Opinions on Comp/equity package for an inexperienced Operator

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by a searcher from University of Oxford
in Orange County, CA, USA

2yrs ago

Opinions on Comp/equity package for an inexperienced Operator

Recently acquired company offered me a role as Operator. I’ll be working along side new Owner who is starting a holdco. This is the first acquisition.

My experience: ~4 years of sales in same industry, young, never operated before. Also on table for me is MBA offer + MBA internship in searchfund. Career goal: become my own owner/operator in ETA (ofc)

Offer has a 10 week trial, then full time.

Company: Rev is ~950k with 15% margins (many inefficiencies in the business ops)

Yr 1 goal is ~950k with 20% - 30% net margins

Comp is as follows:
80k base (5k benefits)
Bonus 1: If yr 1 goal met with 20% net margins, 20k bonus (bonus not part of net margins)
Bonus 2: if yr 1 goal met with 30% net margins, 30k bonus

Total comp is 135K

Equity:
3% four years vested
3% $3M organic rev @ 30% margins
4% $5M organic rev @ 30% margins
5% $8M organic rev @ 25% margins
5% $10M organic rev @ 25% margins

Total 20%

Thoughts? Is this common?
What is worth negotiating?

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reply by a searcher 2yrs ago
from Yale University in Los Angeles, CA, USA

To Jospeh's point above, the math is dreadful. However only you know the intangibles -- does your gut tell you that this relationship will get you to your ultimate goal? If so, the structure of this relatively short term compensation probably matters a lot less than acquiring the skills to ultimately do what you want to do.

reply by a searcher 2yrs ago
from Texas A&M University in Johnson City, TN, USA

You get to ride along with a salary and W2 and no PG, get your operator experience. If all goes well, your equity opportunities will come from sourcing add ons and future deals more than this one. On the downside, the buyer may need a baked in employee buyer sooner than you think to exit the investment and you may end up with some discount and sweetheart deal. Make sure you like the city it's in, cause you may be there a while!