Here's why you should make staff shareholders of your company

At the age of 26 I became an employee-shareholder.

It was a pretty short-lived event as I got married and left New Zealand.

Luckily the shares turned a small profit, as they were listed and easy to sell. As a staff incentive scheme, it failed. The company was large and I was too young to feel locked-in; a small cog with no impact on the business.

At the age of 30, it happened again. This time it was a share option scheme in a much smaller private company in the UK. We had a plan to grow and sell. With only 200 staff everyone was important and everyone felt part of it. A few years later the business sold for £110 million with employees getting £41 million. I owned a tiny sliver. While it was a decent windfall, several of my colleagues became millionaires.

Third time around, aged 40, I sat on the other side of the table. It was my own business, with employees who wanted to be shareholders, and my life would be chaos without them. What an immensely different feeling that was. Not just the emotions or the trust, but the scale of legal advice, tax advice and decisions on how to structure it.

I'll be honest, it's not the easiest thing you'll do as a small business owner. But if you're doing it for the right reasons, know your employees well, and get a structure that achieves your goals – such as growth, motivation or succession planning, you won't regret it.

This week a small business founded in New Zealand 15 years ago, FNZ, made at least 35 employees millionaires. The business is now valued at $3.35 billion and two-thirds has been sold to an international investment duo. In total, 400 staff benefited from the sale.

That's a colossal valuation for a company not many people have heard of. FNZ, who? They're a software business that provides systems for banks and fund managers around the world. Chances are they manage the administration of your own investments. ANZ, BNZ and AMP all use FNZ, as well as global giants such as Vanguard, Barclays, Lloyds and Standard Life.

So where does all that success come from? Well, it's easy to say where it didn't come from. They've got no brand awareness and sit like a ghost behind their well-known financial services clients. Their website is dull but practical and they make no attempt to woo the media.

They obviously provide great technology. And being great is driven by people. So it doesn't take much to deduce that those 400 employees with a shareholding were key to their success.

If you're running a small business in New Zealand or you're an employee of one, it's a good time to ponder the FNZ story. Open a conversation about how far you could go, if everyone's interests were aligned. When employees are shareholders, the results can be powerful.

You don't need aspirations to become a global powerhouse with a billion-dollar valuation.

You only need a small simple reason. Growing your business faster with highly motivated loyal people is one. Creating a succession plan for a future sale is another.

Being too important in your own business will only act as a time-and-money drag when you try to get out. You'll get locked-in for longer by new owners. You'll be subject to larger parts of the sale price being linked to future targets and you'll have to deliver these before your final escape.

You'll be prone to losing employees who don't like the change and new pressures.

For those of you relying on your business to provide for your retirement, having a plan to sell is key. It's never too early to start that plan. My advice is to give yourself the greatest chance of a clean exit with as much of your sale price upfront as possible. Working on an earn-out basis is nothing short of torturous. I've done it twice – rest assured, these words come from experience.

A well-structured employee-share scheme will line things up so the financial gains are shared, but your employees are motivated enough to stay on and pick up the second round of delayed gains from an earn-out.

These schemes cost you time and money to set up properly and the complexities of how they are taxed are vital to understand. But think of the big picture and end game.

Janine Starks is a financial commentator with expertise in banking, personal finance and funds management. Opinions in this column represent her personal views. They are general in nature and are not a recommendation, opinion or guidance to any individuals in relation to acquiring or disposing of a financial product. Readers should not rely on these opinions and should always seek specific independent financial advice appropriate to their own individual circumstances.