Rocco Luisi: Make your business last by remedying unfair compensation between owners
How an imbalance led to the breakup of a father-and-son-owned family business.
Unfair compensation between company owners is a red flag signaling a potential business breakup.
This scenario typically unfolds in the following way. Individual A is the founder of the business. He is older, experienced in the business, is the rainmaker and is the sole owner of the business. Individual B is younger, less experienced in the business, has little or no clients and is a salaried employee. Think Ebenezer Scrooge and Bob Cratchit.
Fast forward five years. Based on Individual B’s great work performance and increased business generation, Individual A makes Individual B an equity partner in the business. Individual A either (1) maintains the lion’s share of ownership and continues to maintain the same level of work; or (2) makes Individual B an equal partner but goes into semi-retirement mode.
Jump ahead another five years. Individual B has really hit his stride. He now brings in as much business as Individual A, and has a level of experience that allows him to work independently without the supervision of Individual A. Although Individual A still has more experience, for the purpose of generating income for the business, they are equals.