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When To Consider Taking Shares In an IT Company?

timothy posted more than 5 years ago | from the opportunity-costs-and-the-time-value-of-time dept.

The Almighty Buck 315

pgpark writes "I've been working as a key resource for a small IT consulting firm in the US. While the job has been interesting and the company's growth quite impressive over the last few years, it's been almost half a dozen years now and being ready for something new, I was ready to quit for consulting. It looks like the CEO would prefer to see me stay, as she is offering me ten percent of shares in the company in exchange for five additional years of my services. So the big question for me now is 'should I stay or should I go now?' Have you guys on Slashdot ever been dealing with such a situation? What points would you consider in order to make your choice?"

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Ask for Revenue Sharing and Shares (5, Interesting)

alain94040 (785132) | more than 5 years ago | (#26660591)

Some points to consider: 10% is worth nothing because until the company gets acquired, shares have no cash value. For a small IT shop, it's unlikely that it ever will be acquired, it will probably fold once all the key consultants or the owner are burned out.

What would be meaningful is a 10% revenue share of the annual profits. Check out FairSoftware [] for a good example of how to mix equity and revenue sharing (disclaimer: I came up with that). It doesn't apply directly to your situation because your company is already mature, but it's a useful guide to everyone considering starting a software business today.

Another curious point: how does the owner intend to force you to stick around for another 5 years? Are you talking about stock options vesting over that period of time? Five years is a very long time. Think of it this way: if you had been offered stock options from the beginning, you'd already be fully vested, since you say you have already been working there for 6 years. Ask for some credit for time served :-)

Bottom line: the fact that you are getting this offer is a strong sign that you are in a good negotiating position. But my advice is that the offer is weak. You can do better. Congratulations and good luck! Ownership is cool.

Re:Ask for Revenue Sharing and Shares (5, Insightful)

PornMaster (749461) | more than 5 years ago | (#26660623)

I'd say that an equity stake should only be considered for such a long-term commitment if you'll also have some kind of control of the strategic direction of the company. 10% of a sinking ship is just a lot of water with debris in it.

Re:Ask for Revenue Sharing and Shares (5, Interesting)

Anonymous Coward | more than 5 years ago | (#26660715)

Talk to a lawyer. Minority ownership of a closely-help company is often not worth much as there is often no requirement to pay dividends, which may be the only way to get a return on your shares.

Agree, talk with a lawyer (5, Interesting)

VampireByte (447578) | more than 5 years ago | (#26661177)

A close friend of mine was allocated 10% of her employer if she would stay there two years. After 5 years the company had grown substantially and was offered $20 million to be acquired. My friend made a comment to the founder of the company along the lines of her $2 million (10% of $20 mil) payout and the founder said there was no way she was getting that much money. Days later he offered her a check for $100,000 if she would resign and not claim her 10% ownership. At that point she went to attorneys who said it would have been better if they could have been involved from the beginning because they could have prevented a later fight. While the lawyers agreed she had a valid claim, she would be looking at $50,000 in legal fees and a nasty fight. End the end she took the $100,000 and resigned, and nobody was very happy. See some attorneys up front, even if just for a brief consultation to see what could options are available.

Re:Agree, talk with a lawyer (1)

mattack2 (1165421) | more than 5 years ago | (#26661367)

Wasn't the 10% ownership in writing? If not, why not? That would seem to have made it certain that she would get the $2 million.

Re:Ask for Revenue Sharing and Shares (5, Insightful)

plierhead (570797) | more than 5 years ago | (#26660747)

This is very complex and most likely the business owners haven't thought it all out.
  1. Waiting until 5 years is up is not a good idea (and I assume they don't want to give it to you up front). Who knows what will happen. Ask for it one year at a time - or even better one month at a time - in advance.
  2. Get tax advice. You are in dangerous territory.
  3. Asking for 10% of the profits is interesting but theres an old saying in business that the 20% owner gets paid what the 80% owner wants them to. Its hard to stop the owner (say) takinga big salary and depleting the profits that way.
  4. Consider a "roulette clause". With this, either party can offer to buy the other one out. The trick is that if they refuse, then you can demand they buy you out. This avoids stalemate, which is very destructive in this situation.
  5. Good luck!

Re:Ask for Revenue Sharing and Shares (4, Insightful)

barzok (26681) | more than 5 years ago | (#26661217)

Asking for 10% of the profits is interesting but theres an old saying in business that the 20% owner gets paid what the 80% owner wants them to. Its hard to stop the owner (say) takinga big salary and depleting the profits that way.

You don't ask for 10% of profit, because the numbers can be manipulated to where you're getting 10% of $10. You arrange it for a percentage of gross revenues (how much money came in, before it was all spent) instead of net profit.

Hollywood Accounting (5, Informative)

KingAlanI (1270538) | more than 5 years ago | (#26661329) []
The film industry made it famous, but they asren;t the only ones to do it.
So there's the term that applies to the method.

Re:Ask for Revenue Sharing and Shares (3, Funny)

Anonymous Coward | more than 5 years ago | (#26661419)

That advice is worthless without
  - ???
  - Profit

Re:Ask for Revenue Sharing and Shares (1)

profplump (309017) | more than 5 years ago | (#26661449)

I don't understand what part of owning shares of a company is "dangerous territory" with regard to taxes. Care to elaborate?

Re:Ask for Revenue Sharing and Shares (0)

Anonymous Coward | more than 5 years ago | (#26660793)

Don't forget to take into account future VC funding rounds. 10% might sound great now, until you find out the executive team is shopping around for a VC investor and when that series A offer sheet is signed, be prepared for your 10% ownership to dilute in half (or MORE!).

Re:Ask for Revenue Sharing and Shares (4, Interesting)

Forge (2456) | more than 5 years ago | (#26661279)

To clarify this point. That depends on how share ownership is structured in the company. Some businesses start out with a fixed percentage of the ownership vested in the founders and VCs are sold a slice of the rest, then With an IPO some of what's left is sold and on like that. Keeping the founder's 10% as 10% of whatever the final total is, This is how M$ managed to have 4 of the top 10 richest people in America at one point.

The bigger questions are:

Will this business become a publicly traded giant or get bought out for enough money that your 10% can push you into the VC business yourself or at least provide a nest egg to make all future work optional?

Do you feel your presence in the top ranks of the business will enhance the likelihood of this type of outcome? Remember a 10% stake dosn't guarantee you a seat on the board, but that is not an unreasonable expectation.

This is just me stabbing in the dark here, but if an Engineer is worth 10% of the business, then this is likely not the type of business you can build up and let go. Basically the top engineers ARE the business.

Finaly. Mr. Neal. Did Hemos and Taco try to give you alcohol before making this offer?

