It is difficult selling a piece of your business albeit to those younger and greener than you. Henceforth, a business owner relies on the positive that an offer of equity ownership will instigate further development, loyalty, and dedication to employees who have helped build the business to its current state. The questions remain: what have they done to deserve ownership? have they staked their livelihoods? have they spent countless hours getting through the business launch and moments of crisis? do they have what it takes? Answers to these questions can make the most visionary of leaders confused and doubtful of next steps.
What started as an employee incentives scheme morphed into an employee’s shareholders’ agreement for a small martial arts academy client. The more I spoke to Mr. H, the more he realized he wanted an exit strategy in 5 years. I explained how exits worked and he became dedicated to developing his business for a graceful and opportunistic exit. We worked on the details of a shareholders’ agreement and its provisions. He understood I am not a lawyer and was not licensed to practiced. We pored over provisions like losses, employee sickness, employee exits, employee competition and more. All this was ammunition for him to have a lawyer draft.