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How can I ensure I am fairly compensated if a group of us from my current employer create an external company?

I currently work with a company that I have been with for several years, yet I have no ownership in it, which is fair based on the current structure and history. I am a senior staff member with a borderline sickness for our industry – I research everything possible and understand things inside/out, relative to most people in the industry.

Recently, ownership approached me and requested that I complete a full analysis and business plan for a new business opportunity. The new opportunity would 100% need to be a separate entity and I relayed that I would require an ownership stake in it. Private equity funding would be required, so my demand would be a percentage of the company based on shares, followed by performance shares being issued in the future (with tangible targets).

It was responded to with a generic “compensation will be related to contribution” statement. While I somewhat understand this, I also don’t feel comfortable hoping that it works out. I respect the other parties and trust them, but not to the point where I’m willing to roll the dice on my future. They were willing to pay me for the planning work, but I completed it all on my own time. They could likely pull it off without me, but I am certain the planning, execution, pitching/marketing, and growth would be substantially better with me involved.

What do I do? It’s very early, but I am 99.9% certain the idea will translate into incredible profits and grow into something massive. All of the research and forecasts I have done align with this as well. Do I give them the report or demand an ownership agreement is signed prior to it? First to market is very important, so it is possible to walk with it, but that would be horrible (for all parties). Difficult spot to be in.

  • Since you haven’t formally agreed to anything yet your situation isn’t that difficult. To get what you want you simply have to negotiate.

    If you can argue that the business will be worth at least 20% more with you involved then you can get 10% equity steak and it will be a win for both parties.

    If you understand the business model as well as you say you do then it should be easy to persuade the owners to give you a significant amount of equity.

    Understand that “we’ll talk about compensation later” means “we’ll talk about compensation when you have no leverage anymore”. Whatever offer you accept, get it on paper. Even an offer on paper doesn’t mean much, but it’s better than nothing.

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  • At the end of the day you are an employee of this company and they are paying you a salary. It’s your duty to do a competent job and that means whatever they are paying you to do it.

    If I asked my employee to do research Into a new opportunity and they withhold the research because they realized it’s a “lucrative” opportunity, I’ll probably fire him or her. You probably can’t pursue the opportunity since its company confidential anyways.

    I suggest not going the my way or highway route and demonstrate how key you will be in the new venture that they will be willing to offer you equity just so you’ll take the position.

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    • The issue is that the startup would be a completely separate entity. I would never go the pay me or I’m going to try to screw you over route – I just dislike have zero leverage afterwards…

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      • As with every negotiation its not what you have done, its what you can do. Are you valuable enough that they would absolutely want you to be in the new entity? If you are, then you should negotiate some sort of stake before hand – and yes – get it in writing.

        However this has nothing to do with the report. They paid you to do the research and it doesn’t matter if you did it in your “own time”. Many people choose to work overtime and they don’t get a stake in the company.

        At the end of the day though, its the company’s initiative – the company will be forking over some funds to kickstart it – no? So you shouldn’t expect equity like a brand new startup.

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    • I agree with this point of view, they had they idea and are paying you as an employee. Negotiate all you want but it is their idea and they pay you for work. Also, just heads up from perspective of the person on the other end of the negotiation, if one of my employees asked for equity and it made sense fiscally, my first thought would be ok, you want all the ups then you have to trudge through the downs, no salary, vacation, healthcare, etc, you would just be a partner in that business.

      Reply

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