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Bonus plan for a small technology company

I am wondering how many small companies are offering bonus plans to their employees. My company CEO wants to create a bonus plan. I am doubtful about the effectiveness of a bonus plan with a small company. I think a small company's main incentive is equity and shall not waste valuable cash on bonus. I would like to hear your experience with bonus plans of small growing technology companies. Thanks!

Answers

Topic Expert
Wayne Spivak
Title: President & CFO
Company: SBAConsulting.com
LinkedIn Profile
(President & CFO, SBAConsulting.com) |

Equity in a small company is a gamble. Cash is real.

Not everyone would a) participate in equity, b) understand why it is good/bad or c) want it (some people need hard cash).

Why not come up with a bonus plan and a exchange rate formula. If someone earns $100 in bonus chips, they can either take it as W2 income or trade it in for 1 share of equity.

Now you've addressed both sides of the aisle and given your people options..

Topic Expert
Malak Kazan
Title: VP, Special Projects
Company: ERI Economic Research Institute
(VP, Special Projects, ERI Economic Research Institute) |

I presume your firm is private in which case equity programs are more complex especially if they don't plan to go public, yet could be done. The marketing/education/transparency of the appraisal or good faith BOD determination of the share "fair market value" of the equity will need to be well executed. Both cash and equity incentive might make sense depending on short term (12 to 24 mos) and long terms goals (2 to 5 years) and depending on the teams and their functions. Hope this helps.

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