Using Short-Term Incentive Plans to Retain Key Employees during the Transfer of a Business
Lifetime Stay Bonus Plan Considerations
In the last issue (for a copy of Issue 98, please contact Christy Viviano, firstname.lastname@example.org), we introduced you to a short-term incentive plan that provides for important employees to be compensated for their time and for their commitment to continue working after a company has been sold to a third party or perhaps transferred to an insider. These employee incentive plans –Lifetime Stay Bonuses –are integral in maintaining the continuity of your company as you prepare to leave it.
We also introduced you to fictional owner John Ewing, who realized the importance of providing key employees with cash incentives to continue with the new company after John sold or transferred his company. John also understood that the efforts of key employees to maintain cash flow is critical to maximizing the eventual sale price of his business. Similar to typical selling owners, John had the following three objectives with respect to his key employees.
Using a sound and thoughtful incentive-based plan for key employees, you can achieve these key employee objectives, as well as your overall Exit Planning objectives. Prior to beginning the Stay Bonus Plan creation process, it is important for you to address the following four Lifetime Stay Bonus considerations.
After addressing the four considerations highlighted above, the next step is to begin formulating the Stay Bonus Plan. In the next Exit Planning Navigator® article, we will look at the steps and the approach John Ewing took to develop a Stay Bonus program that accomplishes John’s vital Exit Planning objectives, as well as the objectives of his management team.
Subsequent issues of The Exit Planning Navigator® discuss all aspects of Exit Planning. If you have questions, please contact Kevin Short, Managing Director (email@example.com).