So You Want to Be An Owner

Many of the consulting engagements that we get involved in start with an issue at the ownership table — a transition issue, a stock valuation issue, or issues related to the agreements.

Firm owners and candidates for ownership should have a clear understanding of the risk and rewards of ownership and have a more rational perspective of what being an owner means. Consider the following if you are involved in ownership or potential ownership of an A/E firm:

Ownership is not simply a promotion — Often, both firm owners and potential owners view the opportunity to buy stock as simply a promotion. Because the status value is overwhelming, the myriad issues that need to be considered are often overlooked. Being realistic about what sacrifices are required of an owner — when times are good and especially when they are bad — is an essential first step in evaluating whether you are a good candidate. Do you really want to have your personal savings account on the line to meet the payroll demands of your company if the company is short on funds?

Agreements are meant to protect all parties — Often, a shareholders agreement, a buy-sell, and a non-compete agreement can accompany a stock purchase. Those documents can stipulate how you pay for your stock, what you get for it, what happens if you leave the firm, what you can do afterwards, and about every other scenario possible. There is a balance here that is meant to give the company power while offering the stockholder some rights too. Many times, these agreements can be written more in the company’s favor, but it depends largely on the perspective of the author of the documents to set the tone. One of the incentives the company has of offering stock is the “golden handcuffs” it can put on its stars. The trade-off for new stockholders is the rights you give up to get potential additional rewards.

Owning stock in a privately held A/E firm is best viewed as a long-term investment — In fact, it is safe to say that an opportunity to be an owner in your firm should be viewed as a potentially lucrative additional retirement vehicle. Of course, I recommend that vehicle be accompanied by a balanced portfolio that includes a well-managed 401(k) and possibly other sources such as traditional and Roth IRAs. Because most of these opportunities are designed to keep you with the firm until your retirement, you need to consider your own career goals and the confidence you have that you can fulfill those with your current firm.

Start learning now about ownership and form a realistic perspective that best uses your money long term. Know where you stand and don’t get hung up on traditions.

Chad Clinehens, P.E., is ZweigWhite’s executive vice president. Contact him at

Posted in Uncategorized | August 12th, 2014 by

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