Re: Ask (0)

Anonymous Coward | more than 5 years ago | (#26660853)

Don't forget to ask our resident "expert" on everything. This guy never fails to get a first post, and he never fails to hawk his lame website.

Since Roland is gone, perhaps we can rally around the new common enemy: Alain94040.

Die Alain, Die.

Re: Ask (-1, Flamebait)

Anonymous Coward | more than 5 years ago | (#26661059)

Shut up nigger [] !

At least my own business don't involve ho'in or stealin' or slangin' rocks, you damn dirty ape! Only those of Aryan blood may have the first post. Don't hate the player, bro, hate the game.

Your master,
-- Alain 94040 -- see, i got 2 forties compared to your measly half-drank one.

Re:Ask for Revenue Sharing and Shares (2, Interesting)

geekoid (135745) | more than 5 years ago | (#26660885)

really? MS shares aren't worth anything?
You do not need to be acquired for them to have value.

I'm confused, are you saying 10% of the revenue or 10% of the profit. These are different things.

You are also assuming the the companies shares don't have value now.

"how does the owner intend to force you to stick around for another 5 years? "

that's the heart of it. Vesting over 5? better have a lot of confidence in the company.
OTOH, maybe they will give it to him now based on his word. Or with a buyback clause if he leaves before 5 years.

I just glance at Fairsoftware, but I didn't see who is liable when you are sued with that plan.

Re:Ask for Revenue Sharing and Shares (2, Interesting)

alain94040 (785132) | more than 5 years ago | (#26660995)

really? MS shares aren't worth anything?

This was said in the context of private companies, not publicly traded ones.

I just glance at Fairsoftware, but I didn't see who is liable when you are sued with that plan

Liability is an interesting topic. Don't believe everything lawyers tell you :-) For instance, no matter how good your contract is, if another party wants to shut you down, they can outspend you. I have been on the receiving end. It's ugly, bogus and unfair, but that's life.

To answer your specific question: projects don't sell directly to the consumer, so the consumer has no direct claims against the distributed contributors. That's a form of liability protection, but again, if anyone promises you that you can't get sued, they are lying.

Re:Ask for Revenue Sharing and Shares (1)

Marxist Hacker 42 (638312) | more than 5 years ago | (#26661025)

If you're not willing to sell them, well, Microsoft has yet to announce a dividend.

Re:Ask for Revenue Sharing and Shares (0)

Anonymous Coward | more than 5 years ago | (#26661093)

If you're not willing to sell them, well, Microsoft has yet to announce a dividend.

False. Microsoft increased their dividend last quarter.

Re:Ask for Revenue Sharing and Shares (1)

missing000 (602285) | more than 5 years ago | (#26661167)

If you're not willing to sell them, well, Microsoft has yet to announce a dividend.

False. Microsoft increased their dividend last quarter.


Bears are always better.

Re:Ask for Revenue Sharing and Shares (2, Informative)

larry bagina (561269) | more than 5 years ago | (#26661271)

fase []

The august 19th quarterly dividend was $0.11/share. The November 18th dividend ("last quarter") was $0.13/share.

Re:Ask for Revenue Sharing and Shares (5, Interesting)

snickers (36112) | more than 5 years ago | (#26660909)

I got offered a similar deal with 5% rather than 10% with a small fast growing company. While I liked the company and the job was interesting I had been thinking of moving to a larger city where a lot of my friends had moved. I ended up taking the deal. What the 5% gave me was a nice bonus at the end of each year plus more input into the direction of the company. While I wasn't on the board I was still consulted about all the decision and projects. We also ended up getting aquired so it was a nice pay day at the end of it which helped to buy a house. Looking back I made the correct decision to stay even though it was a difficult decision to make at the time. If overall you like the job and you think the company is worth working for, having a financial stake in it can make a difference. I found that it really motivated me. Good luck with whatever decision you make.

Re:Ask for Revenue Sharing and Shares (0)

Anonymous Coward | more than 5 years ago | (#26661117)

I think another question needs to be asked - does the company have a product/service that can be (and is) be offered by someone else down the street?? If it's a ho-hum service, I would question yourself what reasons another (and presumably bigger) company would come along and buy it. Perhaps the larger company could just as easily buy the accounts receivable at a bankruptcy auction? I too think the offer seems weak, and almost sounds like the employer feels like he will lose nothing from the deal.

Re:Ask for Revenue Sharing and Shares (0)

Anonymous Coward | more than 5 years ago | (#26661119)

Current economic climate the way it is, I'd take 15%, 3 years, and oh yeah - a BIG CASH bonus now and for *every* quarter we turn profit.
I'm just sayin'...

Re:Ask for Revenue Sharing and Shares (2, Interesting)

Anonymous Coward | more than 5 years ago | (#26661189)

As the parent suggests, 10% of a private company doesn't have a direct cash value, it has value, but you might not ever be able to get at it.

10% is also a fairly large amount, so the company must be smaller and not have any VC or anything like that. I'd ask to meet with the other owners and a very good question to ask would be for them to explain the exit strategy. Are they planning on taking VC? Are they paying themselves dividends? Do they not have one and they just want to do this and get paid a salary until someone dies and let their kid takeover? Is the company totally solvent or will they need more money soon? If they need more money then you really get 2 options, dilute yourself or buy more ownership by putting in money yourself.

If external investment is needed, then understand that a typical VC will dilute the stock and end up with 70% ownership, your ten becomes maybe 3% Which, potentially, is still great, very great. You can also ask about valuations, they don't volunteer that information and they might even try to make it uncomfortable to ask but if they are trying to pay with stock then you're completely within your rights to ask and when you are a shareholder it's the law in most states that they tell you when you ask. Can they put a dollar valuation on the company? If they sold it today, how much would they sell it for? If they can't do that, it's not a great sign. Ask questions to help you quantify this stuff and get answers, don't let them run you around, this is compensation and you should be able to have some idea on its value. Also, if it's 10%, they damn well better be willing to take your meeting to discuss it.

In a venture backed company or one that is going public or has any realistic hope of it, 10% is gigantic. That's principle employee/officer type ownership, that's special SEC rules for you type ownership if it becomes public.

What does that ownership provide in the way of decision making capacity? Do you get a board seat? In your day to day job does that increase your say? Do you get hire/fire decisions?

If she opened with 10%, and she doesn't answer to a board of directors or something, I'd not accept anything less than 15% but it's also indicative that it's a very small outfit and a cash exit strategy might be very hard to achieve. Hard to say though, the big boys might be chomping at the bit to buy your company, you never know. Find out the planned exit strategy and then take a step back and look and try to be honest and objective, are they moving in that direction? What needs to happen for that to happen?

