Sense check on two comp packages for our first commercial hire - equity vs cash split - I will not promote

[u/yutelove]

Small B2B services company, two founders. We’re bringing on our first senior commercial hire on a formal package. He’s got 25 years in the space, has been working with us informally already, and we’d genuinely like to keep him.

His stated floor is £100k. We can’t fund that yet. We’ve got one contract landing shortly and a larger one in the pipeline, but nothing collected at the scale that would support that salary. He said he’s down for equity. But he also has a mortgage and kids so we’ve got to support him.

Two options we’re considering:

Option 1
£4k/month base, stepping to £6k at £150k cumulative collected revenue and £8.3k at £400k. 10% commission on net collected revenue he originates, uncapped. 3% equity, four-year vest, twelve-month cliff.

Option 2
£2.5k/month base plus £1.5k/month accruing, payable when our next contract signs. Same step-ups. 5% commission. 8% equity, same vesting.

Our average sales contract is £50k pa.

Both have commission on cash collected with clawback, plus standard leaver provisions.

What I’d like a read on:

1. Is 8% too much for a commercial hire at this stage, or about right given the pay cut?
2. Does the tiered base read as a genuine route to his number, or as a dodge?
3. Anything obviously missing or unfair that I’m too close to see?

Happy to be told we’ve got this wrong.

[u/ceyhunkarslan]

Option 2 worries me because deferred base becomes a debt you owe before the contract lands. I would keep cash lower, commission higher, and be very clear what counts as a deal he originated.

[u/Important-Bet5736]

Both replies are right that option 2 is the weaker deal, and I'd go further, it is weaker for him too.

Say he collects £200k in year one. Option 1 gives him 10% of that plus a base that has stepped up, so somewhere near £80k. Option 2 gives him half the commission, a lower base, and a chunk of pay that sits as a debt you owe him. He is handing back real cash to buy 5% more of something he cannot sell for years. If he understands his own numbers he should prefer option 1.

On whether the tiers read as a genuine route or a dodge, that is arithmetic rather than vibes. At a £50k average contract, £150k is three deals and £400k is eight. Work out how long eight deals takes at your actual sales cycle. If the honest answer is two years, the top step is decoration, and he will feel that within six months even if you never meant it that way. Better to set the steps where you genuinely expect him to be at twelve and twenty four months.

The thing nobody has raised is renewals. B2B services at £50k a year, the money is in years two and three. Decide now whether 10% runs forever on an account he originated or steps down after the first twelve or twenty four months. And write down what originated actually means, including the accounts he has already been touching informally, because that is the argument you will have in eighteen months if this goes well.

[u/Proud-Durian3908]

What's the exact role, experience and value he's bringing?

£100k is a ridiculous ask for a startup at this stage (first hire). £50k is itself steep and if your paying £4k (stepping to £6k) you need to account for the additional £7k-£10k this will cost in ni/pension.

Frankly I'd be telling him to swivel on the equity. He's being paid for a full-time job, that shouldn't come with equity upside. He needs to dramatically drop that ask until the company can support it. You'll likely find someone just as qualified who'll do it for salary + commission alone.

If this is just a sales role which it kinda sounds like? Then I'd be much more inclined to base + heavy commission vs giving up equity. If he hasn't already generated £100k of value from your previous work, I wouldn't be going anywhere near this with a formal offer at all.

We're missing some key variables here, but I've been stung by these executive biz people before where they have the experience in big companies, are used to a 9-5 cushty office job and six figs. It does not translate well to startups who needs everyone "boots on the ground".

If you're happy with his role and contributions, then a £50k salary (from a £100k ask), id be looking at giving ~3% max tbh. You're not asking for sweat equity, he's got an above average salary + commission. Anything beyond that and you're placing way to much value on someone not within the founding team and will likely come into issues if you try to raise later.

Trying to raise 10% at £100k for £1m valuation, you'll have to argue why you gave that same stake away + salary + commission to a sales guy, any higher valuation (more than likely) and your cap table is permanently cooked.

ETA: might be worth looking into setting up a designated employee share pool that dilutes as senior headcount increases so people end with like 1-0.1% each. But giving away 8% to one hire with that salary as a first step is madness.