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    6 Replies Latest reply on Mar 21, 2008 11:54 AM by Founder2x4

    Where can I research compensation for 1st team for young co?

    Founder2x4 Newbie
      I have an accessory company, structured as an LLC, that has been privately funded, to take my company to the next level, I need to bring on board either 1 person to strategise and also build the business OR 1 Strategic Analyst and 1 Business developer. I am the product developer. I would like to be able to compensate them fairly, so that they feel part of building something but I have little capital. I am thinking of a combination of bare minimum salary and equity; just equity (salary means employee and all the extra tax and health insurance considerations) or even finding individuals who want a challenge and could also invest and buy equity. What are some things I need to think about, I do want to maintain 51%? What is normal and fair for 1st team with little or no salary for the first 6 months to 1 year?
        • Re: Where can I research compensation for 1st team for young co?
          Lighthouse24 Ranger

          Welcome to the community. You might consider a form of convertible debt. Essentially, the person/people you hire (or it could be someone you contract with for a year of their skills/time) would lend you the money that you can't pay them now in salary or fees. At the end of a year, you'd either (a) repay the loan with interest, or (b) the person/people would have the option to convert the debt (at a discounted rate) to equity in the company.

          This arrangement would get you their participation now, but defer part of the cost of paying them until later. From their perspective, it's also a good deal -- the worst they could do is get paid in full with interest a year later. Yet they'd have a strong incentive to help the company do really well, because if the company grew during that year, the debt would convert to equity worth more than the loan amount (i.e., the better the company did, the more they could make). Either way, however, you'd retain control of the company.

          Another reason to consider convertible debt is that the contract terms and paperwork are relatively simple and straightforward (as compared to offering equity up front, which can have many pitfalls, and may consequently involve weeks of time and tens of thousands of dollars in legal fees to set up).

          Convertible debt isn't the only approach, but it seems like one to consider in this situation. Hope this helps. Best wishes.
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          • Re: Where can I research compensation for 1st team for young co?
            LUCKIEST Guide
            Welcome to this web site. Lighthouse24 always has great answers.
            Where can I research compensation for 1st team??
            Do you know about SCORE?? SCORE helps people in business FREE.
            SCORE can help with a Business and Marketing Plan and MORE.
            If you visit your local SCORE office, they will be compensation for your
            industry and area. You can also visit on line.
            *YES you do * want to at least maintain 51%?
            There is NO normal and fair for 1st team.
            Think "OUTSIDE THE BOX" and back to the Silicone Valley start up days.
            Good luck, LUCKIEST
            1 of 1 people found this helpful
              • Re: Where can I research compensation for 1st team for young
                Founder2x4 Newbie
                Thank you to Luckiest and Lighthouse, both are suggestions that I have not considered and will investigate further. As far as OUT of the BOX re: silicon valley days, I was not of that era and my product line is Fashion/Health and Wellness - so I am not aware of what kinds of packages were offered to the initial team.

                If anyone has any good references for research that would really help and I will also check out SCORE and other such organisations too.
              • Re: Where can I research compensation for 1st team for young co?
                gnrubin Newbie
                Have you considered outsourcing these positions? What type of accessories do you sell? What are your target markets?