Re:Ask for Revenue Sharing and Shares (1, Insightful)

Anonymous Coward | more than 5 years ago | (#26661307)

One more thing I forgot to mention, when you're asking these questions about valuations and such, especially the financial health of the company, ask why they are giving you stock instead of a one time cash bonus to stay. They'll have an answer to the effect of they want you to actually stay and the stock might be worth even more in 5 years. If you can get them to put a number on it all though, maybe you could ask for 70% of their valuation in cash instead of the stock.

It's also possible that they simply don't have the cash to pay you a cash bonus, which also tells you a lot. If they really think the company will be worth a lot more in 5 years, it's in their best interest to pay you todays valuation in cash and keep the ownership to themselves.

Re:Equity is much more complicated (5, Insightful)

Anonymous Coward | more than 5 years ago | (#26661337)

It's a lot more complicated than most posts here are making it out to be. I run a company that specializes in incubating start-ups, and employ numerous securities and transaction lawyers. I have to deal with this on a daily basis. What I say IS NOT legal advise, but experience.

1) Programmers have an attitude that they rule the world and no task is too great. BUT they are not securities lawyers, and generally do not understand securities laws (reading the comments here is a good indication or that and a good laugh). DO NOT do this yourself. HIRE A SECURITIES OR TRANSACTION LAWYER. The 1 hour @ $550 it will cost you will yield great dividends.

2) There are a lot of issues to consider and information you need to collect. I am going to list most of it here. Collect and answer all these questions before contacting a lawyer to make the most of their time.

3) What type of company is this? S corp, LLC, C Corp? This deeply affects your tax status.

4) What is the share structure? Preferred vs. Common, Outstanding Shares, Options, Fully Diluted Equity?

5) What is the instrument of the proposed transaction? Option? Warrant? Convertible Note? Tax Issue.

6) If it is an Option, what type? Non-Qualified or ISO? Tax issue.

7) What is the valuation of the company and method of valuation? Fair Market Value, Cash Value? Tax issue.

8) What do the P&L and Balance Sheet look like? They may actually be insolvent, etc.

9) What is the vesting period if an option?

10) What rights do you have? Get the By-Laws if they exist, Charter, Shareholders Agreement, etc.

Finally some thoughts: 10% is a ridiculously high amount of the company to give away! Generally I would give a high value CEO 10% vested over 2 years at fair market value. So unless you are the sole reason the company is making money, I don't see how they can be giving you that much.

Never accept counter offers (5, Insightful)

GigsVT (208848) | more than 5 years ago | (#26660607)

If you already tried to resign, accepting counter offers is a pretty bad idea. Sure you could work there for another 6 months or a year, but they will always be trying to replace you.

Circle of Life, Simba (1, Insightful)

Anonymous Coward | more than 5 years ago | (#26660783)

I doubt that they're interested in replacing the Asker.

However, they will most definitely use the equity vetting timeline to quash all attempts at payraises, since you'd be unlikely to leave over a payraise denial when you're earning a share of the company.

So it's best to make that part of the deal right now. Wrap up the cycle of negotiation quickly and easily, to avoid awkward dickering. What should you be earning in 5 years from now? Ask for that amount effective immediately plus the 10% accruing over time.

If they agree, then take it and be happy. If not, leave and be happy.

Re:Never accept counter offers (1)

lymond01 (314120) | more than 5 years ago | (#26660805)

If you already tried to resign, accepting counter offers is a pretty bad idea.

This entirely depends on why you're leaving. I've attempted to leave jobs simply for more pay. I tell them I've interviewed and they ask what the offer is. I tell them, the offer more, I stay. As long as you like your job, you may as well go with there's more money as long as there's good will (which there was in my case). If there's no good will, a decent manager won't counter even if they could.

You will resign anyway (4, Insightful)

wsanders (114993) | more than 5 years ago | (#26660855)

You're not going to last 5 years at any place that makes you dissatisfied enough to want to leave now.

This sounds like nothing more complicated than an option grant. Option grants almost always wait for a year or two after the grant before they start to vest, then grant a big lump of shares and accrue at monthly to yearly intervals thereafter.

As others have pointed out, your shares are pretty much worthless until the company is sold or goes public.

Re:Never accept counter offers (1)

BluBrick (1924) | more than 5 years ago | (#26661387)

My take on counter offers is that they are almost always amount to an insult. "If that offer is what you think I'm worth, why are you not already giving me that?"

Get the counter offer in writing, decline it, and use it as a bargaining chip with future prospective employers. "Sure I was on slave labor rates at Cheap&Cheat Co. but this here is what I am really worth"

10% of... (0)

Anonymous Coward | more than 5 years ago | (#26660635)

What's 10% of zero, and don't tell me it's zero!

Re:10% of... (0)

Anonymous Coward | more than 5 years ago | (#26660665)

10% of 0 is .0


A tech company with a woman CEO? (-1, Flamebait)

Anonymous Coward | more than 5 years ago | (#26660643)

Run for your life.

Re:A tech company with a woman CEO? (0)

Anonymous Coward | more than 5 years ago | (#26660925)

I worked for an ISP that bought out a smaller company, whose CEO was a woman. She ended up taking my boss's position, pushing him out of the company, and I quit shortly thereafter. She had the people skills of a mouth breathing knuckle dragger. Apparently she was a wiz with the numbers though.

Re:A tech company with a woman CEO? (0)

Anonymous Coward | more than 5 years ago | (#26661045)

a wiz playing the skin flute, more like.

Re:A tech company with a woman CEO? (0)

Anonymous Coward | more than 5 years ago | (#26661073)

by "the numbers" do you mean "sucking cocks" ?

things to consider (4, Insightful)

techmuse (160085) | more than 5 years ago | (#26660649)

Would you be happy staying there for another 5 years?

Would you be happier doing something else?

Could the company go out of business in the next 5 years?

Is it likely to be sold in that time?

Do the shares have any value otherwise?

Is the value of the shares (5 years from now) worth more than you might get in additional satisfaction and compensation elsewhere?

Re:things to consider (1)

UnixGrunt (124733) | more than 5 years ago | (#26660667)

I agree with this 100%. The shares should be a minor factor in whether you choose to stay or go.

Re:things to consider (0)

Anonymous Coward | more than 5 years ago | (#26660777)

Also, does she age well? She obviously enjoys your services, but do you? Viagra is still pretty expensive, and who knows what long-term effects it has?

Re:things to consider (0)

Anonymous Coward | more than 5 years ago | (#26661041)

You must also consider the following, short term issues:

How easily will you find a new job in the current economic crisis?

Are you leaving because you dislike your job or workplace?

Would you have more responsibilities if you stayed?

How long can you go unemployed if you just resign?

I guess you have most likely considered these things, but I don't know about the current state of the IT job market in the U.S., but mostly all other areas are suffering from the crisis. If you are guaranteed 5 years of labor with good compensation, I guess you should take it.. perhaps you could negotiate for a shorter term, 2 years or so, with the same benefits, and renegotiate your terms then.

