Experienced entrepreneurs know that when it comes to slicing up the equity in their new startup companies, the longer you wait to hand out big slices, the better.

That’s because a startup company can create a ton of value in a very short period of time, and in many cases, with relatively little effort.

It’s exciting to get others wrapped into your new idea, and their willingness to bet on your idea may feel like something you want to reward with shares of the company. The issue isn’t whether or not you reward these individuals, but really when you reward them, and with how much of the company.

As a rule of thumb, the longer you wait to slice up the equity (assuming you’re growing the company) the less equity you’ll have to give up. Here are just a few milestones that you may be able to get to on your own, before you’ve begun slicing up the cake.

Get Incorporated

The fastest way to turn your idea into a company, at least legally, is to incorporate. You can incorporate yourself on-line in less than half an hour for a few hundred dollars at most.

The benefits of incorporating early are that you can force every discussion of stock into a legal matter, and not just a handshake deal. If I just tell you that I’ve given you 50% of a company that hasn’t even been incorporated, it’s not the world’s most binding document. But if I update the Operating Agreement of an incorporated company to show that you own 50% of the company, there’s no question that you’re a shareholder in the business.

The process may sound simplistic, but it helps create some value. People tend to take ownership of an incorporated company far more seriously than ownership of an idea you emailed them, which usually means it’s not as likely to get diluted as heavily.

Build a Prototype

The next step is to put together a basic working model of your idea. No matter how rough your prototype is, having an existing product to talk about is far more valuable than just talking about it in a PowerPoint presentation.

Your prototype can come in dozens of forms. It can be a barebones version of the Web site you want to build. It can be a service that you want to offer that you’re delivering to customers by yourself right now. It can be an artists’ rendering of the product you intend to build.

Regardless of its form, the prototype gives you the ability to switch from just talking about an idea and to start talking about an actual product. It’s also possible that an early prototype could even lead to a sale to a customer, which would be the ultimate value generator!

Building a prototype can be a challenging task, and one that you may find yourself needing to seek outside help on. If you absolutely feel that the only way to present the product to a customer or potential investor is to bring on another equity partner, then so be it. But if you can get by with just some sketches or a simple working model to convey the product idea, this would be a great time to keep that equity in your own pocket for a while.

Get Some Traction

If you can get past the prototyping stage yourself, without carving up much equity, and get on to selling even just one customer on your own, you’ll have achieved one of the greatest leaps in value creation.

Getting some traction with partners and customers completely changes the value of your company. Up until this point you had a company with an interesting product. Anyone could second guess whether your idea was useful. No one can second guess paying customers though.

It’s not impossible to get this far with your company idea without any help at all. You can incorporate yourself, piece together a working prototype of your product, and pitch it to some early customers that you setup meetings with. In essence, you’ve done the hard part by actually starting the company. The next step is to grow it from there.

Time to Slice it up

Once you’ve put your company in a position that it simply needs to grow to create value, not just get started, that’s a good time to take on equity partners. At that point the value of having more employees, investors and partners will likely outpace the cost of giving up more equity.

In each step of the journey, you want to keep asking yourself “Is it at all possible for me to get to this next stage without taking on more help?” You may get past the incorporation stage and realize that any hope you have for growing your idea into a company is going to require a few partners. That’s not a problem, as long as you’ve agreed that unless you slice up the cake today, it’s not going to get any bigger.

Take a look around your office right now and ask yourself – is everyone happy? You may think so. People may be working hard, putting in long hours, and cranking through project after project to get your new startup company launched.

You may feel like you’ve got the entire team energized and ready to go at the office. But the real question is – are you winning the war at home?

Startup company managers need to realize that attracting and retaining key talent isn’t just about peppy sales talks and big pitches. It’s about fighting the war for talent on two fronts – in the office, and especially at home.

People don’t think of startups like regular jobs. At regular jobs you think about whether you’ll get a 10% raise and a good review. At startups you wonder whether the risk, time, and (usually) lower pay are worth the benefit of a substantially bigger payout someday.

For this reason it’s worth thinking about the world of your employees through the eyes of their friends, spouses and families. Is their job still as exciting as you thought it was?

Spousal Support

Whether you realize it or not, more than 50% of the decision to stay at your startup lies with the spouse at home. Happy spouses equal happy employees. If you think about it, you’ve really got to keep two people happy at all times.

