6 Essential Factors to Consider When Choosing Equity Management Software
Every business is essential to every country’s economic development. It impacts society by generating exciting new opportunities. A company’s equity is important since it helps obtain investors’ financing. Whether you run a startup or a huge company, proper equity administration is necessary. Equity refers to the ownership shares of a company. When someone invests in a firm’s stock, they become the partial owner of the company.
Therefore, every company should manage equity effectively to give investors precise information and attract more investors. Managing equity involves keeping track of the business’s records and documents, sharing information about the cap table, conducting yearly reviews, and other tasks. However, manually maintaining all of these facts is a difficult task that takes time and effort.
To simplify the work, you can use an equity management platform for your company. The software lets you organize and track the details of each investor and the equity they hold. And there are many equity management software solutions; however, you must pick the one that suits the requirements of your business. Here are a few of the important elements you must take into account while choosing equity management software.
Check for the cap table management.
The cap table must include specific information on who owns what for the company, including share class, number of shares, date of issuance, and share price. It should also contain information about ownership, such as options, SAFE notes, and convertible notes. The incorrect information in the cap table impacts the company’s documentation. Therefore, the software you use must effectively maintain the cap table to ensure that there is no inaccurate information.
Look for scalability.
Things will quickly become complicated when your business expands due to the addition of new employees, potential employee departures, the entry of new investors, and numerous other developments. So, the equity management software you choose must work well when the company scales. It is good to select the high-scale solutions software which can handle higher volumes as the company grows.
Does the software provide professional advisors?
You must choose the equity management software that offers expert adviser support because you will run into issues as your business expands. If the software includes expert advisors, they can provide you with good advice because they are knowledgeable about the complexities of equity compensation programs. Therefore, you need to look for software that offers qualified experts.
Does the software provide an easy way to get a 409A valuation?
A 409A valuation is the fair market value of a private company’s common stock as determined by a third-party appraiser. This value establishes the price to buy a share. Therefore, to offer stock options to workers on a tax-free basis, businesses—especially startups—need to get a 409A valuation. So, the equity management platform must provide a fast and easy way to get a 409A valuation.
Check the price of the software.
The next important factor you must consider is the software’s pricing and plans. The majority of platforms charge different prices depending on the plans they provide. So, you must read the plans and select the one that suits your company’s needs. Additionally, you can check prices on different platforms to find the best offer. Make sure that the above-given factors are included in the plan.
Try demo with the software.
You can request a software demo after examining all the important factors. You can see how precisely the software functions by using the demo. You will see the overview of the cap table, as well as scenarios, reporting, a to-do list, and 409A compliances. To confirm the correctness, you can also create a cap table. If the demo meets your needs, you can proceed to the software’s purchase.
These elements must be present in the selected equity management program. Quality software will save labor costs, increase time and energy savings, and eliminate error.