Is This Something That Would Work?

6 Replies

Okay I hate long post so bear with me. 

I am looking at different ideas for a employee. We all know good help is hard to find and I want to create space for a ambitious person to help me, while making it so he doesn't leave me next year when he thinks he knows it all. So my thought is I find a part-time person (maybe still in school or college) that I can bring into the office to do office work (I want things done a certain way so i want to train them) and help with general work. Once I find a hard working person, I talk to them about more hours and money, in which they begin to help me on deals. They would get a salary, and I would have a budget for Overhead expenses so we would then split all profit (minus salary and overhead) 75/25 (at first) then like 50/50 between our company and a new company I would form.  The new company would be 90/10 first year 80/20 second and eventually after 10 years would be his. I would hold preferred stock and be able to buy back his stock at anytime if he quit before 10 years, but after 10 years I would give him the preferred stock . The idea is he is with me for ten years but I am kind a building a retirement for him to, and I also want to pay well, so this would throw off cash flow as we invested the cash into cash flow. Thus every month he would see the cash generated and hopefully be more eager and hungry to do more deals. The idea is in 10 years I will be doing something else, but this keeps him around a building a nice portfolio for me, while also giving back to him slowly and making him appreciate what I am doing. I want everyone thoughts and if this is a good or bad idea.  Thanks in advance and please don't ask why I would do this, I want to keep this on subject but bottom line is I believe that if one is working hard for you they should be rewarded (but if you give a 20 yr old 50k from a deal you may never hear from him again). 

I love the route your going and have for years felt that people should be paid based on performance with a base.

I am not 100% sure but it almost sounds like a similar structure to an ESOP. I wish I knew more about (employee stock ownership plans), but I have only briefly read up on them.

The issue I have seen 1st hand, in construction especially,  is you teach someone the trade and then when you have them trained the way you want; to the point that you could leave the jobsite and be confident things get done correctly; they whine that they aren't making more money. HELLO I just paid for your schooling. I would like to recoup some of my investment.

@Aaron Junck  my point in this is to pay them well, but also make them stick around or lose the cash flow part and a h of lot of equity potential. Thanks for your thoughts.

Yep, I follow. 

I think it will mainly boil down to selecting the right person for the job that is motivated and eager to be an apprentice and has the understanding that while learning the trade he/she will make a nice income while earning equity in a business. 

Are you familiar with ESOPs?

@Aaron Junck  I am not really, however I still want my business and therefore want to do this with a side business so in 10 years we will both be ALOT better off. I might be able to do this with a side business I will have to check into. 

Im in a similar boat. I was thinking of starting some one off in property management part time while they got on there feet being a realtor. 

My mentor always said the person you want to hire will leave and start there own in 3-5 years or you don't want them. 

@Peter MacKercher  I agree with you in your statement which is why I want to keep them longer. Let me know how your search goes.

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