Ownership in new company: how do I split it

[sophos707]

Hello!

Does anyone know any good resources (or just have good knowledge) about ownership in new companies?

The situation: I have had a very small web design company for the past few years. Recently we started doing more business, and now we are in planning stages for a large program that could bring in a lot of income.

I cannot afford to pay a salary to the new VP of technology or the VP of marketing/sales. So I have been considering giving them a stake in the company. We haven't "officially" signed them on yet.

Here's the question... If they get ownership in the company, how much do they pay? What is it based upon? Can ownership be given as payment - or isn't putting up money for ownership part of the risk?

Thank you!
- Jeff

[Corey Bryant]

Originally Posted by sophos707

Here's the question... If they get ownership in the company, how much do they pay? What is it based upon? Can ownership be given as payment - or isn't putting up money for ownership part of the risk?

Can you even find someone first to even consider that? During the dot com boom, that was the rage and everyone was doing it. And unfortunately it did not work out for most people.

If you are lucky enough to find someone that will forego a paycheck for part ownership - that is your first hurdle. You then need to figure out what he / she can and will bring to the business. Set goals for him and if not met, consider possibly reducing his bonus(es).

You might be able to find someone to do this but I think those days are long gone.

[sophos707]

Oh yes, I have two people waiting on my decision. And more people asking to be part of it. We have a really great product coming out. They all bring individual strengths that I don't necessarily have.

Basically, we are looking at someone buying-in partnership of a company. What are the general ideas around this?

[Corey Bryant]

Well - evaluate the business. How much is it worth? Of course, all of these will be estimates. And how much will these other two people be able to contribute.

I would always try to maintain control of the company of course. Doing something like this - it can be tricky because people themselve might over- or undervalue themselves.