Interesting (1)

DaMattster (977781) | more than 5 years ago | (#26660651)

It might be a great offer if you think the company is going places. I might even ask for 15% because it gives you a second source of income later on in life. It is almost certainly a different kind of counter offers. In most other times, accepting a counter offer is generally not a good as they will then be looking to replace you. However, this offer sounds like they really value your services and want you for the long haul.

Well (4, Funny)

Neil Blender (555885) | more than 5 years ago | (#26660661)

If you are low on toilet paper. Other than that, never.

10% of what? (0)

Anonymous Coward | more than 5 years ago | (#26660669)

If this is 10% of the shares issued, or outstanding. Many startups have far more outstanding shares than issued ones. Percentages mean very little in the absence of the whole picture.

She could choose to dilute you to nothing if she chooses to issue more shares and grant them all to herself.

Beware of the 10% number, it may mean absolutely nothing!

Re:10% of what? (1)

Panaflex (13191) | more than 5 years ago | (#26661261)

I've seen this happen WAY TOO OFTEN. Heed this advice. Seek a lawyer.

Five years is too long (5, Insightful)

EEBaum (520514) | more than 5 years ago | (#26660689)

I wouldn't commit to staying somewhere five years unless I was darn sure I love the place and the type of job, and have no possibility to want to leave the area or try something different. I get antsy after two or three, and being contracted to stay for five would make me stir crazy. Now, I could end up staying at a place longer than that, but I try to minimize the situations where my departure would result in significant losses other than them no longer paying my salary.

I don't know if it could be part of your agreement, but I would much prefer to have an arrangement where I'm given 1% share in the company every 6 months for the next five years, or something along those lines. It's more psychological than anything for me... I'd much rather feel that I have incentive to stay at a company than obligation.

Just the shares? (1)

Bieeanda (961632) | more than 5 years ago | (#26660693)

...because if you're not being paid on top of that, you should start running now.

Be happy (1)

ricelid (1383657) | more than 5 years ago | (#26660697)

If you'd be happier working somewhere else, then leave. Unless owning 10% of the company is going to make it much more interesting or enjoyable for you to continue working there, it sounds like nothing has changed. I'm assuming that either way you'll have enough money to do the things you want to do, and the main difference is not that.

Dilution (5, Insightful)

bigbird (40392) | more than 5 years ago | (#26660705)

Make sure that they can't just issue another 10,000,000 shares subsequently, and dilute your holding to almost nothing.

It happened to friends of mine the day after they signed a deal for an equity stake.

Re:Dilution and more (4, Insightful)

Beryllium Sphere(tm) (193358) | more than 5 years ago | (#26660993)

Head for the law library and look through O'Neal's Oppression of Minority Shareholders. You have to work hard to protect yourself, and there's a lot to protect against.

One gotcha, for example: can the current owners sell their shares to an acquirer and leave you un-cashed out? They can unless you've got an agreement requiring your shares to be included in a liquidity event. Even then I've seen someone try to violate such an agreement.

Re:Dilution and more (2, Interesting)

Anonymous Coward | more than 5 years ago | (#26661457)

One gotcha, for example: can the current owners sell their shares to an acquirer and leave you un-cashed out? They can unless you've got an agreement requiring your shares to be included in a liquidity event. Even then I've seen someone try to violate such an agreement.

This happened when a company I worked for was acquired. The executive team had unvested options that vested immediately, while the rest of us had to keep waiting for our options to vest. Naturally, this was to keep the employees from leaving, but felt a bit like the execs cashed out when they had the chance.

Fortunately, it was a publicly traded company, so I could got my money later.

Re:Dilution (2, Insightful)

Lumpy (12016) | more than 5 years ago | (#26661039)

that is simple
  word the contract that you hold 10% of the shares
  If they issue more shares they MUST issue you the amount needed to keep yours at 10%

Honestly, I wont take shares. I have thousands of bullshit shares of AT&T cable and AT&T wireless that were worth nothing when issued to us in the 90's and nothing when the companies were sold out. The AT&T cable shares were changed to Comcast options at $68.00 a share. Comcast will NEVER EVER hit $68.00 a share.

Never accept options, those are worthless. and unless the company is a publically traded company, provate shares are also worthless.

Listen to your gut (5, Interesting)

SiliconEntity (448450) | more than 5 years ago | (#26660709)

If your gut is telling you that it is time to go after six years, trust me, you will hate it after eleven. I took a strong counter-offer after trying to quit a job once, in exchange for my promise to stay on for a long period - and I badly regretted it. I ended up leaving early, with a great deal of bad blood and recriminations for breaking my word.

Eleven years at a company is a long time these days. it can lead to stagnation and absence of career growth. You need new challenges, you need to be around new people. Don't get lured by this false hope they are dangling in front of you. Move on, don't look back, and in the long run you'll be glad you made the right decision.

(BTW when I tried to leave that company? The company I almost switched to got acquired by a huge internet firm the next year (during the dot com boom) and all of the employees ended up retiring early, taking trips around the world, and generally living it up. You probably won't be so lucky, but it was salt in the wound for me, grinding away at a dead-end job I'd foolishly trapped myself into.)

Minefield (5, Insightful)

EmperorOfCanada (1332175) | more than 5 years ago | (#26660711)

Make sure that your shares are not dilutable. That is if you get say 100 out of 1000 shares, don't sign a contract that would allow them to issue another 5000 shares. Also make sure that they can't fire you in 4.9 years. Make sure that you don't have any restrictions as to who you can sell them to. Lastly make sure that the shares instantly are yours if there is any significant change in the company such as it selling, merging, or whatever. Oh and is this company profitable? If not, I doubt it will be around in 5 years.

Re:Minefield (0)

Anonymous Coward | more than 5 years ago | (#26661197)

Mod parent up - all points are correct and concise.

One minor edit to make - the shares should vest over 5 years, not just at the 5th year anniversary.

Stock is for chumps (5, Informative)

Anonymous Coward | more than 5 years ago | (#26660719)

I've been in the biz for 15 years now. Been at 5 different startups, had juice in 4 of them. Of these, here are some sobering numbers:

* One was acquired, and the share value increased. However, I had 1000 shares and I was 24 at the time (this was in '94, before the great Equity Craze of the DotCom bust), and decided to let those shares go. Loss: about $35,000

* One went IPO before I joined, my vesting price was at $15. During my time there, the stock sank continually to $8 (this in the late 90s, so you can imagine my frustration) Loss: None, other than my time.

