Opening a branch

[HR Solutions]

We have been operating in Capetown for some while now. The way we are at present doing it is commuting down there around twice a month seeing clients, seeing candidates etc etc. We have found offices in Century City and have actually been operating out of some on a temp basis. It is now time to take the next step and get permanent offices and permanent staff down there and open the branch.
My question is : What is the most advisable way to do this ? I would like to run the books etc all from JHB, obviously separate the two branches. We would also like to give the lady that has been targeted to be Branch Manager shares in the business (CT only). But how exactly do we go about it and what is the best option ? Do we do plain simple profit sharing or what ? We would like to give her a fair percentage in the CT branch to obviously keep her interested and have a long term interest in the business.

I would appreciate some comments. Thank you

[Dave A]

We would like to give her a fair percentage in the CT branch to obviously keep her interested and have a long term interest in the business.

For a new hire? You must be joking.

Just makes things more complicated if you have to sack dismiss her. Profit share is the better way to go if you feel you have to have that sort of incentive in place. And even then, big question marks as to whether it will actually affect performance. It's just too far removed from a direct action...

[HR Solutions]

For a new hire? You must be joking

She is not a new hire, she has been working for us in Jhb for a long time, built her way up, has been trained for the position and is now getting transferred.

[Dave A]

I withdraw the "You must be joking" then

[sterne.law@gmail.com]

I suggest a structure along the lines that the person gets shares of X percent. It only converts to true equity after 2 yrs (as example) that is cant be sold, traded or ceded and such.
If she leaves, for whatever reason, before 2 years, the equity returns to you. Along the way she gets her equivalent profit share.
You need to decide if the shares can only be retained while person is working. If so, on departure company buys shares out at agreed formula. ( further protection, is that person must work for further 2 years before equity can be sold) in this way Alternatively shares acumulate as time passes. In interim profit share incentive in place.
Good to allow person opportunity to purchase shares alobg the way, example buy 4 percent get 5 percent, price can be set. This is often an indicator if person is truly invested or merely happy to take shares as a salary bonus.

[Miro Bagrov]

I think staff gets salaries. Business partners get % profit cuts.
If the salaries are too low, the staff leave, if they don't then they are happy. If a business partner doesn't cut enough profit then he sells off the shares.

Everyone is entitled to their own thing. But in no way can one mix the certain and the uncertain and the employees with the owners, and the salary with the profit. That's trouble. With all respect, it's big trouble.

So the realistic options in my mind is:
1. Franchise - Investor (buyer) forks out a lot of money to buy into the business and pays every month for admin and commission on sales (and his own rent).
2. Fully owned store - workers get salaries, landlord gets rent, and the head-office owner gets his profit.

Incentive/Rewards systems that can be used to motivate staff:
1. Bigger annual increase (after reporting period, after 12 months)
2. Bonuses (not as high as the owner's profit, again after 12 months of steaming profits)
3. Other benefits - tax deductible allowances, where the business and the employee benefits.

Let's just be honest - workers don't want to be bosses, or feel like they are owners. That's obvious because they are not prepared to take the risks the owner takes. So why pass off profit where no risk is accepted?

[DeonT]

There is absolutely no way that I'd give shares away in any of my businesses. I've made that mistake before and vowed to never do it again. Although my intentions were good, I was naive and I opened myself up to things that I could never imagine at the time of gifting the shares. A shareholder is as close to you as your wife and I only have capacity for 1 wife.

Staff get salaries and bonuses, better leave provisions, lunch at work, nicer laptops and cell phones etc. They don't get shares. Your circumstances might be different, but if I were you, I'd re-think that idea.

[HR Solutions]

Miro I appreciate you comments, but would like to thro some spanners into what you said.
Franchise wont really work because she will not be able to buy into the business. she is fairly young and we are wanting to still run/control it.
Fully owned store , basically same as above.

Therefore I still am not sure which way to go. She is not just a worker. She has been with us for a while. She is looking at her future and wants to be a "part" owner in the CT branch. This to me is a good thing because she is showing sense and is looking ahead.
she does not just want an annual increase or a bonus etc and neither do we want to just give her that. If she has the business at heart she is naturally going to give more into it

Let's just be honest - workers don't want to be bosses, or feel like they are owners. That's obvious because they are not prepared to take the risks the owner takes. So why pass off profit where no risk is accepted?

Most of the time yes. I agree fully with this statement, but in this case I hope and think we have found the right person, therefore we would like to KEEP her and grow the business from there.

[HR Solutions]

In the same breath can anyone advise me which is a good reasonably priced Management course that we can send one or two ladies on ? Possibly a two day course. There are a few out there but would like one that someone has a good experience of and can recommend please ?

[wynn]

Just make sure that you compartmentalize the new business with a separate Pty. Ltd. co registration so that if for whatever reason it goes further south than cape point it doesn't drag your existing business with it.

[CLIVE-TRIANGLE]

Bear in mind that restrictions on rights attached to shares require a pretty complex amendment to the MOI, because the MOI trumps any agreement in conflict with it.

[HR Solutions]

Some great thought here. Thank you. It would seem that a way to go would perhaps be to give her Profit sharing immediately which would incentevise her for the first year. She could take this "profit share" (if the company made money, which would depend on her a lot) and buy shares in the company with it ?