The decision to join your startup probably wasn’t made by the big pitch you gave in your interview. It was made by the big pitch your employee gave to their spouse later that evening.

As you can imagine, their pitch probably didn’t include the long hours and endless stress you’re undoubtedly enduring. Instead, it likely focused on the potential for a big payout someday that could change their lives forever. If that pitch isn’t holding up at work any longer, you can imagine it’s probably not holding up at home either, which is a problem.

Comparison to Friends

Even if a spouse isn’t in the picture, you can bet the employee’s friends are. When an employee is buried in work at a startup, it often becomes the first topic of conversation among friends. At the very least, it’s because they are explaining why they’ve been so absent lately!

If you’ve ever listened to someone describe how things are going at work, you can usually tell within the first 15 seconds whether they are thinking about leaving the company. Excited employees will brag about their accomplishments. Disinterested employees will only complain about their struggles.

It only gets worse if the employees’ friends are enjoying more free time and making more money at the same time.

Your employees want to brag about what they are doing and create envy amongst their friends. There’s no reason your startup company shouldn’t give them that opportunity, as long as they feel confident that the big dream you’ve sold them is alive and well. Even employees that are missing time with their dearest friends will be proud to say they were at least building something great instead.

Think about the Children

If your employees have kids, you can add yet another group to the list of people you need to keep happy. Every minute that your staff stays in the office is a minute that they are not spending with their children, and those minutes cost a lot emotionally.

Those late nights when your employees don’t get to put their kids to bed and every long trip that guarantees missed baseball games and piano recitals puts them one step closer to the door. No one ever feels like they’ve spent enough time with their children, and when a job pulls them away even more, it’s a powerful breaking point.

When your employee gets off the plane from yet another business development trip and sees their kid waiting for them, the only thing running through their mind is “was this worth it?” When they walk into the office tomorrow, if there isn’t some justification for the time they’ve lost, they’ll be spending their time updating their resume, not working harder.

You can’t Win ‘em All

Lets’ face it – you can’t make everyone happy all of the time. Any job is going to put a certain amount of stress on employees lives and relationships. The difference here is that people in startups tend to think of startups as dreams waiting to be fulfilled, not just a regular job.

When the dream starts to fade, people often go along with it. That’s why as the Manager of a startup company, the only way to keep people excited is to keep the dream alive. Remind them why they risked what they did to start with you in the first place.

Attracting and retaining talent is about fighting the battle on all fronts. Your ammunition is the motivation and desire to build something big. If you don’t give your team the ammunition to stay, you’ve already lost the war.

There's an old adage that says "Entrepreneurs do what other people won't in order to do what other people can't."

The suggestion there is spot on - that the entrepreneurs who get to live the life people dream about did so because they were willing to make the sacrifices it took to make that life happen.  

So the question really is: can you afford not to be an entrepreneur?

If the answer is “yes”, your life will probably be just fine doing whatever it is that you enjoy doing.  But if you really want a taste for what it means to control your own world and reap the benefits of taking risks, starting off on your own is really the only option.

A Paycheck versus a Pay Out

Most people equate starting and growing a business to the financial rewards of being the business owner.  That's because business owners enjoy the difference between earning a paycheck and earning the bigger reward - a pay out.

You may think those with a big paycheck, like the Celtics' Kevin Garnett's $25 million pay stub, are the big winners.  Not at all.  It's the guy who can write that check, like Celtics owner and Highland Capital Managing Partner Wycliffe Grousbeckand, who paid $360 million for the entire team.

Even if Kevin Garnett continues to be the highest paid player in the NBA for the next decade, he still won’t be writing the checks that his boss can.  

The real cash comes from either the profits of the business on a regular basis or the eventual sale or IPO of the business down the road.  Until your earnings are tied to the performance of the company, not your position, you’ll never be in a position to enjoy the real rewards.

Give Yourself a Raise

As big as they can get, paychecks are inherently limited to what someone else is willing to pay you.  If you can’t stand the idea of someone else determining what your pay scale should be, then starting a company is the fastest way to change all that.  

The day you start your own company, the only person that will ever determine your income is you.  If you’re as good as you think you are, the sky’s the limit.  

Most entrepreneurs are financially stifled in their current jobs, particularly among younger workers.  Since salaries are often dependent on age and experience, not raw capability, your earnings may not at all reflect what you are truly capable of.  