* One burned through $35 million of VC and kept hyping the "inevitable" acquisition. I bought 33% of my vested shares. The company went belly up on Aug 17, 2001, three months after I bought. Loss: $3,000

* One is still in existence, but because I was a contractor and forced out by management who wanted "engineers they brought in", I had to purchase my shares to stay in the game. Current loss: $1,900. Likelihood of gain: Probably 10-25%.

Bottom line: Unless you think there is a significant chance they will be acquired or go IPO, shares are WORTHLESS. And they generate huge headaches for you and your coworkers (think of the time you waste talking about share value or stock prices of comparable companies).

Only one thing matters about your job: Your paycheck. If they want to give you a cool title, wicked shares, or some new's all fluff unless they want to pony up cold, hard cash to back it up.

Of course, in this economy, it's good to be employed too so take it all with a grain of salt. :)

Re:Stock is for chumps (1)

rhizome (115711) | more than 5 years ago | (#26661209)

Another note would be that $3.50 per option in an acquisition is very high.

Depends...consult a securities lawyer (0)

Anonymous Coward | more than 5 years ago | (#26660721)

But since I employ 5 of them ... Here's what you should consider :)

What is the valuation? Fair market or other?
What is the entity? LLC, S or C Corp?
Is it a Grant, Option, Note Convertable?
What type of option is it? ISO or NQO?
What class and structure? Fully dilluted? Common or perfered? Rights?
If they are growing and you are instrumental in their sucess than YES get it. 10% is ridiculosly high percent - I give that to a CEO over 2 or 3 years at FMV! Bottom line: get a sec lawyer.

Here you go (3, Interesting)

geekoid (135745) | more than 5 years ago | (#26660727)

1) Is that in lieu of any raises?

2) What is the companies project worth?

3) Is the 10% yours now, or at the end of 5 years?
If they sell in 3 years are you out of luck?
The cynic tells me that maybe she doesn't want to lose you now becasue she is looking at buyers.
I've been burned hard in the past, so I'm always a little suspicious.

4) If you sit down and think about it without any emotional ties, do YOU believe the company will be here in 5 years?

5) IF the company's profits sky rocket, and then bottom out in 4 years, can you live with yourself knowing you could ahve been rich a year earlier?
Somethign I personally had a hard time coming to terms with. I went from Worse case: Walk away with 5 million, and possible end up with tens of millions, to getting nothing becasue management made some bad decisions. It was a hard year for me after that.

6) If I was to give you advice based on the limited information, I would say go for it.
WTH, you end up working a job you know and worse case your looking for work in a few years instead of now.

Shares or options? (1)

Neil Blender (555885) | more than 5 years ago | (#26660733)

Shares can have tax liabilities, even in private companies.

schizz (1)

schizz69 (1239560) | more than 5 years ago | (#26660749)

So how many shareholders are there? Assuming there are less than 10, it is most probablly run as a partnership company, and it would be worth investigating the books before commiting yourself to 5 years. if they have a steady cashflow, and 10% appears to be a good dividend, then go for it, if not, do not. To get the best answer, I would advise consulting with an accountant and assessing your '5 year plan' and look to see whether it will be viable/acceptable for you. Most importantly, do you enjoy your job and your staff? That is paramount in my books.

Private company? No, Public Maybe (2, Insightful)

Anonymous Coward | more than 5 years ago | (#26660751)

As has already been mentioned, if the company is private the shares are worthless to you unless you have controlling interest. . . unless it goes IPO.

If you have threatened resignation, I would not stay -- you've played your cards.

However, if you have had another offer and this is your current employers counter, you should as has already been mentioned look for credit for 'time served', but only accept profit sharing. . . My experience with small IT consultancies is that they are very difficult to take public by themselves -- however, they can and often did (before the current economy) received buyout offers from the bigger fish occasionally (in which case 10% may be a heap of change, if the controlling interest decides to sell).

10% is crazy (0)

Anonymous Coward | more than 5 years ago | (#26660767)

I'm betting these shares vest over 5 years? Look, that ain't gonna happen. If you get shares make sure they are already fully vested. Otherwise your shares are worth nothing. If the company is bought out within that 5 years then your shares disappear.

Plus no sane company would offer you 10%. That means you're at a low-rent poorly run company. Run.

Middle ground (3, Insightful)

starfishsystems (834319) | more than 5 years ago | (#26660819)

It would be entirely reasonable, even admirable, for you to chart a middle course. I'll assume that the offer is being made in good faith because you're regarded as a key individual. Fantastic. Trying to see this from management's point of view, there is high value in the continuity of keeping you on board.

But nobody expects such a situation to prevail forever. So there would be equal, possibly even greater, value in having your help in making a smooth transfer of knowledge to another resource. Competent management knows that it has to embrace this sort of change, because such changes are a normal part of business over the long term. Every transition is an opportunity to get better at it, and thus become more agile.

So I'm thinking, why not propose some sort of middle ground where you participate for a year (or whatever seems appropriate) in finding and training a replacement? Everybody wins. And because you took the initiative in suggesting it, you gain some advantage in negotiating the terms. I'd take 5% in shares in addition to salary for the period. And I'd really excel at making it work too. After all, I now have a stake in the company's success long term.

Never (1)

Ngarrang (1023425) | more than 5 years ago | (#26660823)

Never accept shares. Not in today's market. The company can appreciate you more with greater pay, which you can then place into more secure investments like gold or the money market.

Re:Never (1)

LUH 3418 (1429407) | more than 5 years ago | (#26661201)

I agree with the parent. A contract granting you a yearly raise for the next 5 years, for example, is much more worthwhile for you. Why take the risk of losing out in the long term, when you could ask for a raise effective immediately instead? You can do whatever you want with the money, starting now, investing it in whatever projects you may have. Shares of this small company, however, may be diluted, or worthless in the long run, as others have pointed out.

Bogus advice... (4, Interesting)

SerpentMage (13390) | more than 5 years ago | (#26661319)

This is why some people make money with shares and others loose money with shares...

Right now is THE TIME to buy shares. Gold? Oh yeah whatever. Notice how gold just can't get steam? Want to know why? Because people are producing like crazy, and central banks are selling.

If you think we are heading towards deflationary times then cash is the thing to hold. Deflation means cash is worth more, and thus T-Bills are the thing.

What people don't realize is that because there is a deleveraging going on there is less cash.

When you are leveraged you are creating money due to the velocity of money increasing. To put it in perspective. If have a 100 USD, and I lend 90 then that person with 90 can lend it out again, say 80. Thus at this time outstanding in the entire system are loans of 190 USD, even though there are only 100 USD's. This is leverage and velocity of money.

The past leverage ratio was about 40 to 1. That means for every 1 dollar that the government prints there are about 40 forty floating around. With deleveraging to say a normal 13 to 1, 27 dollars are being taken out of the system. CREDIT CRUNCH!!!!

So what does the Fed do? Print money. They are reflating the system, even though it is contracting and deflating...

