Make a real difference to your business this Christmas

Giving shares to your employees can be an incredibly powerful motivator. It’s something that can have a much greater impact on their life (and your business), longer-term than a cash bonus today (that will be forgotten in the aftermath of New Year's eve).

Like a lot of business owners, you’ve likely been meaning to get round to putting that employee share scheme in place all year. Now you can feel the Christmas rush is closing in and you’re wondering if you’ve missed the boat, or if it’s still possible.

You’re probably grappling with questions like:

• How long will it take to set something up?

• Isn’t there lots to consider?

• How much will this all cost?

• Do I need a valuation?

Let’s take each of these one by one, so you have all the information you need to make progress. For the purposes of this post, we’ll assume you’re looking to setup an EMI option scheme (86% of SME’s tend to use this). However, most of the principles apply to any scheme (and our team of experts at Vestd would be happy to guide you through the options, for free).

How long will it take to set something up?

“Have I really still got time to get a share scheme in place before Christmas?”

The answer to this question used to be more uncertain and complicated. First you had to find an accountant and a lawyer to help you with the various elements, have the various meetings, start working on your valuation. Then they would start preparing the paperwork, adding various custom clauses for deliberation/discussion (but often with limited true utility). After you’d reviewed the various versions and at some point, finally agree the documents, get them wet signed by your team (after attempting to explain what everything meant) and then you’d still need to go through the process of registering the scheme with HMRC. All this takes time and as you’ll know with lawyers and accountants, you are paying by the hour and it certainly starts to add up.

Today the story can be dramatically different depending on how you approach things. Harnessing software you can dynamically build an agreement that’s right for you, simply and in a few minutes. Cutting your admin and time down to nearly zero and completely eliminating the paperwork through digital signing.

That means something that used to takes months can now take days. The key thing to start early on, is the valuation. That’s outside of everyones control as you’ll be working to HMRC’s timelines and they take around 4 weeks to approve them. If you want the scheme in place before everyone heads off for the holidays, I’d suggest you ideally start the process in Oct/early Nov.

Isn’t there lots to consider?

“I’m coming into the busiest part of the year, have I really got time to do this with everything else going on?”

We hear this a lot and it’s understandable. The decision is a seriously important one for the business, no one wants to make a mistake with their equity, and you want to make sure you have all the information, so you can have comfort in your decision. I appreciate all the language and options are likely new and confusing when you first start to look at this. However, choosing a scheme really isn’t that complicated once you understand what you are trying to achieve and what type of scheme can be used in your situation. Usually your businesses situation will determine that one option is clearly better than the rest for you.

At Vestd, we help more SMEs set up EMI share schemes each weshare ek than anyone else. We’ve taken all we’ve learnt and the common questions that come up and created this free share scheme guide that only takes 10 minutes to read and will tell you all you need to know. Anyone that signs up for the guide, also gets a free 30min consultation with one of our share scheme specialists to answer any additional questions. At least by then, however you decide to put your scheme in place, you’ll know exactly what you need.

How much will this all cost?

“I want to give shares as a bonus but don’t want to break the bank doing so.”

This is a hard one and it’s the reason we set up Vestd over 4 years ago now. So many business owners know the power of sharing ownership (the research is clear — these companies outperform their peers on everything from productivity to revenue to happiness) however, cost can be a huge barrier. And that’s just to get the scheme set up. Only business owners who have experience of having been there before can appreciate how the hidden costs can mount up over the lifetime of the scheme.

The fact is, it doesn’t have to be this way. Costs can be completely transparent, spread over the lifetime of the scheme and be predictable so you’ll know exactly where you are each month. No nasty surprises. Yes, setting up an EMI can easily cost up to £10k if you are doing this the traditional way. However, with a digital service, you’ll be paying as little as £150/m which will include all the support and guidance you need to manage your scheme compliantly over its lifetime.

Do I need a valuation?

Yes, for an EMI scheme you’ll need a valuation pre approved by HMRC. The time you’ll need to prepare the valuation can vary. Again, if you are doing this the traditional route, I’d allow up to a month to work with an accountant on this. And then you’ll need to allow 4 weeks for HMRC to approve the valuation before you can grant the options. A lot of accountants don’t do these regularly, so they either take even longer or outsource to someone else (and you’ll be charged accordingly either way).

This used to be our biggest bugbear at Vestd. We’d reduced the costs and complexity for setting up and managing a scheme hugely by harnessing technology and simplifying the process. However, it felt like we were going back in time every time a customer needed to get a valuation done. To solve the problem, we built our own inhouse valuations team and tool. And we’ve included ongoing valuations as part of our standard plan. That means, every time you need one to issue more options, there is no additional costs to worry about and we can process the valuation for you quicker than anyone else.

So now you know you’ve still got time to get your scheme in place, get your copy of the only share scheme guide you’ll ever need. It’s free, takes only 10 minutes to read and will help you understand how to put a share scheme in place and make a real difference to your business this Christmas.

What’s Vestd?

Vestd is the UK’s share scheme specialist. We are authorised and regulated by the FCA and every week, our experts, help more companies set up their EMI option schemes than anyone else.