Want to conserve your start-up cash? Take another look at the professional fees you're paying. Some professionals (attorneys, accountants, consultants, etc.) may be willing to defer part of their compensation or accept equity in your company instead of cash.
Before you suggest this, put together a proposal that creates a win-win situation, advises Rich Squar, a partner with Squar Milner, a CPA and business consulting firm in Newport Beach, California. He suggests keeping these issues in mind:
- Not every professional can ethically accept equity in lieu of payment. For example, an accountant who's preparing your financial statements must maintain his independence.
- Consider a "split rate" or "hybrid rate" proposal. Squar says this is more common on the legal side-attorneys accept payment close to the actual cost of providing services and take the difference between cost and their standard "retail" rate in equity.
- Use your connections. Professionals are more likely to listen to your proposal if you've been referred by someone they know and respect.
- Demonstrate the upside. Are you willing to pay a higher rate or deliver a substantial amount of business as your company grows? Does having your company on their client roster provide an image-enhancing benefit for their firm?
- Finally, use business sense. Don't give away too much, get it in writing, be willing to sign a note for any deferred payment and be sure you understand all the details.