Compensating leadership

- Your business plan needs to include a perspective…on how you're going to compensate management.…There are various ways that you can compensate…your leadership team.…You can give them cash, bonus, or equity.…And there are a variety of forms of equity…that you can issue, things like stock or options.…I highly suggest you get some legal assistance…from somebody who has done this…type of agreement before.…When you are awarding equity…that equity needs to vest over time…even for the founders.…This way if a founder quits,…they don't walk away with a big chunk of equity…just for having a good idea.…

Cash is also tight when you first start your business,…so equity tends to be the preferred way…to compensate management,…but you have to realize that equity…is the most expensive form of financing,…and give it out wisely.…This is why it's so important to spell this out…in your business plan.…Deferred cash, or a bonus, is another option…for compensating management,…if your executives don't need cash right now.…And doing so is cheaper than equity,…