Never, ever, under any circumstances give away any shares in your own business. Period.
I'm paraphrasing Felix Denis, the late publishing billionaire here. He believes that business owners and entrepreneurs should hold onto their share capital as their greatest opportunity to retain wealth and as a fair reward for their enterprise and risk.
That's not to say he didn't believe in rewarding his employees. He argued that rather than through shares, this should be done by giving them a fair 'slice of the annual pie' of profits.
As a general rule I agree with Felix. Including employees and others as shareholders adds complexity and creates tensions. It also takes some incentive away from the entrepreneur to drive the business forward.
Are there exceptions to Felix's golden rule though?
I think there can be in cases of succession or exit or in exchange for providing finance and specialist knowledge, skills or contacts (Dragon style) but the entrepreneur should tread carefully and consider the pros and cons before taking this step. Once ownership is diluted things will never quite feel the same again for the founder so my default view is, 'Don't do it' unless there are compelling reasons.
As Felix says, 'Getting rich all comes down to ownership. Every single percentage point counts'.
Of course there is more to creating and running a business than getting rich but his point is well made. As the owner you are the one who has made sacrifices, had sleepless nights, strained your personal relationships, worried about paying the mortgage. If you give away the fruit of your endeavour lightly you may have a long time to regret your decision.
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