People don’t use options enough.
And I’m not talking about stock market options. I’m talking about options inside deals – the kind that give you flexibility, alignment, and leverage.
Let’s say you’re investing in a project. You could ask for an option to increase your position later. Or maybe you’re buying a company, starting with a small stake, and getting an option to buy more once certain milestones are hit.
Options have many uses. But one of their most powerful roles, at least for me, is as a tool for incentives in exit deals.
The Scenario
Picture this.
You’re sitting with a small development company that’s leading a mid-rise project in Fort Lauderdale. The plan is fully designed and heading toward permitting. You want to buy the project.
But at the same time, it’s in your best interest for the current owners to stay involved.
They know the local market. They have relationships with the city.
You’d rather not lose that momentum.
Most buyers in your position do the obvious thing. They buy the company outright and offer the sellers a management agreement for a few years.
That way, the original developers stay on board, get paid, and everyone feels secure.
Sounds fine in theory – but in practice, it’s weak.
Why That Approach Fails
The moment you close the full acquisition, the sellers mentally move on.
They got their payout. The deal is done. They’ve made their exit.
Sure, they’ll manage the project, they’ll show up to meetings, but their passion fades fast.
The hunger that drives real progress is gone.
A management fee isn’t motivation. It’s maintenance.
What you need instead is a structure that keeps them emotionally and financially invested in the project’s success.
That’s where options come in.
The Power of Phased Ownership
Here’s how it works.
Instead of buying 100 percent of the company right away, you buy 25 percent now and get an option to buy the remaining 75 percent once the project reaches a key milestone – for example, when the permit is approved.
That simple change completely transforms the psychology of the deal.
The sellers still have skin in the game.
They still care about the outcome.
And they now have a clear, tangible goal that ties directly to their own payday.
You’ve essentially created a self-enforcing incentive.
If the project performs, they win.
If it stalls, they don’t.
Why Not Just Use a Bonus
People often ask, “Why not just pay a success bonus when the permit comes through?”
Bonuses sound good on paper, but they rarely change behavior.
Once someone has already cashed out, a bonus is just extra. It’s a nice-to-have, not a must-have.
When a person has already banked the main payout, their mindset shifts.
They’re not as driven. The urgency disappears.
That’s human nature.
Options work better because they make the outcome conditional. The seller doesn’t get the big payday unless the project actually reaches the target.
That is a much stronger motivator than an optional bonus.
Why Not Milestone Payments
Another common idea is milestone-based payments – paying as each stage is completed.
I like milestones in general. They can work well.
But even there, options tend to outperform them.
First, milestones can be gamed.
People can push hard just to check a box, like forcing something through a committee, even if the result isn’t actually good for the project.
Second, once a milestone is achieved, the payment becomes mandatory.
You owe the money, even if the broader market changes or conditions deteriorate.
With an option, you keep the freedom to choose.
If market conditions get worse, you can stop. You’re not forced to throw good money after bad.
That flexibility is incredibly valuable.
Real Incentives, Real Accountability
Options create a built-in test of commitment.
The seller must deliver for the option to be exercised.
They can’t just wait for a check. They have to earn it.
It’s no longer about hoping they stay motivated.
Their motivation is baked into the deal.
If they want the rest of the payout, they have to make sure the project succeeds.
That’s how you align interests without having to micromanage anyone.
The Economic Bonus You Didn’t See
There’s also a financial benefit here.
By buying the first 25 percent, you’re already partially exposed to the upside.
If things go well, exercising the option later feels natural.
But if things go sideways, you can walk away with limited damage.
In other words, an option structure gives you downside protection and upside control.
You’re not overcommitted, and you’re not locked into a failing project.
It’s a safer way to stay aggressive.
A Quick Example
Let’s put some numbers on it.
You agree to buy a project for $1,000,000.
Instead of paying that all at once, you buy 25 percent now for $250,000, and you get an option to buy the remaining 75 percent at the same valuation once the permit is issued.
If the permit comes through, great – you complete the purchase.
If not, you stop there.
Meanwhile, the sellers have every reason in the world to make sure that permit gets approved.
They know the rest of their payday depends on it.
They can’t relax or shift their focus.
They’re locked in until the job is done.
The Human Factor
This is not just a financial structure. It’s a psychological one.
Once people think they’ve already “exited,” they mentally check out.
Their drive turns into maintenance mode.
They might still care, but not the same way.
Options prevent that.
They keep people hungry. They keep them accountable.
It’s not about punishing anyone. It’s about designing deals that naturally keep everyone focused on the same outcome.
Why This Matters So Much
In real estate, alignment is everything.
You can have the best project, the best model, the best design – but if the people running it don’t feel connected to the result, things fall apart fast.
Options are one of the simplest ways to make sure that doesn’t happen.
They combine flexibility, accountability, and motivation in one tool.
And they keep your partners from drifting off to their next shiny deal before the one you bought from them is even finished.
Final Thought
Bonuses are nice. Milestones are fine.
But options are how you really keep people committed.
They turn a seller’s future payday into a performance condition, not a hope.
They give you flexibility to scale your investment while protecting your downside.
And they remind everyone that deals are only done when the work is.
So next time you’re structuring an acquisition, don’t just think about how to pay.
Think about how to keep people driven.
Thailand can wait.
First, get the permit.
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