They are willing to go salary free and on a 12 month contract and being very open to whatever I throw at them. Very cool guys and both seemingly committed, but of course I need to stay at the top (or close to the top) of their priority lists while also protecting my return.
There are several factors to consider:
1. Profit share does not have to equal equity. As an example, two people can agree to split net profits 50/50 even though the percentage of equity is split 60/40. Just get it in writing. So find out their expectations for long term income and equity. Are they expecting a share of net profits or just the ability to recoup their investment when you sell the business?
2. What value do they bring to your business? Are they funding? Are they bringing significant contacts or the ability to secure contracts? Are they helping with infrastructure or product development? What would you pay someone in salary with no equity to do the same exact thing?
3. Are the short term or long term? In other words, once they help you launch, do they continue to have value in building the company? Or, are they no longer needed?
There is no right answer to how you compensate them for helping you get started. But, try to look at all the value variables. Maybe that will help you identify what they are ultimately worth and what a fair, win-win offer would be. It sounds like they are very reasonable and you have a good opportunity to get their help for a reasonable compensation package.
Good luck.
If you would like to talk more about this at no charge, I offer a one time free call to new callers. Just use this link to schedule a call.
Answered 10 years ago
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