When growing a successful business, you NEED people. Scaling without people is pretty difficult…
Even if you’re an online business, at some point, you’ll still need more people to satisfy customers, do more marketing, manage accounts etc.
The hard part is finding that top talent in the first place. Hiring is hard work, particularly in todays environment.
In fact, a recent article from Workable states that it takes an average of 42 days to fill a position. Thats a lot of downtime when you need the right person in the right role.
With this in mind, it makes perfect sense then, to retain your best people for as long as possible. When planning for exit, this is also true, as your people will become the operating force that continually delivers your product, so you can evetually step away.
So how do we retain them?…
Theres a myriad of options to help them stick:
- Incentive programs
- Bonus structures
- Paying them handsomely
- Profit sharing (though this can become tricky at sale time)
- Professional development programs
- Paid training
- Retention plans that include flexible working arrangements, investment in culture and social events.
Many of these work, however, it takes a well crafted strategy and fabulous execution to ensure it works correctly and you end up with happy employees…
Its also worth noting that businesses that DON’T invest in their people are the most at risk.
The best of both worlds…
I feel that the best tactic a business owner can use is that of a combination of TWO compensation style rewards.
> One that rewards current performance
> One that rewards loyalty
This way, your employees receive immediate gratification for the hard work they put in over 12 months AND for the dedication they give to the business in the long term.
Heres how it looks:
Rewarding Current Performance
This one is the easier of the two to manage and deploy. Firstly, get clear on the targets that you wish for your employees to achieve, then tie a corresponding bonus to that target.
This could be a percentage or a dollar value, and is best either paid quarterly or at the end of the year.
Rewarding Loyalty
For loyalty, you want to incentivise your team to stay with you, and earn as the company grows.
For this, put aside a separate amount of funds, labelled for each employee of your choosing, and continue to do this for three years.
Then after year three, they are able to withdraw up to a third of the fund, every year, as it continually grows.
For example:
Yr 1 – Create fund and contribute $1000 per employee
Yr 2 – Add in another $1000
Yr 3 – Add in another $1000 + employee can withdraw $1000, (on top of their performance bonus) therefore leaving $2000 in funds for the future.
Obviously you can adjust the fund amount to suit your business, and you could even align the amount with the performance bonus you have started.
The kicker?…
If they ever decide to leave, the funds remain with the business and they’ll be walking away from potentially three years worth of bonuses.
The benefit here is your employee is consistently rewarded for longevity in the business and have already committed three years of service before they are able to access their first payout.
You could also up the ante, and add the funds into a high interest account, so their funds grow and the payout figure increases over time. (Confirm this with your accountant first!)
Of course, you can adjust this concept to your liking, but its a great start in the right direction.
Thats it. Instead of trying to lock in your top performers with only ONE option, try blending a juicy combination of two, that rewards current hard work, matched with hard work over time.
Overall, its a Win – Win – Win scenario!!
Does the above seem overwhelming?… It shouldn’t be.
The best time to start planning your Exit is NOW!
If you need help with Exit Planning advice, or have a question about the exit process, simply hit the ‘Got a Question” button below.
Righto, in my next email, I’m going to share a story of how a simple checklist transformed a flat out cabinet-making business.
Until then,
