There are three things that can happen in your business that you want to make sure your key people stick around for. They are:
If your company employs more than 75 people you likely have thought about compensation design for the key people in your company. For most compensation has four components:
A stay bonus is extra compensation you pay a key employee if one of three triggering events happens. Whether you transfer ownership of the business, die, or become disabled a stay bonus can be key in helping your business retain its value.
My friend Rob Slee calls selling a privately held business the bizarre bizarre. I agree with him. I’m amazed that any business ever sells. Most of the time when a deal falls apart it’s because the owner has not prepared his business and or himself for the sales process.
Owners need to realize what the needs of buyers are if they’re to have a successful sales transaction. It’s easy to concentrate on what we want, but a successful sale often revolves around buyers’ needs and not sellers’ needs.
Having a stay bonus in place, especially if the business owner is over 50 years old, is an important part of making sure key managers stay with the business if something happens to the business owner.
A stay bonus is a payment that key managers receive if a triggering event such as death or disability of the business owner or sale of the business happens. The purpose is to make sure key people stay with the business during a crucial time.
What they are really asking is what’s going to happen to me if you decide to sell the business, become disabled and are not able to work, or die.
I believe one of the best protection strategies you can put in place for your business and your family is the stay bonus. This bonus will pay a certain amount of cash to the key people in your company if one of the triggering events above happens.
I write a lot about the use of a stay bonus when you’re going to exit your business. Keeping your key people is often the difference between a great buyout price and one that is so, so.