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Business people - do you think this is a fair % split for my business? Opinions please.

Discussion in 'BlackHat Lounge' started by JimmyWong, Nov 5, 2012.

  1. JimmyWong

    JimmyWong Registered Member

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    Hi,

    Please give your opinions on this:

    Business consists of two people. Myself (technical) and Steven (sales).

    It is a new media agency (design, eCommerce etc)

    - Steven has no knowledge of the market. He does what I tell him to get sales. It is early days, but he seems okay. His own ideas on marketing are questionable. Tends to listen to "marketing gurus". Steven does not have any capital, or inside knowledge. He's also five years younger than I, and new at business.

    - Myself - I run a few successful eCommerce businesses which will always be more profitable. I have done a split because I don't want to spend the time networking & so on, and quite fancy a shot at something new.
    The portfolio is all mine, hosting and creation of our agency site.

    We agreed the business to be split 50 / 50. I take a small wage on top for creating the website. This will be all legal and set in stone soon.

    It's becoming apparent that Steven, when independently thinking, doesn't really have "it". I have to spoon feed him in a way and it's becoming time consuming. He is more interested in self promotion and creating a buzz, than profit.

    Have I been too generous? Shall I dissolve the partnership before it gets too deep?

    I know there's a few bright sparks out there who can help and give me a fresh perspective on things.

    Much appreciated.

    Thanks
     
  2. upl8t

    upl8t Regular Member

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    Setting up partnerships without really knowing your partner.... a disaster waiting to happen. Partnerships are tough in the best of times. Solve it now. Push to make the changes required for a successful business or unravel it while you can. Odds are it will only get worse.
     
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  3. IamNRE

    IamNRE Jr. VIP Jr. VIP Premium Member

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    I predict a shit thread!
     
  4. khurramasgher

    khurramasgher Registered Member

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    Make sure you do your due diligence
     
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  5. YouFeelMeDawg?

    YouFeelMeDawg? BANNED BANNED

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    Honestly, the way I see it is very simple. I wouldn't want to JV or form a partnership with someone that doesn't have anything to offer that I can't simply get or that its up to my skills/standards. That is unless, the person gets less than 50% or gets a % to justify his/her skills contribution to the partnership.

    Just think about it for a second, the point of a partnership is so both parties can grow and enrich each other skills together(and their individual pockets ofc),else why would you want a partnership. Once it gets apparent that one of the party members can't seem to catch up to the other or its holding back the whole partnership due to his/her skills/contribution not being equal as to the other member or simply causing more damage than good, then thats when the bad vibe starts to show from the recentment partner, and things can get ugly after that and I mean really ugly.

    From what you mentioned about his way of thinking and his skills he possesses, I would rather not JV with someone like that. I mean really, you are even designing the whole site yourself plus your teaching him how to get sales and he has no idea of the market while you on the other hand does since you hold a portfolio with of successful ecommerce sites, what the hell do you need him for?. You will be better off just JV'ing with someone who has atleast 50% in skills that you lack poor of or you need.Else you are just simply mentoring him or making him a favor , not the other way around.
     
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    Last edited: Nov 5, 2012
  6. cocococo

    cocococo Senior Member

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    dumb answer, what exactly is the due diligence.

    My advice to OP, if you have to spoonfeed to him, that means your experience and have much details to succeed, why not go it alone? before this turn to what ya dont plan for.
     
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  7. Duffers5000

    Duffers5000 Elite Member

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    I wouldnt be so worried about the split 100% of nothing is still nothing and I would rather have 1% of Facebook. Sounds like you were setting this up as a side project that would be run by this other chap while bringing something different alongside your own business. If its looking like this biz will only work if you are going to do all the work then I think I would concentrate on my core business.
     
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  8. so2toll

    so2toll Newbie

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    I think there are a couple factors at play. I don't agree with going at it alone. Domain expertise is important, but not necessarily everything if his focus is sales. Some people's learning curve are bit more steep so it takes a little longer to start up, but once they get it, they get it and completely run with it. If you sense he has a propensity to learn and become that, could be okay. 90% of the success/failure of the business is in finding customers and marketing/sales (some will disagree), so if he's going to spending all the time doing that then % split can compensate for that. Your past experiences warrant more split, but I think it really depends on how much time you see yourself spending on it down the line. If your goal is to kinda automate yourself out of the business and continue running your core, then you should probably be only spending so much time spoon-feeding for too much longer.

    Perhaps if you set some kind of performance/success metric agreement from the beginning that can make things more defined?
     
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  9. Reyone

    Reyone Elite Member

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    This is something very serious, when you set up a company, firstly you have to be sure of who you are going to team up with.
    Once you have done this, make sure, and I can never stress it enough, SIGN A SHAREHOLDERS AGREEMENT!!!!!!!!!!!!!!

    Without a shareholders agreement you are pretty much screwed since there wont be any evidence of who gets what, and getting someone out of the company becomes a tremendously complicated task.

