The reality of today's workplace contends that stock options are a priniciple vehicle in fostering corporate and individual growth. The main idea is that if you own something, you value it, and are willing to work hard to keep it alive and in making it grow! Your stock options represent your nest egg, your key to a secure financial future, or your keys to a new VW Bug.
Stock options mirror a theme featured throughout the articles on this site - smart people sharing in the wealth to guarantee everyone's future success. The days of the lone rangers and corporate hot shots are fading, given the rising complexity of commercial and technical issues. Just try starting a technology company out of your basement, only to find out when you come up for a breath of fresh air and some UV rays, that your "invention" is now literally history!
So how do you know if you are getting a good deal or not? How do you realistically value a stock option and how many should you be asking for upfront? These are obviously not easy questions to answer, but here are a few suggestions on where to start your research. For a high-tech start up / soon-to-be IPO company, find out at what price other industry firms shares went public, how the share prices have done in the first two years, and finally, what analysts predictions are for your company and your industry. Then compare the strike price of your options with that IPO price to estimate their value. For a public company, then check out the difference in the strike price and today's price, and analysts' future predictions to estimate the size of your nestegg.
The bottom line is, "the greater the risk, the greater the reward!" Therefore, carefully consider the risk that the magical start up will not survive! Check out the depth of the management team, consider the business plan, talk to existing or prospective customers, do some of your own research on the market - Basically, you are a venture capitalist - investing your time, energy, and LIFE - there is no turning back the clock!
Take your time, do your homework, and then, make the decision to chase your dream and help realize the huge potential financial rewards of those STOCK OPTIONS!!
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