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Keeping Good Employees
Retention is a particular problem in a labor market where employees are willing to jump anywhere they see a better opportunity -- whether it's a dot-com company with the lure of stock options or a competitor who offers a few more dollars. "The loyalty contract has been broken over the years by mergers, downsizing and acquisitions, so there's no employee loyalty," says Bob Losyk, president of Innovative Training Solutions, a Davie-based human resources consulting firm, and the author of "Managing a Changing Workforce."
So what's an employer to do?
Evaluate your compensation package. Salary may not be everything, but it does matter. Employers need to remember that the skills of many employees are easily transferable; attractive and creative compensation plans are a must to retain these people.
Create a corporate culture where employees feel valued. "Work has to be a place in which people can feel some roots -- an environment that provides the life/work balance that employees are striving for today." Flexibility and alternative arrangements such as telecommuting are key, Shea says.
Focus on retention. "The cost of turnover is outrageous," Losyk says. According to one survey by the U.S. Department of Labor, it costs one-third of a new hire's annual salary to replace an employee. So it's up to employers to take care of their employees to reduce turnover. "Give them everything they need to do the job, take away the obstacles, and they'll stay," Losyk says. "This is not rocket science."
Make employees stakeholders. Stock options are a way to attract and retain employees at all levels. Options give employees a stake in the performance of a company, encouraging them to work harder and to stay for the long haul -- or at least until their options vest.
E-Recruiting: The New Way to Find Workers
When Erika Buckley needs to hire a new employee, she logs onto BrainBuzz.com, a Tampa-based online recruiting site. A few mouse clicks later, and Buckley has all the resumes she needs. "Internet recruiting has been more successful for us than other methods of recruiting," says Buckley, human resources manager for Mediacentric Group Inc., a Clearwater-based custom software development company.
Job-seekers have known for years about the advantages of the Internet. Now employers are using the Internet to recruit, citing the following benefits:
Lower cost. Internet job banks are inexpensive. While executive recruiters typically charge up to 30% of a new hire's first-year salary, some sites are even cheaper than running a classified ad. An ad on Headhunter.net, for example, costs as little as $20 and remains on the site for a month; a one-day, three-line ad in the Orlando Sentinel, on the other hand, costs $68.70.
Speed. Rather than waiting for a classified ad to be published and receiving resumes by mail or fax, employers can be reviewing resumes in less than an hour after posting an Internet ad. Mediacentric has even hired employees within 12 hours of posting an ad.
Exposure. Internet ads are seen by potential employees throughout the world.
Be aware of the limitations of the Internet, however. Some employers complain that web queries leave them inundated with resumes -- many inappropriate -- and that sifting though them wastes time and money. Software available through most major recruiting sites can ease that task. -- Robyn A. Friedman
Today's Employees Say, 'Show Me the Options!'
By Robyn A. Friedman
When Evin Daly joined Deerfield Beach-based Sweepsclub.com Inc. as vice president of operations last August, he left behind a secure job and a competitive salary. Daly was so eager to get in on the ground floor of the new venture that he took a cut in salary -- just to get stock options.
"If you want to do well, stock option-wise, getting in early is the key," says Daly, who was Sweepsclub's first employee. "I evaluated the opportunity and have no regrets."
According to the National Center for Employee Ownership, an Oakland, Calif.-based nonprofit organization that provides advice to its members on stock ownership plans and stock options, between 7-million and 10-million employees now work for companies that provide stock options, up from 1-million employees a decade ago.
"Traditionally, stock options were used only by public companies to bring executives in and keep them happy," says Bob Boehm, a corporate attorney with Akerman Senterfitt in Miami. "Now, startups that aren't even close to an IPO are using options to attract not only senior people but technical people, who see all these 24-year-old jillionaires in Silicon Valley."
A stock option represents the right to purchase a company's stock in the future at a predetermined price. If an employee receives stock options at $1 per share, for example, and the value of the stock at the time of exercise is $20, that employee has made $19 per share.
Stock options come in two flavors: Non-qualified stock options and incentive stock options. When non-qualified stock options are exercised, employees must recognize the difference between the exercise price and the current market value of the stock as taxable income, even if the stock isn't sold. With incentive stock options, however, the difference is not taxed until the shares are sold and then may qualify for more favorable capital-gains treatment.
Although employees are usually thrilled to receive stock options, many don't fully understand how they work. Options are speculative; receipt of stock options does not guarantee riches in the future. If a company's stock does not go up, the options are worthless. Also, a grant of options does not mean that they are immediately exercisable. Options are usually subject to a phase-in schedule, in which a certain percentage vest -- and become exercisable -- every year.
"A lot of people look at all these companies like Yahoo! and these people who have made extraordinary amounts of money," says Boehm. "But they're the exception, not the rule."
And yet many companies continue to use stock options to create employee loyalty. Richard Kaufman, CEO of Sweepsclub, says: "You want everybody to feel like they're part of the company and if they work hard, they'll see the rewards."
How A Typical Stock Option Award Works
An Internet startup hires a vice president, who might typically command a $150,000 salary. Since the company is cash-poor, the employee agrees to cut his salary to $100,000 provided that he receives 100,000 stock options, exercisable at $2 per share. When the company goes public at $14 per share, the employee exercises the 10% of his options that have vested by that time. He pays the company $20,000 and sells the options for $140,000, making a $120,000 profit before taxes.
Kid Biz
An Ormond Beach 17-year-old builds a business selling computer parts and service.
