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Need advice...Partnership opportunity with sales guy/father-in-law

Discussion in 'Offline Marketing' started by goodstuff, Feb 15, 2011.

  1. goodstuff

    goodstuff Newbie

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    Hey blackhat friends,

    I have a serious question that some advice would be greatly appreciated on.

    I have a full time job directing an info marketing company. I don't own the company myself but I do get a nice salary along with a 15% stake in ownership of deals that get done with students from the company. The owner can sometimes be all over the place so it can be stressful. Over the past year I've picked up several side jobs doing local internet marketing. I'm not actively promoting myself and these jobs came via word of mouth. I'm confident that if I had to I could go out and gather up enough business to replace my salary within 3-6 months in the event I left my job. I just don't have time to build this business while working for the other company.

    Enter my My father in law. He's a mid 50's ex International Sales Director & Product Manager for a fortune 500 company. He used to get paid like $200k a year for this stuff. After working for the same company for 30 years he was fired because A) his salary was too high B) Medical cost were too high C) The company was cutting costs and shifting to younger sales staff. He's got a huge list of contacts in my area for businesses of all shapes and sizes.

    So, he's seen how easily I'm able to sell these services and has offered to build a pipeline for me while I focus on my current job. He would handle all client interaction while I simply sourced the jobs and provide quality control. He wants to start a company and split the profits 50/50. Also see the potential for creating a much larger local company is greater with him on board.

    My concerns are as follows:
    1) I feel like I should get more than 50% BUT being that it's family I would almost feel more comfortable in a evenly split scenario.
    2) I would be worried about the possibility of loosing my job and being forced to make ends meat doing freelance...I now would have time to focus on sales and clients but would still be forced to split my profits.
    3) I feel like I still have alot to learn before I would be a good partner and the idea of testing this out with a family member makes me a bit uncomfortable.

    If anybody has any advise about this situation could you please drop some knowledge on me!!!

    - Is 50/50 fair?
    - Are there things I'm not considering in terms of complexity working with family?
    - Is there a better way to work out this deal?
    - Any other advice...PLEASE!!!
     
  2. stressfree

    stressfree Senior Member

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    hey sounds like his experience and contacts are invaluable......50% is MORE THAN fair. I'd rather have 50% of $1m than 90% of $50k....

    Watch Dragons Den..so how they tell people.....it's 5% for the advice it's 30% for the contacts and channles I can open for you..Don't be greedy.
     
  3. stressfree

    stressfree Senior Member

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    Ha...that can be aHUGE problem. Get contracts draan up. you might be tempted to skip over this but I guarantee down the line you'll be so glad you did.

    You must know his character.....Trustqorthy, knows his stuff and CAN YOU WORK WITH HIM? Be honest...

     
  4. whatisthis

    whatisthis Registered Member

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    50% on PROFITS for sales in this industry is a good deal for you. Take it. Plus, he's family with all that experience. I'll take it.
     
  5. goodstuff

    goodstuff Newbie

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    I really appreciate the perspective. He's been waiting for an answer from me so hopefully with this great advice I can come to a conclusion and wrap this up in the near future.
     
  6. whatisthis

    whatisthis Registered Member

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    You should want a whole team of reps taking 50% ON PROFITS! Let him build the marketing department. Lucky.
     
  7. goodstuff

    goodstuff Newbie

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    He is wanting 50% of the NET profits of the entire company...not just an affiliate type deal. Does that change your thoughts?
     
  8. ooodaveb

    ooodaveb Junior Member

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    Why don't you break down your numbers with and without him and see if it's worth it for you.

    Say currently you keep 100% profit with 20 hrs work and your profit is X.

    Now with him around doing his thing and you doing 20hrs of work with 50% profit do you get to keep X or > X or < X.

    If it's >=X then you do it. If it's < X you skip.
     
  9. goodstuff

    goodstuff Newbie

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    If that's the case than "With him" would be the clear winner at this moment in time as I cannot actively pursue the opportunity on my own due to my current job. That being said my situation could change at any moment. My company could go out of business tomorrow and I'd be on my own.
     
