I run a business with less than 20 employees. Two of my top staff who have been with me for 4 years want more equity or they are threatening to leave and start a competing business. I don’t want them to leave but I’m not sure if giving each of them 30% of the equity is reasonable.
What should I do?
I can’t answer accurately until I know the full story since there is more to this than you have explained.
Here is my suggestion, take it with a pinch of salt since I’m not your certified advisor.
1. Decide if the value they bring to the business is equal to the equity they are asking for. If not, let them go.
If they are that valuable, then you should have given them that equity a long time ago.
2. Be careful about HOW you do this.
If the rest of your team sees this as weakness, others may demand for more equity as well.
Firing 1:I got fired sometime ago and the boss simply called me into the conference room at around 11a.m. He said “I’d like us to divorce our work relationship but I want us to remain friends. Please leave your work laptop. We will pay you for the rest of the month.”
Firing 2:The next time I got fired, it was a partnership of sorts. The person I was working with simply sent me an email. He talked about how we didn’t have the same vision and that he had even spoken to his father about it etc. In that instance he immediately cut off my salary. lol
Both experiences weren’t great but at least it made me respect the first CEO more for having the boldness to tell me to my face.
3. Consider Loyalty
This reminds me of a story from Felix Dennis’ book, How To Get Rich.
His version is a tad harsh but he has some interesting thoughts on the subject you asked about.
He had a similar experience and I’ll share it below.
Personally I don’t approve of blackmail so if their loyalty is purely based on money then we shouldn’t be working together.
Loyalty is worth more than equity. People who do not share the same vision as you do probably shouldn’t be working in your company.
Think about their value to you if they stay and if they were to leave. That will help you make a wise decision.
Email me at email@example.com if you have any more questions about attracting customers, making sales or how to influence people.
Felix Dennis’ account:
Years ago, in the early days of my company, four of my colleagues got
together and had a long talk, I assume in a pub, although I cannot be sure
of that. One was a senior manager, one was a publisher, one was a designer
and the other an editor. Together, they hatched a small conspiracy. Knowing
how important they were to my little company, they confronted me and
demanded a share. They bearded the lion in his lair.
They were polite and civilised about it. They pointed out that I owned
100 per cent of the company and could easily afford to share out, say, 20 per
cent between them. It wouldn’t cost me anything and it was only fair. Those
were the words they used. They were working just as many hours (10–12
hours on a good day) as I was and they were committed to making the
company a huge success. They were even willing to discuss a slight reduction
in their salaries in return.
In addition, they went on, I should remember that such a ‘dispersal’ (I
remember they actually used that word, too) would incentivise them mightily.
Such a gesture would never be forgotten. And my remaining 80 per cent
of the company would ensure that I was still the boss.
However, should I not ‘disperse’ these shares among them, they
intended to leave. And leave immediately, virtually without notice. They
would have no option but to do so, although they didn’t want to.
The company would suffer dreadfully — and might even fail altogether.
They had already agreed the name of their new company, in case I wouldn’t
play ball, and had even registered it. They would set up as rivals. They were
serious and they meant business. All of this unpleasantness could be avoided
if I would just hand over a pitiful 20 per cent to them, perhaps based on
Both as friends and colleagues, they earnestly advised me to consider
their demands dispassionately and honestly. In my heart, they argued, I knew
they were right. It was only fair.
I fired them on the spot. Or they walked away. I can’t remember which
– it didn’t matter then and it doesn’t matter now. What mattered is that I
held on to every single share in my company. I would run the entire bloody
company myself, write the articles, design the pages, answer the phone and
sell the ads if I had to. But I would not part with a single, solitary share. Not
for love. Nor for fairness. Not for loyalty. Not for anything. And certainly not
for moral blackmail.
They set up their new company. They launched their magazine. Either it
folded or they gave it away, I don’t remember now. Two of them came back
to work for me. There were no recriminations. I am on friendly terms with all
four of them to this day. Not one of them ever got rich. Nor ever will, I
I didn’t blame them, by the way. I would have tried the same stunt
myself if the positions had been reversed. But if I had tried it, I would have
made a damn sight more certain of its success.
‘Why doth treason never prosper? For shouldst thou fail, thou must
hang. And if it doth succeed, why, ’twas never treason!’
Over the next thirty years, I estimate that their suggested 20 per cent,
had I handed it over, would have earned those four gentlemen around
$80,000,000 — say it again — eighty million dollars, in current asset value and
past dividends. This is the problem with sharing ownership. The laws of
simple mathematics are relentless and obdurate.