Family Business Compensation Planning
A good compensation plan for family members can be a great asset for your family-owned business, helping to motivate and retain valuable employees. The absence of such a plan is often a source of tension.
Research suggests that improvements in human resource practices, specifically compensation, translate into higher gross revenues and personal income for family business owners. Studies also note that family businesses that implement executive compensation systems, strategic planning, and solicit outside directors perform better financially than those without such resources.
In a well-run business, you can’t afford to neglect your compensation plan.
Two Forms of Compensation
Family business compensation planning needs to take two forms of compensation into account. First, there is the compensation earned by all employees. Next, there is the compensation that’s unique to owner-employees.
Traditional employee compensation depends on job value and personal performance. These rewards become operating expenses of the business. Family business owner-employees receive traditional employee compensation plus ownership dividends dependent on family business operating results and their relative percentage of entity ownership.
The Right Strategy for Your Family Business
Your successful compensation strategy may include all or some of the following:
- Base salary
- Performance cash bonuses
- Equity-based compensation
- Employee benefits
- Recognition awards
- Promotions
- Length of service awards
- Education opportunities
- Training & development
At MJM Financial Advisors, LLC, we will help you to understand, improve, and manage your compensation programs. The plan we create will have a positive impact on the success of your family business.
Contact us to learn how we can provide solutions for your family business.
More information about family business consulting coming soon in these areas:
