How to Negotiate Equity Incentives With a New Boss was originally published on Ivy Exec.
You’ve got a new job in a company you love and would like to be part of in the long run. But you don’t know how to negotiate for equity with your new boss. You might worry that they wouldn’t want a new employee to own a part of the company. It’s also common to be anxious about their response to your request.
Negotiating equity incentives is crucial for career and financial growth. Owning some shares motivates you to work towards the company’s success. It ensures you receive the right rewards for all your work and innovativeness.
Let’s discuss how you can approach your new boss about equity incentives.
✔ Learn More About the Company
Before asking for equity incentives from your new boss, it’s vital to research. Find out if the company has an equity structure. What’s the value of the company’s assets? Are there any debts that may affect its performance in the future?
The value of a company’s shares will vary based on dividend policies and interest rates. When negotiating equity, it’s good to understand how different factors may affect it. Find out if the dividend policies will likely change in the future. Besides, determine how much interest you would earn if you cash out. You should also evaluate the likelihood of the firm expanding based on the competition in your industry.
Learning more about a company allows you to determine how much equity to ask for. It helps you choose an equity scheme that aligns with your career goals and financial interests.
✔ Prepare Your Pitch
No employer wants to give equity to employees who don’t value their job. Many business owners also prefer to share the same beliefs and goals with their partners.
As you prepare to ask your new boss for equity, determine how you can help the company grow. Find out the impact you can make in your new role. Identify the strengths and skills that make you an asset essential to the company’s future.
After that, ask yourself why you want equity in the company. Do your career goals align with the firm’s mission and financial objectives? Are you ready to make a long-term commitment to the company? How will getting equity incentives motivate you to meet personal career goals?
Thinking about such matters will help you prepare your pitch. You can identify unique ways to show your new boss you are valuable. Moreover, it will be easier to answer their questions about your future in the company.
Your new boss may not be fully open to giving you equity. But, if you prepare in advance, you can anticipate objections and address concerns they may have about your proposal. Further, you can provide well-researched responses to show that you understand the responsibility that comes with equity.
✔ Know the Language Used in Equity Negotiations
Equity negotiations can be tricky if you don’t know about essential terminology. You may find yourself committing to things you don’t fully understand. It’s also hard to assess if your new boss is being fair without a deeper understanding of the topic.
Before the negotiations, familiarize yourself with the terminology. Read widely about employee equity and know all your options. You can also get legal help or consult a financial advisor if you are unsure about anything.
Some essential terms to learn about are:
- Option grant
- Acceleration
- Restricted stock units (RSUs)
- Anti-dilution provisions
- Liquidation preference
Your employer may have several equity schemes and different conditions for each. For example, they may offer you performance-based stock. This means that you must meet specific goals to get equity. The value of your shares may also vary based on your output.
Understanding such aspects will give you an upper hand during negotiations. It shows genuine interest and seriousness about equity ownership. If you plan to make career changes, you can avoid signing up for an agreement that will affect them.
✔ Be Flexible
Your request for equity incentives might not match what your boss has in mind. For example, they may have a long vesting schedule, affecting your career’s direction. Besides, they might tie your equity to unrealistic performance goals.
When negotiating equity with your new boss, stay open-minded and flexible. Be ready to explore options that meet your needs and the company’s. Assess how asking for ownership in the company might affect your employer’s goals and the firm’s.
If you are flexible during equity negotiation, you can come to an understanding quicker. Once you and your boss lay out the conditions, be ready to adjust expectations, but ensure you don’t accept unfair terms.
✔ Prove Your Commitment
It’s common for employers to ask for time to decide after an equity negotiation. They could use this period to assess their options or consult other stakeholders.
Proving your commitment, meanwhile, can improve the chances of your boss granting you a favorable equity deal.
Here’s how to impress them:
- Be proactive in solving challenges before they have significant effects
- Show enthusiasm for your new role
- Identify opportunities for innovation and leverage them
- Be efficient in your duties
Committing to your duties can clear doubts your boss may have about granting equity to a new hire. It helps build a good rapport and improves your relationship with company leaders. Meeting your goals after being in the firm for a short time also improves your visibility to decision-makers.
✔ Ensure You Are Realistic
Your new boss might be unable to grant you equity for some reason. For example, some shareholders may not approve of the idea. On the other hand, they might agree but set conditions that will impede your career in the long run.
Being realistic when negotiating equity incentives can prevent disappointment. Have a positive mindset and determine if you will still be comfortable working there if your boss denies the request.
Negotiate for Equity Incentives Like a Pro
Negotiating for equity with a new boss may be intimidating, but it doesn’t have to be. Educate yourself on the topic and explore your options.
Don’t be afraid to list your requirements and highlight how you can help the company succeed. It’s also wise to prove your value and show your boss that you can make a difference in the workplace.
Explore this page for more career advice.