"Youth is wholly experimental," said Robert Louis Stevenson. When Jayson Meyer was just shy of his 14th birthday in 1996, he decided to experiment by opening a computer repair business. With the help of his family, he pulled in about $4,000 that year. Fast forward to 2000 and Jayson, now 17, is raking in a cool $500,000 a year in sales.
Meyer Technologies has seven employees and a 3,000-sq.-ft. office in Daytona Beach Shores, just a few miles from Jayson's home, where he lives with his parents, Michael and Kim Meyer, and 15-year-old brother, Martin. The company sells computer hardware, software and network services to a clientele made up mostly of local businesses.
Young Meyer had precocious beginnings. As a student at Ormond Beach Middle School, he says, teachers often asked him to work on the school's computers, which naturally progressed into servicing their home computers. At some point, a teacher paid him $30 for his efforts, and a business was born.
When Meyer Technologies began, Jayson and Martin, who oversees the programming side of the operation, required a little assistance getting to work sites because they couldn't drive. The Meyers' parents would transport them to appointments and sometimes wait in the car while the boys made service calls. Jayson recently rectified that inconvenience by purchasing a 1999 Lexus. Apparently, though, that's his only luxury. He says he works 16 hours a day, six days a week, and has few interests away from business, except for "movies and fine dining."
Jayson says broadly that his typical business clients employ between 15 and 500 people and that he'd like to snag some larger companies. His marketing tactics include posing as a delivery person, with some chocolate logos in hand, to gain access to elusive information systems managers in these target companies.
Although Jayson and Martin are the only family members officially on the payroll, their father handles some of the accounting and mother helps, as mothers always do, with a little of everything.
What's next? Jayson, who graduated from high school last year and is taking classes at Daytona Beach Community College, plans to open new offices in Palm Coast and Jacksonville. Meyer isn't content with the computer sales and service business, though. He recently entered the highly competitive Internet arena, launching an Internet service provider and web hosting company, DBWorldnet Internet Solutions.
Quick Start
Money isn't everything when it comes to building an Internet business.
By Barbara Miracle
Boca Raton entrepreneur Scott Adams has lived the dream of building a wildly successful Internet business. In just three years, he built Hiway Technologies into the world's largest web-hosting company and then sold it in early 1999 in a deal valued at approximately $300 million to Colorado-based Verio Inc., a web services company.
Adams, 36, isn't spending his days sailing the Caribbean or visiting the world's premier golf courses, however. He's investing his time, experience and money helping other south Florida Internet ventures get off the ground.
In February, Adams and four partners put a total of $5 million into their new venture, Cenetec, a for-profit "technology accelerator," or incubator, designed to provide fast-track assistance, including office space, technology, management help and a bit of money, to young Internet businesses. He says, "We were seeing that companies needed more than the first round of venture capital."
Cenetec has also attracted another $1.5 million total from four Florida venture capital firms: Jacksonville's Rock Creek Capital, Boca Raton's Sun Capital Partners and HIG Capital and Interprise Technology Partners, both in Miami. Adams expects those firms, which typically focus on funding later-stage companies, to be good contacts for businesses when they leave the incubator and look for second-round financing of $1 million or more.
Adams and his partners are investing an average of $100,000 in each of their Internet tenants and are offering the office space, technology and services for free. In return, Cenetec gets an equity interest in each business, with the size of the stake determined on a case-by-case basis. "The range could go from 5% to 90%," he says.
Florida has more than a dozen incubators that provide office space and management assistance to start-up businesses, most of which help businesses for two to three years. Cenetec, on the other hand, is targeting rapidly growing companies that it can help jump-start in only six months. Adams explains, "Since we're focusing on the dot-com space, everything is speed to market."
Cenetec, which stands for Center of e-Technology, set up its first operation in a 25,000-sq.-ft. facility at the Blue Lake Corporate Center in Boca Raton. When complete, the facility is expected to house 25 businesses. So far, Cenetec has received about 100 applications for the initial eight spots. Adams says he is particularly interested in business-to-business Internet ventures, wireless and web-based services. "We've seen a lot of business-to-consumer companies, which we're not very hot on," he says. "We've seen a fair amount of portal opportunities."
Next on Adams' agenda is a Miami incubator, which likely will open by this summer in the city's Design District. And long term, he says he'll explore opportunities in Orlando, Tampa, Jacksonville and even outside the U.S. The goal is to build companies, says Adams: "We're not just creating something to get rich quick."
Deal Flow
SportsYA!, a Miami-based Spanish and Portuguese language sports portal, raised $15 million in venture capital from IMG/Chase Sports Capital, Fred Wilpon (co-owner of the New York Mets), Chase Capital Partners, Flatiron Partners and others.
Maitland-based GoCo-op Inc., a business-to-business Internet company for the hospitality and health-care industries, has secured an additional $6 million in financing from Invemed Associates LLC and Safeguard Scientifics. The two firms provided $5 million to GoCo-op in December.
Asista.com, which recently moved its headquarters to Miami from San Francisco, received $8.5 million in private investments from J.P. Morgan Capital and Morgan Stanley Dean Witter Private Equity. Asista.com is a business-to-business Internet company for goods and services in Latin America.
Clearwater's Visiosonic, an Internet music company whose PCDJ product allows consumers to mix music like professional disc jockeys, raised $4 million in a preferred private placement in March. Since its start-up in March 1999, the company has secured $5.25 million.
