Hello, I would appreciate your thoughts on equity for a president that will stay on after close. I’m evaluating a deal where the owner (one owner at 100% ownership today) has a small role and the company has a president who is highly involved in the day-to-day. The president is interested in owning some of the company, but I understand he may not have the financial means or risk tolerance to purchase the company. Today, he plays a key role in developing and executing business plans and brings subject matter expertise. I have met the owner so far and I expressed that I’m open to the president having some ownership, but no details have been discussed yet. Meeting the president is a next step. The owner wants to exit fully in 2020.

My initial thought is the president “buys” some equity alongside me in the 3-5% range, then has the opportunity to “earn” another 3-5% if certain financial hurdles are met. I’m thinking only revenue to make it simple, but should profitability also be included? This would vest quarterly over 3-5 years.

If I go SBA, is there anything special I should consider? What would be the pros/cons of other options - i.e. an annual bonus vs. equity after close? Anything else I should think about asking? Thanks everyone!