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Developing an Ownership Plan |
Dear Dave Dear DD The finished plan should include a description of how you will determine how many shareholders there may eventually be; the specific criteria necessary for someone to be considered for ownership; what increased responsibilities, expectations and rewards go along with ownership; how the stock of the firm will be valued and what mechanisms will be put in place to facilitate the buying and selling of firm stock as shareholders are added, and again when they eventually leave the firm. Having a thought out and articulated ownership plan for your firm can offer enormous benefits. You can use your developed plan to help you retain and provide incentives to your current up and comers by showing them the opportunities available as they continue to grow and mature over time at your firm. A plan can also assist in attracting new key staff by being able to share an overview of your firm’s ownership plan as an integral part of the recruiting process. Not many firms have plans and therefore in a position to do this, which creates an advantage for those who do. Is becoming an owner an all or nothing proposition at your firm, or will you create several intermediate steps or layers leading up to ownership itself? Within the ranks of owners, will all owners be equal or will there be varying levels? Your finished plan should illustrate the "path" for how staff might ordinarily expect to advance within your company. Picture in your mind this path as looking like a profile of a staircase with a series of upwards steps. The criteria and conditions for reaching each step, or plateau along the way, should be thoroughly described. For some staff members, based on a combination of ability and ambition, any one step can become an ultimate destination as they may be lacking necessary attributes to go any higher. For certain others, the steps will serve as intermediate waypoints all the way to the highest levels of ownership. Pricing and terms of ownership are important components
of any plan. Keep in mind that for internal buy/sell ownership programs
you are dealing with a closed-loop system, i.e. there are no outside buyers
bringing fresh investment capital into the transaction. The typical employee
has a limited amount of assets or income available to invest in company
stock. No matter how you cut it, the company has to redistribute its disposable
income in such a way as to provide additional income to the buyers so
they may in turn re-invest back into the company (closed-loop). Due to
this fundamental limitation, internal buy/sell programs as a rule tend
to result in stock prices toward the lower end of the price spectrum when
compared to selling the firm to outsiders, if and when that option exists. |
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