I get a lot of calls from people looking for advice on how to give away shares in their company. Often people ask about giving share options, so I wanted to talk briefly about the difference between share options and shares, and why share options are not such a good idea for small businesses.
Share options are great for bigger companies with lots of staff. That price will usually be cheaper than if you buy the shares at the time.
Staff like this idea because they have an incentive to work hard, and will see some of the upside when the company is worth something. In one of my previous businesses, we fell for the share option hype, but because it was so costly and complex, we never got round to actually setting up the scheme, and I reckon the staff thought we were a little flaky for not following through on our promises.
Often, they want to bring in one or two people at a high level, often with expertise and experience in their sector, and get them on board. Much less complicated than messing around with options, cheaper, and it gets done. It could save you hours of thinking about this, and thousands in legal fees. Photo credit — Pie chart by Various Brennemans, from Flickr on a creative commons licence.
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Share options vs shares Share options are great for bigger companies with lots of staff. Free guide to my secrets of business success From working with hundreds of businesses — these are my secrets of business success. Send me my free e-book. Secrets of Business Success - your free book I've written a free little book containing the Secrets of Business Success.
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