Cross-border company "equity plan" integration! Let's take a look at the industry's general plan first, maybe it will be helpful to friends who start a business...

Recently, due to business needs, I have been learning about equity, so I have sorted out the relevant information myself. Everyone in the forum is a talent, and they will definitely start their own business sooner or later. I strongly recommend you to click to follow and collect it, maybe one day you will be able to use [doge].

I have always focused on business capabilities, and my knowledge of corporate law, finance and taxation, and equity design is limited to fragmented platforms such as Zhihu and Douyin. Therefore, the knowledge is very fragmented and I cannot deal with more practical and complex problems.
 
Respondent's basic information

1. 4 years of cross-border experience, with rich experience in projects from 0 to 1 (monthly sales of 500,000 US dollars, please don't criticize me~)
   

2. There is a bottleneck in the company's work, and a lot of internal work needs to be done, which is unlikely to be of much help to personal growth and skill improvement
   

3. Long-termism: Willing to give up some immediate benefits, hoping to do something with a more far-reaching impact, and longing for a more free and controlled life
   

4. I can’t continue blowing~ let’s get to the point
    

1. Business Model

1.1 Existing resources: Take inventory of existing resources, which can be divided into two situations:

a. For those who have not started the business at all, they can just take stock of the resources that can be used in the future, such as supplier resources, existing connections in the team, and which ones can be quickly absorbed.

b. If a newcomer joins the existing business, this is actually equivalent to financing and investing. It is necessary to take inventory of the resources invested, the current business scale, personnel situation, and sales situation, and to conduct financial accounting and redistribute equity.

1.2 Business planning: Combine existing resources, inventory, and available cash flow to formulate business goals for the partnership. In essence, a partnership must make money, but you must pay attention to matching goals with resources. If the investor wants to sign a bet with you, but sets a very high goal, you must be careful not to fall into the trap. It is recommended to make a full-year operating profit forecast, a break-even point forecast (no need to continue to invest), a cash flow forecast, and other core financial data forecasts

2. Cooperation and Division of Labor

The specific division of labor between partners must be determined in the early stage of a partnership. The main forms of partnership can be divided into

a. Only invest but do not work, this is a pure investor
b. Provide funds and participate in the operation of the company
c. Not contributing funds, but only participating in the company's operations

Partners involved in the operation of the company can be divided into the following categories based on the early work of Amazon startups: supply chain, logistics warehouse, store operations, and company support work: recruitment, finance, policy, and other related work. The initial division of labor is based on the partners' work backgrounds.

 
3. Equity Distribution

3.1 What factors should be considered in equity distribution? The most common equity is divided into: capital shares, human resources shares (technical shares) , and other factors to consider: other industries such as engineering, municipal and other related businesses may also rely on relationship resources, which also need to be considered.

Back to the cross-border industry, some founders may have stronger supply chain-related resources, and can get better prices, scheduling priority and other advantages. The proportion of contribution can also be negotiated in the equity distribution.
 
3.2 Contribution of each factor: Equity distribution has always been a very controversial issue, because many things cannot be quantified. You say that you provide supply chain resources, so what should be your share?

How to ensure that the subsequent supply chain resources play the expected role in actual operations? Resource equity is generally constrained by a gambling agreement. It is difficult to have a one-size-fits-all solution. Let's first look at the general solution in the industry: 60% capital shares and 40% human shares

 
Considering Amazon's industry situation, it is very dependent on later practical operations and operational management. It can be said that after the supply chain is stable, a stable and capable operation team is the company's most core asset: the corresponding data in the table is: 50% capital shares and 50% human shares. But what is the actual situation?

Investors will generally keep the manpower requirements very low, but it is recommended that you have a 20% bottom line and reserve some room for negotiation.
 
3.3 Equity distribution calculation table: Determine the contribution factors involved in the equity calculation: generally, it is capital + manpower. Resources are difficult to evaluate (negotiated by partners). Determine the contribution ratio of each factor. For example, refer to the calculation table below:

The capital contribution accounts for 60%, the manpower contribution accounts for 30%, and the resource contribution accounts for 10%. Then determine the specific contribution ratio of the partners to each factor. Here are the ratios of the factors corresponding to the three roles and then calculate them according to the formula to get the equity ratio of each partner:

Party A's equity ratio = 80%*60%+0%*30%+10*10%=49%
Party B's equity ratio = 10%*60%+60%*30%+10*10%=25%
Party C's equity ratio = 10%*60%+40%*30%+80*10%=49%

However, the equity distribution here is only calculated based on theory. The actual equity distribution needs to consider more factors. For details, see 3.4
 
3.4 Reasonable equity allocation:
a. In fact, it is necessary to formulate a healthier equity distribution structure according to the different numbers of partners. A reference plan is given here directly. The specific reasons will not be elaborated in detail. I believe you can figure it out.
At the same time, you should have a preliminary understanding of the basic equity ratio thresholds, such as 100% is complete control, 67% is absolute control, 51% is relative control, and 34% is the safety control line.

