[trevelyan]

I'm a single founder and disagree with the other posts here that this is unsalvageable. But first things first, remember that it isn't odd for employees to own around 10% of the business IN AGGREGATE after dilution with senior non-founders taking up to 2%. Double that number if there are no outside investors, and do the math based on whatever your company is worth. Then divide by four to factor in vesting....

If those numbers don't make you happy, the problem is that your company isn't valued at the speculative 5-10 million that would make what you are asking for reasonable. Assuming the business makes 100k a year, we can guesstimate you want at least 10% of the value of the company for a single year's work. That might be fair or it might not be, but it's clearly disproportionate given the time and risk the others have already put in.

Where does this leave you? In my opinion as a business owner, the best way to get around this is NOT to haggle over the valuation of the company because you have no control over it and neither do your partners. By all means throw the ball in their court and see what they offer, but whatever they come back with remember that you can probably do better by linking your ownership to growth and the amount of new revenue you drive. This will be easier for them to agree to since they'll only give up more ownership if the company performs better thanks to your work. And assuming your work makes the company money - you will be able to push your stake in the business much higher than you would get otherwise as an employee, possibly even up to founder levels.

[anorak]

Thanks for your hard numbers; they're enlightening to a worker-bee like myself. A few questions: "Double that number if there are no outside investors" - do you mean double the 10%, or double the 2%? (I'd like to pursue this vein so I can relate to the owner's perspective.) How do you recommend calculating what the company is worth? Assets and revenue? (Company is still trying to turn a year in the black.)

So you'd suggest that I propose a stock package based on growth of the company over a certain period? Say maybe, over the next six months (if I stay with the company), what the increased revenue is? [Or would you recommend doing that in retrospect over the last six months - to say "a growth of X makes it reasonable for a compensation of Y"?]

[trevelyan]

If there aren't outside investors and no-one is getting diluted the 5% you mention in your write-up is reasonable since there is usually around a 20% total allotment to employees. All I meant otherwise is that from the owner's perspective it can be psychologically difficult to give significant equity to a new hire if you've been running the business for several years. It is always easier to agree to something generous if it is funded out of growth and conditional on business improving generally, so arguing for conditional options or whatever based on performance can be a good way to align interests.