Finance

The Problem: During a period of strategic change, a Toronto based IT consultancy lost several key employees, including their most skilled implementer and developer. In an attempt to rapidly scale, this staffing change proved to be a significant setback in the company’s growth journey. The firm brought in CREO to develop a compensation plan that would allow management to increase employee retention and free up cash flow for necessary expenditures.

The Approach: We approached this project in two phases. The first involved a rigorous evaluation of the company’s financial position and compensation strategy. Our team analyzed financial statements going back five years to identify trends, as well as their current variable compensation mix including bonuses, vacation days, and other benefits. We then utilized a mixture of comparable company, precedent transaction, and discounted cash flow methods to arrive at an accurate company valuation. Second, we conducted in-depth primary research on a number of alternative compensation plans, including employee stock options, phantom equity, and profit-sharing. We extracted knowledge from over 15 expert calls with successful startup founders, private equity professionals, and business school professors.

The Result: Combining the information gained through research with extensive collaboration and input from our client’s C-Suite executives, we built a working phantom equity plan tailored to our client’s needs, as well as suggested a number of changes to their current compensation structure that could save them over $45,000/year.