    In terms of the split, you should never set a %, firstly you need to cover your cost, you cannot split the gross profit 50/50, you need to get paid as a director by waiving the net profit.

    If you need a template just send me a PM, I can give you further guidance if you need to; I've got a couple of businesses and I've had a lot of problems in the past when there was not an agreement in between.
     
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  10. alternatesword

    alternatesword Jr. VIP Jr. VIP

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    If you spoon feed all the things to get work means
    He is your assistant, not a partner.
     
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  11. steelballs

    steelballs BANNED BANNED

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    First as you are effectively the lead player - If I were in your position with some doubts it would by maximum 49% each and 2% floating in case you get gridlocked and cannot agree...

    Then at all times you have the 2% to fall back on to unlock the gridlock

    But at this moment you have moved away from that option and I would say to the guy look this is not about being a partner it is about being a strategic player hence his split should be based on revenue milestones and profit

    Say

    $X USD = 30%

    $Y USD = 40%

    $ZUSD = 49%

    Then it is all clear cut and no one can argue the payment % if the revenue target is not met...

    That needs padding out of course but is a foothold to build upon!
     
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  12. MonkeyWithHumanHair

    MonkeyWithHumanHair Newbie

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    Those statements are pretty big red flags, don't you think?

    I think 50/50 in that kind of scenario, would be too generous. If you're bearing most of the responsibility (time, training, finances for start-up and operation) with someone who's not bringing equal effort and his/her own skill set that's moving you forward I'd reevaluate the partnership.
     
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  13. Z0mbie

    Z0mbie Regular Member

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    50-50 isn't always fair, just like in this case.

    Since all he does is Sales, and nothing else, you should pay him a small wage and offer him a generous performance based commision, rather than a partnership. From what you've said no far, it doesn't sound like a fair partnership to you, not even in the slightest.

    You might even be friends, but in cases like these, if you don't dissolve it now, you'll only regret it later on.
     
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  14. HighRiskJohn

    HighRiskJohn Junior Member

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    Having been through 2 partnership breakups, MY advice would be to cut the cord now. If your "Partner" hasn't been or isn't going to be stepping up and pulling his weight, it's best to separate now before it becomes messy later. I've personally went through a nasty "breakup" with (at the time) my best friend. After seeing how our vision for the business was 180 degrees different from each other, it was a very painful and messy break up.

    At this point all you've really lost is some time and some effort. (maybe a couple of bucks) If for some reason the business takes off and starts to become profitable and your partner hasn't done shit to help and then you decide to separate, I promise you there will be lawyers involved and it will get expensive and messy.
     
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  15. JimmyWong

    JimmyWong Registered Member

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    Some really great & wise answers here. Really do appreciate it. This is why I find BHW the best hangout on the web, and the people here make it so. Thanks & rep will be given.

    We also have a joint bank account setup (I know, risky move). The bank account does not have credit facilities. Steelballs, I like that idea. Technically I would have 52%? Or assign the 2% to a third party (who I would make sure was on my side).

    The reason this thread has come about is that I spoke to him today, and I can see that he is becoming a bit cocky, and shit. Please review the following what he considers a sales letter.

    We disagreed in our approach. I think it's shite, so shit that it could've been done by a school child, and to get high paying clients we need a professional style letter. Please let me know what you think of the letter. After seeing this was a discussion about the quality of the letter and our approach which has led to me creating this thread. (The letter would be formatted and have a: "your website before, your website after" image on)

    [​IMG]
     
    Last edited: Nov 5, 2012
  16. Techxan

    Techxan Elite Member

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    That letter is garbage and will probably not even be read all the way through, you are correct in your opinion.
     
  17. JimmyWong

    JimmyWong Registered Member

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    My gut feeling is to dissolve the partnership and lose out on the £900 we have snagged from the first client.

    I think there would always be some malice and bad tensions if I continue to work with the guy after renegotiating.
     
  18. steelballs

    steelballs BANNED BANNED

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    Oops that letter adds a new and several approach to your arrangement...

    It says take you and your poxy letter and walk out of the door marked EXIT and for f**ks sake keep walking and don't ever come back...
     
  19. JimmyWong

    JimmyWong Registered Member

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    That is what he came up with when left independently to work. Astounding isn't it.

    Before this - he did exactly as I said, and instructed. We snagged a client - great. Let's get a JV sorted out I thought....

    After seeing that, I was gobsmacked.

    The issue here is that we have one client, who is happy. Considering cutting my losses, handing her over to him, and be done with it.
     
  20. Z0mbie

    Z0mbie Regular Member

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    I'd throw that letter in the trash after reading the first line.


    You could give him £500 on the first deal just to show goodwill, and inform him that your partnership isn't going to work and tell him why, and offer him a good reference.

    EDIT: Even cutting losses at this point would be a wiser business decision than continuing with him.