3.5 Other FAQs:
How to prevent equity dilution: Financing requires the consent of all partners, partners have priority in investment, etc.

How to ensure the core control over the company: equal shares with different voting rights (AB shares), even if financing and increasing shares are raised, ensure that only the right to dividends is obtained, and no voting rights on major matters.

Financing channel selection: The above mentioned are generally large capital investments. You can also implement internal employee stock ownership (incentive + investment). Some cross-border companies say that if you allow employees to hold shares, you should also be careful about "the boss takes your money and does his own business"
 

4. Dividend Distribution Method

4.1. Dividend distribution method: Direct bonus distribution is more effective, but it can also be done in kind, such as mobile phones, tablets, or even cars (deductible, those who understand will understand)
 
4.2. Dividend cycle: It is recommended to distribute dividends every six months, which happens to be after the mid-year membership promotion and the Black Friday Cyber ​​Monday at the end of the year. This can provide employees and partners with very timely positive feedback. Industry approach: Many companies distribute dividends to employees in batches. For example, if the dividend bonus of an operation during the mid-year promotion reaches 30,000, dividends can be distributed twice at 60% + 40%. This method can retain employees and reduce the company's financial pressure at the same time (I won't get beaten for saying this so thoroughly, right?)
 
4.3. Risk fund reservation system: Before the core partners receive dividends each year, a portion should be reserved as risk funds. The recommended ratio is 20-30%, which can be used for: expanding business scale, optimizing business model (investing in supply chain, logistics warehouse management, employee matters, etc.)

Answer: Yes! Human resources stocks reflect your core contribution. We can analyze them in three situations:
a. Only receive human resources shares, no salary: The company may suffer losses, and basic living needs to be guaranteed, so this situation will be very extreme, with no income for a year.

b. No human resources shares, only salary: This situation is actually working in the company, employees will not work hard, and it is understandable that they only do their job well.

c. Take human resources shares and salary: This method is more reasonable. Human resources shares are deeply bound to them, but the salary should also be reduced at this time. It is more reasonable to reduce it by 0.8 according to the market situation. If you are more altruistic, you can not take commission in the first half of the year to show other partners your determination and confidence.

Partners should also have this awareness: give up the current small profits, reduce the company's initial operating costs, and then adjust upwards when profits are made in the later stage.

 
5. Exit Mechanism

5.1 Partnership projects usually start from 3 years. Extending the cooperation period is also to leverage greater benefits, and generally a relatively high penalty will be set.
 
5.2 Exit timing:
a. Exit at the expiration of the contract: The company and other shareholders repurchase shares in the form of net assets, and the exiting party transfers shares. The company and shareholders have the priority to repurchase

b. Exit when losing money: Many people think it is unfair for the company to repurchase shares for 1 yuan, but if the investor directly withdraws the investment and runs away, the project can basically be said to be a failure. Therefore, the essence is that the interests of the partners are deeply bound, and "jumping off the train midway" is prohibited.

c. Exit when profitable: When the company is profitable, you can only exit at 60% because you have continued to benefit from the cooperation and it is highly likely that you have recovered your investment. The conversion share can be adjusted according to the actual situation.

d. Exit form: phased exit, 30% in the first year, 30% in the second year, and 40% in the third year. This is very important to prevent the core partners in the team from going out to compete with the current company after mastering the technology and resources. If the withdrawing partner cooperates with the core customers in any form or poaches the company's employees within three years, the unrefunded shares will not be withdrawn.

 
6. Other agreements

6.1 Confidentiality Agreement: Confidentiality protection for core business secrets, such as core product catalogs, core supply chain catalogs, etc.
6.2 Non-compete agreement: to prevent core team members from going out to work on their own and competing with the original company
 
This article could have been submitted according to the forum's paid reading standards , but I chose to make it available for public reading. Perhaps it can promote healthy cooperation between cross-border entrepreneurial teams and capital within the forum, which can be regarded as a small contribution to the industry.
 
The complete mind map is as follows, but it only shows the third-level subtopics. The complete mind map is exported as a picture, which is too poor.