We need to recruit a heavy-hitting outside operations leader to prepare our business for an exit, but we cannot afford their cash salary demands. How do we structure a performance-based plan that aligns their incentives with our exit goals without diluting our equity?

Question

Tyler Smith · Accepted Answer

Recruiting top-tier talent when cash is tight requires creative incentive design that aligns their success directly with your exit goals. You do not have to give away equity to attract a high-performing leader. Instead, you can use a Phantom Equity plan or a synthetic equity structure tied directly to the appreciation of the company's value. This aligns their financial incentives with your goal of a clean exit, as they only receive a payout when the business is successfully sold. Start by defining the specific outcomes they must deliver on the Accountability Chart. These should be translated into clear, measurable Rocks and scorecard metrics that directly impact your valuation, such as EBITDA growth, recurring revenue, or operational efficiency. Structure their compensation with a competitive base salary, a performance-based quarterly bonus tied to hitting their Rocks, and a long-term incentive plan (LTIP) that triggers upon a change of control. Ensure the LTIP payout is structured as a percentage of the enterprise value above a specific baseline. This ensures they are highly motivated to maximize the company's valuation before the exit. By aligning their incentives with your strategic goals, you attract elite talent, preserve your cash flow, and ensure a highly profitable exit for everyone involved.