You don't have to do it all at once. You can build your compensation and benefits plans in layers as your company grows. That's what Barb Todd did at Good Catalog Co. In 1992, its first year, the company had $1.3 million in sales. As it grew Todd enhanced the comp package and added key managers. Here's how it went:
1994 Todd boldly predicts the company will go public or be sold between 1997 and 1999. New benefit: Medical insurance for 32 employees. Hire: CFO. Sales: $9.6 million.
1995 New incentive: Stock options for all 63 employees. Hires: VP of operations and VP of fulfillment. Sales: $16 million.
1996 Pay raises for all. New incentive: Bonus pool equal to 30% of gross profits, split among 50 of 70 employees. New benefits: 401(k) with up to 15% of salary tax-deferred; dental and vision plans. Sales: $21 million.
1997 Todd rejects the IPO route. New perk: Massage therapy. Hires: Circulation manager, creative director, and information-systems director.
1998 Hire: Sales VP. In October, Reader's Digest buys the company for more than 20 times earnings, or about $30 million. Good Catalog options convert into large cash payouts to more than 90 employees. Sales: $25 million.
1999 New incentives: "Earn-out kicker" for all employees, to pay out in 2000 and 2001; Reader's Digest stock at a 15% discount. Projected sales: $38 million. Next hires: A controller, then a president to replace Todd in 2001.