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I have recently launched my small online business(sole proprietorship). I have no funding and this is something I been working on for the last two years on the side at night after work.

I am relying on some key people in order to sell the service and they have already shown abit interest. In addition to salary is there something else I could offer them that would make them want to join and how would I go about it? I know there is shares but Im pretty green when it comes to this stuff.

Any advice would be greatly appreciated.

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3 Answers

up vote 2 down vote

You said it. Most startup compensation is a mix of salary (cash) and equity (stock).

Very often, startups without funding can't pay any salary at all, so they offer significant stock to the first few "employees". Actually, most people agree that if you work for a startup for no salary, you should think of yourself as a co-founder.

In order to give stock, you need to incorporate the company properly (usually, in the US that means a C corp).

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Alain is right that you can offer stock and other monetary benefits, but it's also worth noting that something doesn't have to be monetary in nature to have value.

  • Work-life balance (a combination of flexibility in hours and ample vacation)
  • Doing something one is passionate about
  • Working on hard, interesting things with bright people

I could go on and on. These don't replace a salary -- most of us have bills to pay -- but when applied properly they can make a lower salary position more attractive.

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great thank you so much for the advice everyone! I was told another thing to consider is to give a quarterly bonus as Incentive Compensation. If I lets say take 25 % of the profit after taxes and split it up for everyone. So depending on the effort you have put in, the bigger part of the bonus. Does anyone have any experience or thoughts about that approach?? Thanks again, Hans – user11033 Jun 15 '11 at 5:33
@user11033 That would work best on people who are primarily extrinsically motivated -- that is, the exact opposite personality from the sort of person who takes a lower-paying position in order to do something they love with bright people and great work/life balance. Pick one strategy and go with it -- few people are interchangeably extrinsically and intrinsically motivated. – HedgeMage Jun 15 '11 at 21:49
up vote 0 down vote

If they are going to be sales people perhaps a straight commission deal would work? You can entice them with a higher than normal commission rate (I'd set an expiration date on the higher rate though). Good luck.

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