This story appears in the
April 2000 issue of
Entrepreneur.
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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.