Consider the fact that Bill Gates, Michael Dell, and Steve Jobs were all around 30 when their companies went public.  Can you imagine how little they would have been paid (by comparison) if they had stayed in their salaried jobs?  Clearly their ages had nothing to do with their capability, and starting their own venture was the only way to prove that.

Don’t Leave Money on the Table

When you’re working for a paycheck, you’re making yourself a bit of money, but you’re also making the company a bit of money.  Every hour of your time is putting a dollar in your pocket, but it’s also putting a dollar in the owner’s pocket as well, which is good for him, not so good for you.

The fastest way to double your money is to put both of the dollars in your pocket for the same amount of effort!  Of course as the owner yourself you may have more overhead than you would as an employee, but long term you’re not only maximizing the payout on your time, you’re creating a business that will one day exceed your own value.

Cumulative Value

Even if you’re incredibly well paid in your current position, it doesn’t change the fact that you’re only one person.  You can only earn as much as your own time and contribution will afford you.  At some point, in order to get to the next level, you need the company working for you, not the other way around.

That means taking on employees and leveraging the economies of scale.  As the employer, you can infinitely scale the size of your income by adding more business and more employees.  At some point the cumulative value of their contributions will far exceed what you could possibly earn as a W-2 employee.

Stop the Bleed

No one is ever surprised to hear that you can make a great deal of money as a successful entrepreneur.  

What is surprising is to consider how much you’re losing by not being an entrepreneur yourself. When you add up how much value you’re losing by taking a paycheck every week, you start to wonder what was keeping you from taking the plunge in the first place.

In many ways, starting your own company is the only way to eliminate the risk of not being paid enough.

Your First idea is only the Beginning

Like everything else in this life, the plan for your new startup company will almost certainly change beyond anything you could have contemplated. 

We would all love to think that we can have one new product idea that is so brilliant we never need to change a thing, but that rarely happens. In fact, many successful companies launch with one idea in mind but become fabulously successful by shifting directions completely.

Google started out just powering keyword searches before they realized they could become a massive advertising platform.  The founders of PayPal thought they were going to build a company that beamed payments between Palm Pilots before they shifted focus to power payments on eBay.

Ideas, even the ones that are the basis for your entire company, were made to be changed.  It’s important, however, to understand why those ideas change and how to feel comfortable reacting to them.

You don’t have a Customer

A big part of the reason startup companies have to change product strategies early in the game is because they are only guessing at what the customer really wants. 

Sure, you may get some focus groups that tell you what they’re willing to buy, but until someone actually writes a check for your product, it’s still an educated guess at best.  Only when the product hits the shelves and people react with their wallets can you truly evaluate the idea. 

Prior to having real customers, it’s fair to assume that your product idea is only in “beta mode”.  Assume that the product will likely change dramatically based on true market testing with real customers on a sustained basis.  In the event that your initial idea is spot on and no changes need to be made, you’ve become the exception, not the rule.

You don’t have any Scale

Even if the first few customers do purchase your initial product just as you had envisioned, the product still isn’t truly tested until you’ve sold enough of it. 

You may think that just because the neighborhood wives have all bought your fancy homemade hand lotion that you’ve got it figured out.  But until the product can sell next to dozens of others on the shelves at Wal-Mart, you really don’t know how great it is.

It’s easy to get excited about the success of a small market test or an initial reaction to your product, especially if people are buying.  But that doesn’t mean the idea and its success will necessarily scale to a bigger company.  Like not having any customers to begin with, not having any great amount of scale in your sales relegates you to still having to guess whether your product is ready for the big leagues.

You may find that the approach that works for your local market only makes sense for that audience.  Once again, you’ll have to be prepared to consider drastic changes to your product if you want to reach a much more substantial audience.

You don’t have a Company

There’s a big difference between solving a problem on paper with your business plan and building a successful company with that same idea.  Until you’ve tried to build an entire business around your idea, especially one that employs lots of other people, you still don’t know how well that idea translates into a growing company.

Many ideas work great to support just one person, and that’s OK too.  However if the business idea only works if you’re the person creating all of the work, it may need to be modified to scale.  Some ideas, like offering consulting services based on your personal wisdom, will need to change significantly if you’re going to scale them past just yourself.

