizen. This ignited interest in the market from consumers and manufacturers alike, which led to innovations like air conditioning and other appliances we can’t imagine living without today. There were some key
Lessons in Innovation From Henry Ford
factors that played into his success, and, if you apply them to your own journey, you could gain a new perspective and be inspired to create and innovate in your industry. Consumer-Focused Ford realized cars were unreliable and unaffordable to most and set out to change that. After developing the first moving assembly line, Ford lowered the price of cars and made them accessible for people outside the upper class for the first time. As long as you keep the consumer and their needs in mind, you’ll find ways to make their experience better and increase your success. Small Changes, Big Impact Unlike many companies today who sacrifice quality for quantity, Ford found ways to focus on both. He looked at how cars were actually made and found that, if he could build more cars within a certain time frame, he could pay less per car, per worker. Thus, the moving assembly line was born. When looking for ways to innovate in your industry, rethinking even the smallest, simplest details can make a huge difference for your business. You may not be able to reinvent the wheel, but who said you couldn’t reinvent the brake pads? Henry Ford may have changed the automobile industry forever, but you don't have to go to such lengths to innovate in your own. The next time you find yourself uninspired or stagnant, look to those who made your industry what it is today. You might just find the inspiration you’ve been searching for.
PUZZLE
HAVE A Laugh
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Inside This Edition
1.
The Do’s and Don’ts of Stock Plans
2.
Tips for Women Climbing the Business Ladder
International Business Card Etiquette
3.
How Henry Ford Innovated His Industry
Have a Laugh
4.
Play This Song to Your Sales Team
‘Got My Mind Set on You’ George Harrison’s Sales Advice In conversations about sales, one doesn’t usually think of George Harrison. But the truth is that the Beatles’ lead guitarist actually has some solid words of wisdom when it comes to converting warm leads. His last No. 1 hit single, “Got My Mind Set on You,” may sound like dated courtship advice, but it’s actually the perfect road map for turning interested parties into loyal customers. ‘I Got My Mind Set on You’ The theme of the song is painfully straightforward: A lovestruck singer has his mind set on dating someone. While your mileage may vary on single-minded romantic pursuits, this level of unwavering dedication is a must for warm leads. Unlike the mystery woman of Harrison’s song, these are people who have shown interest in your business. To build toward a sale, you have to return the favor. Send personalized emails or newsletters, or pick up the phone and call them.
and giveaways are your best friend. Targeting these special offers specifically at your warm list is a great way to cultivate lifetime customers.
‘It’s Gonna Take Precious Time’ The No. 1 mistake sales teams make is giving up on leads too early. If you dump a prospective customer because they hesitate on your first few attempts, you’re shutting the door on future profits. Depending on your business, leads that take months or even years to convert
can more than make up for the time and effort you’ve spent on them. Customers won over this way are far more likely to stick with you. ‘To Do It Right’ The final conceit of George’s song is that there may be other ways to win a person over temporarily, but this is the right way. By remaining dedicated and spending the time and money to build your relationship, you can win over lifetime customers — no singing required.
‘It’s Gonna Take Money’ As the first verse of the song suggests, building this promising relationship isn’t going to be cheap. If someone hasn’t already taken the leap to become a customer, they need some incentive to get serious. This is where free trials
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