What of others who did the same at this firm? (1)

Stormin (86907) | more than 5 years ago | (#26660829)

I've worked at a two different "small IT shops" where the owners offered out shares to hard working employees to keep them around. Not one of those employees is still on speaking terms with the owner of either company. Lawsuits were not involved with the departure of all of these people, but enough of them did end up involved in suits that I personally would never accept stock in a small IT shop where I was working. In fact, watching what said shops did to many close friends - I don't think I would even work as an employee at a small IT shop again!

Suggestions... (5, Informative)

FrankSchwab (675585) | more than 5 years ago | (#26660831)

If they're offering 10%, take it. It will certainly have a vesting schedule attached to it. Don't feel guilty about leaving in three months if things aren't working out; they won't feel guilty about firing you in three months if business goes south.

Ask for an immediate vesting clause in the case of termination (other than for cause), or sale of the company. You don't want to accept their offer, then get fired three months from now when they find someone new (because you threatened to leave), or when the company gets sold.

Ask for the latest financial statements. Your perception of the money being made by the company, and the finance guy's perception may be totally different. If they're offering options to keep you, you need to be able to value the offer.

If there is a board of directors, insist on a seat. With a 10% stake, you would be entitled to it. Its the best way to find out where the company is, and where its going.

Ask the CEO for his exit strategy - is he planning on running the company forever, is he planning on a private sale, is he planning on going public? Each of these has a different risk/reward tradeoff that you have to make.

Being handcuffed with vesting options, but having no visibility into the viability of the company, is like being harnessed to a wagon with a closed box on top, being told "You'll get what's inside after we make it over the mountain". Especially when you don't know if the wagonmaster is dipping into the box on the trip.

Good question... (0)

Anonymous Coward | more than 5 years ago | (#26660847)

The Clash (you know the band?) has been asking this question for awhile...

Important questions (4, Informative)

UserChrisCanter4 (464072) | more than 5 years ago | (#26660863)

Is this common stock or preferred stock? Is the company contractually obligated to pay out profit or a portion of profit as dividends to its shareholders? For that matter, what is the structure of this company? How will this five year period be enforced?

If you can't immediately answer these questions, you need to speak to an attorney. Period. There has been quite a bit of development in the last 10-15 years in terms of small business structure and practices, and I highly doubt that you have enough experience in how this company is legally structured to be able to make an educated decision. At this point, your question is like asking /. which server you should use at your business. We have absolutely no idea about any of the criteria or facts that would explain that situation.

Note that this is entirely separate from the equally good advice that others have been throwing around: if you were ready to leave, why are you now ready to stay for a fairly lengthy period of time? If it's just the money, then it's doubly important to get to a lawyer and have this situation analyzed carefully.

Asking for trouble (1)

Stevenovitch (1292358) | more than 5 years ago | (#26660869)

The deal isn't as good as it sounds. There are so so many ways for the company to compromise the quality of their offer without actually breaking their agreement and exposing themselves to legal risk (diluting the shares, sneaky divestment clauses), whereas your end is so straightforward that you're going to have a hard time breaking it without exposing yourself to substantial legal risk. You could get a lawyer involved but that's more likely to flat out end negotiations than it is to actually mitigate the above mentioned factors.

Appropo Timing (4, Insightful)

drpimp (900837) | more than 5 years ago | (#26660901)

I have actually just recently taken an offer with a substantial pay increase of around 20K. I start in a week. I asked myself similar questions that the posters are suggesting the past few months. I have been at the current job for around 3 years. We get good benefits, the environment is nice, and profit sharing (compared to shares since the company is privately held). Each year you get 20% more vested into what ever profit sharing has been put into your 401K account. The past 10 months though we have been on a 10% salary cut (which wasn't the end of the world at first, but now there seems to be no end in sight), and now having had multiple job offers the past 10 months I have decided to leave. It's uncertain times, and I chose new beginnings over somewhat unstable comfort.

A bird in the hand... (1)

al0ha (1262684) | more than 5 years ago | (#26660913)

If you are happy enough at the company to stay without the options, then take them and stay. However it sounds to me like you were ready to move on and if so, do it and don't look back. Happiness has value in terms of health and life. Options are worthless, and it makes no sense to chain yourself for 5 years for nothing if it could be in trade for your happiness.

10% vs 100% (1)

ShashFool (1464597) | more than 5 years ago | (#26660915)

As I was told once, would you rather have 10% of the profits or 100%. If you feel motivated to strike out on your own then go for it. A CEO always has their own agenda. We always want to feel important, but we can always be replaced. Maybe you are great at what you do, but someone new will be motivated for another 3 years. That can be better than an employee that is bored and working at half their potential.

Money you can get anywhere... (0)

kawabago (551139) | more than 5 years ago | (#26660917)

Personal satisfaction is the most important consideration. If you aren't happy doing what you're doing, you won't do it well.

'should I stay or should I go now?' (-1, Troll)

Anonymous Coward | more than 5 years ago | (#26660937)

You should always consult slashdot on situations involving your life. Its a sign that you know where you are going an where you want to be in life. The mark of a true professional.

When you get home tonight, ask your mother if its OK to kiss your sister.

Take shares AND cash (4, Insightful)

geekmux (1040042) | more than 5 years ago | (#26661007)

I'm certain I'm not alone in this forum as a holder of thousands of dot-bomb shares that aren't worth the paper they're printed on.

My advice? Take shares + cash. Make it a blended investment. That way, no matter what happens to the shares, you've got something to show for it.

Is there a bigger sucker than I am (1)

Marxist Hacker 42 (638312) | more than 5 years ago | (#26661043)

Is there a bigger sucker out there than you are to sell the shares TO. If not, you just got talked out of the last raise you'll ever see at THIS company.

Almost never (1)

tnk1 (899206) | more than 5 years ago | (#26661049)

Options or shares are good at only one time, just before the company goes public and you have a strike price of like 5 cents. If you are accepting them in lieu of industry standard compensation, you're getting screwed.

As a part of your compensation, I've only felt that options are any good whatsoever when you can do something to actually improve their price directly with your own performance. That's why when you are an executive, they aren't bad. It also helps that unless you have 20 kids and college loans up to Doctorate level, an exec probably doesn't need those shares to supplement their salary.

For a minion? Make sure that your actual salary needs are covered before you play Wall Street roulette.

My feeling is that options or shares are a good thing as a bonus. That means that your company is stable enough to pay you what you need to live on, but is willing to reward you based on how you can help them improve that price.

In general, shares are risky (1)

presidenteloco (659168) | more than 5 years ago | (#26661123)

Because you may have to pay tax on them (as a taxable benefit) well before you could ever liquidate them, if ever.

