You may reach a point where you need to bring on help to scale up your new company, but lack the cash flow to run a regular payroll. To solve this conundrum, you’ll need to be inventive and flexible.
Below are some suggested ways to compensate talent, as well as some ideas for the right people to target when it comes to recruiting.
Three things you can offer
1. Equity and/or delayed compensation
Rather than pay salary or hourly, you can get creative with your compensation. Here are a few ways to do that:
- Offer project fees (via typical payment types: bid, retainer, time-and-material)
- Offer partial compensation in project fees, partial compensation in equity
- Offer all compensation in equity on sales
An example of the second method would be to offer 10% of all web sales and 5% ownership stake through stock options. Options would have to have some vesting terms, which might look like:
- Half would vest upon launch of new e-commerce website
- Balance would vest monthly over 3 years as the employee continues to maintain the site and help with SEO/marketing
- All options would accelerate if the company is being sold
Strategies like these would allow you to pay your talent with the cash flow they help to create, rather than pay for them work that has yet to create any cash flow.
Ambitious, career-oriented people may be willing to take one for the team in the short run if they’re convinced that they’ll be a valued part of a successful team in the long run. Those who are essential to getting a company established should be rewarded accordingly, both financially and with opportunities to grow.
Also consider that a new company can provide an opportunity for raw, inexperienced talent trying to break into a new field.
3. Flexibility for your workers
The need for flexible arrangements will be a deterrent to some talent, but it can be a plus to others. The people that agree to flexible compensation terms very well may be those who need flexibility themselves, particularly in their schedule.
Types of people you can target when recruiting
As you can see, this kind of arrangement would require a complex structure and only appeal to somebody who is open to some risk. So what kind of people will be open to these things?
Let’s say you only have ~20 hours of work to offer somebody each week, or your cash flow will only allow you to compensate somebody for that much work. That could be a good thing for people who want part time work in a world where most employers insist that we work 40 hours at minimum. Worthy talent might be found in free lancers, college students, parents with young kids, or other entrepreneurs.
Or, let’s say you can’t afford to pay a competitive wage on a regular basis, and you’re offering something like the structures we mentioned above. You’ll need to target people who can afford to get by without a “normal” income for awhile. Again, the same types of people are likely to be interested.
Free lancers will have other contracts keeping them in the money. Professionals with young kids might be part of a household where one partner still has a full-time income. College students might be supported by a scholarship, grants, savings, or their parent’s incomes. And other entrepreneurs, of course, are already making do with their situation.
These are people who are likely to be open to the three major things you have to offer, which are, again:
- Delayed compensation
- Opportunities, now and in the future
- Flexible arrangements
These are good types of people to target with your recruiting efforts, but this is not necessarily an exhaustive list. Be sure to keep an open mind to other possibilities.
At Free Vector Advisors, we believe it’s never too early to think about your end game
Even for owners of startups still in the early stages, the best time to start planning your exit strategy is always now. That might be as simple as just spending a few minutes each week thinking about where you’d like your current venture to take you in the next 5-20 years.
As you get established and things start to slow down for you, you can start to invest in a solid exit strategy. Business owners in Seattle, Pittsburgh, Palm Springs and Bozeman can contact Free Vector Advisors for help with growing or selling your company.