How to Keep the “Lebron James” of Your Business From Jumping Ship
Posted in Closely Held Businesses and Business Start-Ups on July 19, 2010
Every business--big or small--has one or more key employees considered "MVPs" by ownership. As a business owner, how do you protect your business from having the Lebron James of your team from leaving you when you need them the most? After all, most employees in Virginia are at-will employees who can leave (or be asked to leave) any time for any reason, right? While that is certainly true, there are a variety of strategies a business owner can pursue to increase retention rates for key employees:
1. Strategic use of written employment agreements with the "MVPs" of your business can provide a greater degree of certainty over the term of employment and the circumstances under which the employment relationship may be terminated. The use of a written contract can help both parties better plan ahead for thr future and strengthen their relationship.
2. Creative use of equity and "equity-like" compensation for key employees can significantly promote employee morale, increase loyalty, and effectively incentivize key employees by better aligning their interests with those of the company. For owners who are apprehensive about diluting ownership and taking on a business partner, a phantom equity program can offer key employees the economic equivalent of ownership in the company without the associated legal rights of being an equity owner. For an MVP whose motto is "just show me the money," a phantom equity program might be effective.
3. Carefully drafted non-compete and non-solicitation agreements can encourage key employees to stay put (albeit in somewhat negative fashion) or at least limit the potential damage they can do to your business if they jump ship for a competitor.
These are just a few ideas to consider, all of which should be tailored to the specific facts and circumstances of your situation and structured with assistance from legal and tax counsel.
Two Critical Lessons Entrepreneurs and Business Executives Can Learn from Hulk Hogan
Posted in Closely Held Businesses and Business Start-Ups on June 28, 2010
Here are a few helpful hints for any entrepreneur, business executive, or professional in the sports and entertainment industry pulled from several pending lawsuits initiated by pro wrestling legend and actor Terry Bollea, better known to the world as Hulk Hogan:
1. Always Maintain Adequate Insurance. Hogan, who was reportedly worth as much as $30 million a few years ago before a less than amicable divorce and a horrific car accident involving his son that left a young man permanently disabled, apparently only had $250,000 worth of liability insurance coverage at the time of his son's accident, according to a lawsuit he filed against his insurance agent for negligence. Regardless of your net worth or the type of business you are in, maintaining reasonable types and amounts of insurance coverage is a critical part of any risk management strategy.
2. Keep an Eye on Your Advisors. Hogan is also suing a couple of his former attorneys for ringing up over $1 million in legal fees in connection with the fallout from his son's car accident, allegedly without telling him that his legal defense actually could have been provided per the terms of his existing insurance policies at no cost to him. Professional athletes and entertainers are sometimes easy targets for being taken advantage of for a variety of reasons. Regardless of the root cause of the problem, professionals cannot blindly delegate responsibility for their finances and business affairs to others, no matter how experienced, well-regarded, or well-meaning those advisors appear to be. Trust, but verify, and never be hesitant to ask questions. Once you start having suspicions about the people working for you, then it is generally time to make a change.