Use case: Growth Company
A growth-stage company with 5 employees has revenues and is starting to hire talent.
- 25% of EBITDA allocated towards bonus compensation
- Everyone starts with a base that is at 70% of their market rate
- Goal of 10MM in revenues per year within 5 years
- Vesting: 2 years
- Divesting: 3 years
- Improved Cash Flow Leads to Faster Growth: because everyone comes in below their market rate, cash flow is improved thus allowing hiring of additional talent, which results in faster growth.
- New Employees are Partners: New employees feel more like partners because they’ve invested themselves, thus affecting the culture
- No Slackers: because everyone is directly affected by the growth of the company, people manage and assist each other and do not tolerate poor performance.
- Transient Talent: growth requires technical expertise that is temporary. The company is able to hire a database administrator (DBA) for 6 months to build a system and leave to profit from sales that happen over the next 3 years.