Tài liệu Practice Made Perfect 16 pptx

128 PRACTICE MADE PERFECT

Consider these questions:

! What are the thresholds to become a partner?

! What are the qualities—financial and nonfinancial—the firm is

looking for in a partner?

! When can the firm afford to add a partner without diluting the

income of current partners?

! What kind of partners will create value in the organization, as

opposed to diluting it?

! What is the value of ownership?

! How much ownership will be shared?

! Are the other partners willing to share control?

! Are there structures in place to compensate and evaluate part￾ners consistently?

Figure 7.3 (at right, and continuing) summarizes several equity

compensation plans.

Owner’s Compensation

If you’re an owner and actively working in your business, which

most advisory firm owners do, then this entire compensation dis￾cussion applies to you too. Owners of advisory firms should be

compensated like any other person for their role as employees of the

business: base compensation for the job they do and incentive com￾pensation for exceeding expectations. And they should be held to

the same performance expectations and evaluation process as any

employee doing the same job. The third component of compensa￾tion, ownership distribution, is the piece that distinguishes own￾ers from others who do the same job. This piece of compensation

rewards the owners for the risk inherent in running a small business

and should be evaluated against returns for other investments of

similar risk.

Essentially, each owner should be paid:

! Base compensation: Market-rate compensation for the job he or

she does

! Incentive pay: Compensation for exceeding the expectations of

the job