The goal of a business is usually to solve a customer’s problem, not to solve the problem of building a company.  So it’s no surprise that in order to support the growth of the company, you may have to broaden or change the focus of the product accordingly.

Prepare for Change

No matter what your cause for change, and truthfully it will probably be all of the items mentioned above, you need to embrace that things will inevitably shift, maybe even dramatically.

With so many unknown factors going into your startup company’s launch, it would actually be a miracle if you were to pick the perfect product without any real market testing.  For those of you that are truly the prophets of product development, we salute you and your wisdom.

For the rest of us poor schleps that aren’t as all-knowing, it’s back to the drawing board over and over until we find a fit that works.

No matter how well your startup company does, sooner or later you're going to be faced with the fact that someone has to go.  It may be a disgruntled co-founder or it may be the intern that looked great on paper but turned into a disaster when they walked into the office.

While parting company is a tough thing to do, there are definitely better and worse ways to go about it.  There's an art to ending a corporate romance on a positive note, and it starts with looking past the moment of departure and into the future.

One Size Doesn’t Fit All

Unlike the big corporate machine where everyone is expected to fit in, a startup company is a perpetually chaotic, anxiety-inducing roller coaster of emotion that fits very few people real well.  Chances are the person you are sitting across from is just not a fit for any startup company, let alone yours.

A great way to set the stage is to explain how well you understand the incredible challenges of being in a startup company and that it’s very difficult for anyone to maintain their footing in this environment.  This isn’t about you patronizing your co-workers – it’s about recognizing the fact that there are often very good reasons the fit just isn’t right and using those reasons as a platform for departure.

In many cases the person you’re sitting across from has had to endure a lot of sacrifices just to be able to contribute at all.  Even if they didn’t work out as an employee, it’s a good idea to recognize and appreciate the sacrifices they have made up until this point.  Those sacrifices were part of their contribution.

Leave the Door Open

Although today you may feel like you can’t possibly get this person out of the door fast enough, always be sure to leave that door open for them to return.  This may sound ridiculous, since the last thing on your mind right now is ever seeing this person in your office again.

Yet your corporate life is very long, and it extends down many roads.  The gal that just walked out of your office today may be the key customer that hires you a few years from now.  It may be the person that was a bad fit in the formative stages of your company but is exactly who you need three years from now.  It never pays to be short-sighted when winding up any relationship, no matter how tenuous at the time.

Leaving the door open also shows a gesture of good faith.  If people know that they might have to deal with each other again in the future they’re a lot less likely to spew fire and brimstone today.  You may find that a few years from now, after you’ve both forgotten a about what brought you to this departure, that there’s a much better opportunity to re-connect.

Send People off with Dignity

There’s a big difference between just terminating someone and terminating someone with dignity.  No matter what the situation is, everyone deserves to be shown the door without being crucified in front of their peers.

Aside from the fundamental respect of another human being, you’re also setting an example for how you will treat the rest of the organization.  If all of your employees watch a person get humiliated in front of their peers the first thing that you’ve instilled in everyone else is that they will be treated the same way.  That kind of fear is incredibly unhealthy in any organization.  (Unless you are a pirate, in which case you’ll probably be just fine.)

Instead, go out of your way to make sure that this person’s departure ends on a positive and supportive note.  Even if the rest of the organization dreaded their existence, it’s important for you to be the bigger person and show that everyone will come and go with dignity at your company.

Think About the Ripple Effect

A departure affects more than just one employee.  It creates a ripple effect through the entire organization that’s impossible to ignore.  If you think that an employee walking out the door takes their drama with them, you’re dead wrong.

The gory details of what you’ve said, how the employee responded, and every moment thereafter will be repeated in infinite detail inside and outside of your organization.  Think of the termination event like a video clip on YouTube that is about to get re-broadcast endlessly. 

A simple, positive parting isn’t worth gossiping about.  There’s no story.  But an ugly and bitter battle is something that will keep lots of people talking for a long time, all at your expense.  When it comes to parting, creating as little drama as possible is absolutely critical.

Look at the Big Picture

Every time you let someone go you’re changing the face of the company and setting the tone by which it treats its people.  If you can use this opportunity to show that you’re supportive and respectful of the people leaving your company, you’ll make both the people that work there now and the people that will work for you in the future far more comfortable with living in your world.