If you are certain the company is going public in the near future, on a real stock exchange (not the OTC:BB or Pink Sheets or something scammy like that), and you think the company will maintain decent stock value for longer than your vesting period PLUS the legal holding period you have to hold your shares (maybe 1 year after actually receiving the shares),

then, and only then, go for it...

Oh and I forgot to mention. How many more rounds of financing (and stock dilution) is the company going to go through before you can sell your shares? Will your 10% of the company be 1%, or 0.001%. That sort of dilution happens in the seedy end of the corporate finance world all the time, as companies are subject to reverse takeovers and other bizarre ripoff schemes.

Cheers and good luck.

Every situation is different (4, Informative)

Giant Electronic Bra (1229876) | more than 5 years ago | (#26661133)

Frankly most small professional services type companies are virtually worthless on an asset value basis. The only concrete assets they generally own are nothing more than office equipment, some IT infrastructure, and possibly some licenses and distribution agreements.

With a small company the intangible assets amount to basically customer good will and name recognition. Customers often are more attached to the partners than they are to the business itself. If it is a business that has been a going concern for many years then the intangible value MAY be substantial, but it is difficult to measure.

Thus the REAL value of your 10% ownership is on paper at least very close to zero in most cases. It is even worse if you are a really key player in the business because it is likely to collapse if one of the really key people leaves. Maybe in your case that isn't the situation, but you never know when the VP of marketing will decide to take off with all the customers either.

Technically an equity stake entitles you to dividends, but that may not amount to anything at all. The principals in the company can just as easily take their profits in salary and you'd really have little or nothing to say about that, being a minority owner. You can also be pretty easily diluted, the board can issue more shares, etc.

Thus owning 10% may be worth exactly zip.

On the other hand, not all business owners are that cutthroat, you have to judge how much you trust them. If they are really making an offer to have you onboard as a co-owner and thats what they really want and they are honest people, then maybe its worth something. You could make some (or a lot perhaps) of extra money.

Consider though. If they are offering you equity, then that probably means the equity is cheaper than what they think they might have to pay you to convince you to stay otherwise. Even if the offer is in good faith and all it either means you're worth a LOT to them, or they are just broke and can't pay more but need you enough to give up some (possibly worthless) equity.

Only Once (1)

sexconker (1179573) | more than 5 years ago | (#26661161)

The day before the IPO.
Then sell, sell, sell, and bail out.

worthless advice (1)

dr2chase (653338) | more than 5 years ago | (#26661185)

I have a really bad track record with work and options, so take everything I say with a grain of salt.

First, this requires a lawyer, if you are serious. If nothing else, 10% of shares seems like a lot (seriously, it does -- I'd put it in "too good to be true, so probably isn't" territory). But there's an obvious risk of dilution, which happens All The Time in these situations. Anytime they get money from outside (by selling stock), bang, dilution, and as a minority not-even-shareholder (because until you buy them, they are just options to buy, not even real shares) you don't get to say squat. And understand, if it's a private company, your ability to convert shares to cash are limited.

Second, it does sound like she is trying to find a buyer. Some places I've worked, had "shares-vest-on-acquisition" clauses on their option grants. (Talk to a lawyer.) This would matter, if she finds a buyer. Maybe you can get accelerated vesting if there is dilution. There are things that they "can't do" -- for instance, it's really unusual for your shares to be dilution-proof (automatically multiplying to prevent it), because how could they raise more money? Other investors would not be happy if your shares magically increased to eat into their share. But accelerated vesting is not that big a deal -- your vesting was going to happen anyway, in the same time frame that the investors are likely to get their cash out. It does not substantially change your handcuff equation, either, since if the company is looking for money, the shares are likely neither tradeable nor especially valuable. But, it's the thought that counts.

Third, non-competes? Just curious, I hate them, seriously qualified lawyer friends I've talked to say that they're generally unenforceable (and they're almost totally unenforceable if there is any California in the equation), but consideration (e.g., this agreement you might be entering into) can affect their enforceability.

The economy is whacked right now -- it's hard to imagine an acquisition going through, there's also something to be said for the stable devil that you know. On the other hand, as other posters have noted, 6 years in a job nowadays is a long time, and 11 is even more. But that might be the best choice, and you might need strategies to help you cope if the job goes sour and there are no other choices. Is there room for any other growth there? Do they give you spare time to fiddle with other interesting stuff? Do you enjoy your hobbies?

The tax paperwork consequences can be annoying, once the you buy the shares, if this is an LLC or Subchapter S (guess how I know), especially if the company is profitable, especially if it is active in multiple states. Each state may be after you for their share of your share of the company's profits. You may need an accountant -- I don't, but that's because the company I own a scrap of, is not profitable enough to matter, otherwise I might be filing in MA, NY, CO, LA, NJ, and CA.

mod uP (-1, Offtopic)

Anonymous Coward | more than 5 years ago | (#26661199)

allQ over America

The money is worthless compared to your happiness (1)

ESarge (140214) | more than 5 years ago | (#26661255)

If you are happy in your current job then stay. If you are unhappy then make arrangements to leave - taking due regard and precautions in the current economic environment.

The shares are a red herring and I would remove them from your decision making.

Let me make my case.

There is a fairly new school of psychology, called positive psychology, looking at what actually makes people happy - which is different to what people *think* will make them happy. The leader in this is Dr Martin Seligman who wrote a very approachable book called Authentic Happiness.

The most surprising result from positive psychology is that more money will *not* make you happy. If you have enough money to put a roof over your head and food on the table then you have sufficient. The evidence for this is to study people on different incomes and see if there is any difference in their happiness - there isn't. Even winning the lottery won't make you happy. Studies of lotter winners show that a year after the win they are no happier than they were before.

The extra money you might get from the shares might make you happy if you can use them to do something that will make you happy. I suggest you work out what that is and make arrangements to do it - shares or no shares.

How to be truly happy? Use your signature skills, those things that you can do really well that others mostly can't, to make the world a better place.

If you get up in the morning excited about doing the work then good - go at it. Shares will make that all the better. But if you're not interested, and you seem not to be, then you will end up rather unhappy.

The shares are a difficult thing. There is a high risk they will end up being worthless and a firm and long commitment required from you. From what I hear from your question I wouldn't take them.

If I were you then I would make a clear eyed assessment of your options and move from there. If you think your consulting business will work in the current climate then go for it. Otherwise, it might pay to hang around for a while until the economy is ready for you.

All the best!

Cash or GTFO (1)

Eggplant62 (120514) | more than 5 years ago | (#26661273)

Sorry, but stock options have a habit of tanking when in a bad market and going up in a good market. Sure, it might be a good time to get in, but I think I'd counter with a half stock, half cash offer to ensure you at least see some of that promised gain. When those shares mature enough to do anything with them, will the company be in business to allow you to pick up that capital gain?

