COVENANT BUSINESS PLANNING SOLUTIONS

Key Employees Part 2: Incentive Planning

Before they can sell or exit their businesses with financial security, most owners need to grow their company’s cash flow and transferable value significantly. Without management leading the charge, this is an almost difficult task in today’s economy.

Few sophisticated buyers will seriously consider acquiring a company that lacks a capable management team that remains with the business after the owner exits.

A sizeable percentage of businesses are sold to key employees - up to 40% according to a recent survey of 700 written exit plans created by business exit planners

Transferring a business to children is especially risky in the absence of key employees who will remain with the new ownership. Each of these observations highlights an owner’s need for motivated employees to grow business value and to stay with your company after you leave.

The beauty of a well-designed key employee incentive program is that as your employees meet their incentive-defined goals, you attain your Exit Planning goal of making your company more valuable and more marketable. And, of course, you are able to exit! If there was ever a case of ‘win-win’ for both employer and employee, it is key employee incentive planning.

The first task in key employee incentive planning is to identify exactly who your key employees are. Most of your employees do not fit into the ‘key’ category. Instead, they are attracted to your company and motivated by the usual items: a pleasant work environment, a stimulating job, good wages and benefits, and job security.

Key employees who tend to be in management, on the other hand, act and think more like you do. They want more challenges and opportunities. They want to prosper and grow as the company does. In short, they behave like owners. You may have key positions in your organizational chart. Make certain the persons filling those slots are key employees.

If you need more information on Employee Incentive Plans including whether that’s a good option for your business situation, please check out our resources available for your business at www.CovenantBusinessSD.com.