  10. agente808

    agente808 Regular Member

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    ... don't take this wrong, but you say "I feel like I still have alot to learn before I would be a good partner", and "he is going to deal with all of the sales and client interactions" and you think you should get more than 50%?! - You are in charge of outsourcing and quality control right?
    - I think 50/50 sounds more than fair here.

    Aside from the money though, you always have to be VERY careful when doing business with family, and double that for in-laws.

    How is this guy's personality? is he going to end up as 'the boss' and you are going to get pushed around? Does he have a good temper? Does he really need the money or is he doing this to have something to do? (or to help you out?)

    What is going to happen in your business relationship when you and your wife get into a fight?
    What is going to happen to your relationship with your wife when you get into a disagreement with her father?
    Are they going to be able to seperate things?

    Mixing family and your main income source can be hell if one side of things tank.

    I think you have to be very careful going in, and you have to stay very careful not to mix things - do not discuss your problems with your father-in-law with your wife, and vice-versa. Do not discuss business at family gatherings, only during work meetings. Do not involve your wife, or any other relatives, in the business down the line.

    Even though this is family, and you may get along well, draw up a contract and a business plan. Even if it's informal (no need for lawyers). Make sure everything is spelled out, including the profit split, and the specific work each party is expected to do. This will prevent problems later.

    If you can handle the separating things, this is one of the best ways to get going in your own business, because your father-in-law wants you to succeed and it sounds like this guy has some great contacts and experience.

    If you don't have the time to do it on your own, this may be your only real shot at getting something built for yourself.
     
  11. squark

    squark Junior Member

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    So far everyone here is focusing on the 50/50 from a money standpoint. That's totally fair and is a big part of the question.

    But there's also the business side of things. And 50/50 partnerships (especially with family) are often disasters. Everything looks rosy when you're still just seeing potential and what can go right.

    But most businesses fail. It's just the way it is. And you would be making a mistake to think it can't happen here (I'm not saying it will... just don't overlook the potential downside). And 50/50 in a failing / struggling business is a bad spot to be in.

    If you're going to go 50/50 you'd also better have contracts drawn up for who's got actual accountability and decision-making authority. Things can get nasty when there's real (not dreamed) money at stake and on the table.

    One common practice is to go 49/49/2 with the final 2% going to an unbiased third-party with some business sense. They become the tie-breaker for tough decisions. Or just go 51/49 (and if he's worth it then give him the 51).

    In this situation you would be well served to evaluate the extreme end-games...

    What happens if there's a lot of money on the table and things are a roaring success. The age difference and different goals could be an issue.

    And what happens if things go south and there's debt and pissed off customers and unhappy partners. Because, statistically, that's your most probable scenario.

    Believe it, or not, I'm a raging optimist usually. But this situation really requires that you put on your pessimist hat for a little bit and at least consider the extremes.
     
  12. goodstuff

    goodstuff Newbie

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    agent808 and squark...Thanks for the excellent advice! You've given me alot to think about here.

    I have a follow up question though...

    If I go into business with somebody to provide local marketing services AND my job is to oversee sourcing and quality control...Does this mean I should not create other similar businesses or provide similar services as a freelancer anymore? For example: I have $500 in monthly income for providing local marketing services that had nothing to do with my new partner to be. Am I suppose to give that to the business or is it mine?

    Or say I come across another great sales person who wants to partner with me and bring more business my way...do I now have to share that?

    I guess I just envision a relationship in which he takes 50% of the net from whatever he can bring. And then he would get 50% of net for any repeat or referral business that comes because of his actions...

    I know that you go by what the contract says but I'm just trying to get a feel for what's typical. I don't want to over step and I also don't want to box myself in...
     
  13. Dragn

    Dragn Regular Member

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    in my opinion, working with a family member in business is a dangerous concept from the start...so many "personal" aspects to take into consideration.
     
  14. hardybents

    hardybents Regular Member

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    If you love his daughter do not go into business with him. Period
     
  15. three3s

    three3s Regular Member

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    Don't be greedy here, 50/50 is the right share with the considerable skills and contacts he brings to the table.

    Get a 100% watertight contract drawn up and establish a limited company with both of you as equal partners, job done.