Besides worrrying about the SHARES, why not (1)

davidsyes (765062) | more than 5 years ago | (#26661275)

Think about the PAYCHECK? Unless you can know the company will NOT be around over the next 2 or 3 years, you might want to consider getting a paycheck until something sure-fire and lasting emerges. Who knows? Your company may be involved in work related to any stimulus package activity. Might take 18 months for it to happen for any such lucky companies. But, considering consumer low-confidence, constant layoff reports, and banks/lenders being not yet bound by law/government restrictions to LEND to individuals in exchange for government help, then it's possible that any number of companies will fold in the next 9 months.

Right now, if your company has a strong customer base (you won't know unless you know their financials, their work load, work backlog, and other things) and your company has a backlog of work, then you might want to stay put. Even if you go to another company, you'd have to drill DEEP into their past 2 years and their business partners/client base's past 2 or so years to make sure you're not hopping out of one potential mess into a real mess in the making.

Money talks (1)

plopez (54068) | more than 5 years ago | (#26661287)

Bullshit walks.

Ask for a raise instead.

Simple: Never (0)

Anonymous Coward | more than 5 years ago | (#26661311)

Simple: Never. Unless you're a fucking genius who is solving some major world problem, or are the type of person who is in the top 1% of your industry, it will never ever ever work out. Every start up is a long shot and because of survivor bias, you only see the ones that make it, not the 1 million that failed with the same story.

Watch the vesting, find some passion (0)

Anonymous Coward | more than 5 years ago | (#26661345)

Just be sure there's no onerous provision where if you leave before the 5 years you get nothing. Standard is to have a 1 year "cliff" then fully vested in the 10% in 4 years. Some places a vesting schedule over 4 years is disallowed, I beleive.

Since you're established, push to skip the "cliff" and just get 1/12th of 1% per month for 5 years ownership.

If you're thinking of leaving, though, you're a crappy candidate for an owner, minority or otherwise. See if you can find your way to putting your heart into it so you can build something worth real money someday.

Smells like 5 years of prison (0)

Anonymous Coward | more than 5 years ago | (#26661347)

"Darling you gotta let me know...
Always tease tease tease...
Siempre - coqetiando y enganyando...
If I go there will be trouble...
An if I stay it will be double...
This indecisions bugging me..."

10% shares means nothing good
unless the profits are shared with You
at the end of the year. But with 10% You are not the one that will decide that.
You'll get a greater sense of responsability
that will be throwed to Your face every day
during the next 5 years.
5 years... seems like a prison...

If You need something new... search for something new, not old CEO tactics.

If it's only interesting and not what You want for the next years... You should go

Anyway, congrats, for now You can decide.

hmmm, 1:17am and working, these shares that I have only gives me more work...

No, No and No (0)

Anonymous Coward | more than 5 years ago | (#26661373)

Did I forget to say no?

Unless the company is publicly listed and traded the shares are worthless. It will only cause you grief. There are a million and one ways a majority shareholder can diddle you, and your only option for recourse will be a court case that you cannot afford. I hope the company is limited liability otherwise you get saddled with the company's debts. What happens when the 90% (controlling) shareholder trades the company insolently despite your objections: the companies limited liability is overridden and you lose everything, and its completely outside your control.

Trust me: there are no free lunches in business. She's trying to take advantage of you. For the amount of grief this arrangement will cause you, you would be far better off to put your effort into starting your own company, rather being the person who picks up the poo after someone else's elephant.

Walk away (4, Insightful)

pvera (250260) | more than 5 years ago | (#26661383)

The fact that you are considering leaving the fold makes you unreliable. By staying under the promise of more compensation you are reinforcing the idea that you are not to be trusted.

All that you are going to achieve is making it easier to your boss to find your replacement and have you train him/her. You will be out of a job in less than one year. There is a reason why you are leaving after 6 years, just move on and don't look back.

10% of a body shop has little value (1)

0WaitState (231806) | more than 5 years ago | (#26661385)

Consulting firms have relatively low acquisition prices, typically about 1.5 times annual revenue. Unless the shares have a cash stream associated with them such as dividends, or excess earnings distributions, they're just wall paper. Even then, unvested shares don't pay dividends.

If your boss wants to offer you 10% of company earnings (paid quarterly) on top of your existing compensation, then that is something--but you don't need to fool around with stock to do that, unless the company is structured as some kind of partnership. But 10% ownership of a consulting operation, where its human capital would likely scatter post-acquisition, doesn't thrill me.

High quality (3, Insightful)

FrankSchwab (675585) | more than 5 years ago | (#26661429)

Has anyone else noticed that this thread has an extremely high ratio of replies marked "informative" or "insightful". At least, it's got the highest ratio I've ever seen.

OK, mod me "off-topic" now. /frank

Look at the job security... (1)

mnslinky (1105103) | more than 5 years ago | (#26661439)

As long as you get the revenue sharing and such figured out, as is mentioned above, keep in mind we're heading deep into a recession, and jobs, alone, are valuable. Basically a 5-year guarantee of a job is kind of nice.

Just my two cents.

its a trap (1)

TheGratefulNet (143330) | more than 5 years ago | (#26661443)

(sorry for that)

but honestly, shares are a fool's game. I know of no one, personally, who ever got rich from shares (I live in silicon valley and have been since the mid 90's). I've moved place to place on the promise of shares.

you know, JUST when you are about to vest, some nasty things happen. seen it over and over again.


got that?

"in god we trust. all others PAY CASH"

got that?


Similar Situation Here (1)

carp3_noct3m (1185697) | more than 5 years ago | (#26661455)

Im actually working at a startup tech support company right now. Im having fun working part-time trying to write a few of my own apps and working on a book, but my boss keeps asking me to come back on full time. His incentives are to a) make me a partner b)profit sharing - aka - 10% of every quarter of the companies profits as a quarterly bonus(this isnt real big right now, but were growing so fast, I could see it get pretty high) c)buy me whatever new laptop I want for work. The crux is that I havent finished my degree (international business) yet, and am torn between the need for education, the debt I'm already in, and the potential security and potential profits for me. So I would want to work on my certs (CISSP, CCNP ect), but for me its a question of A)pabout it, but just thought I'd let anyone else know another similarart-time work there till I get my degree and get passed up if it goes sky-high, but safe we go under or B) get certs and start saving for retirment early with a small chance of the company going under (as with any startup) Im still thinking situation.

**Edit messed up formatting last part of post (1)

carp3_noct3m (1185697) | more than 5 years ago | (#26661463)

A)part-time work there till I get my degree and get passed up if it goes sky-high, but safe we go under or B) get certs and start saving for retirment early with a small chance of the company going under (as with any startup) Im still about it, but just thought I'd let anyone else know another similar thinking situation.
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