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First a little background...
I have run a small, web site business (sole proprietor) for about 13 years. For most of that time it has been more of a hobby than a business and I have a full time job elsewhere. About a year ago a friend I have known for about 9 years approached me about working on this and, in that time, we've had a blast doing so. We're good friends, have worked on the same projects for most of those 9 years on our "day jobs" and things look very rosy. Yet I know many friendships have been broken based on misunderstandings about business relationships. I don't want to go down that path.
In the past year, we've taken the site to the next level, have increased readership and revenue significantly (although still at pretty low levels in the big picture) and have e essentially achieved our first year goals of "building a platform" for future growth. Now comes the challenging part...
In the next 12 months we need to take the operational and business elements to the next stage. One big challenge for me is ownership in the company. I have put a lot of time and effort into this business over 13+ years and my friend has been involved for just 12 months. But he has brought a tremendous amount of passion to the cause and has been a key factor in transforming the site to what it is today. We are both tremendously excited about what we can do with this.
I believe I need to move from the sole proprietor status pretty soon, for various reasons. As part of that I absolutely want to reflect my friends drive and contributions in a fair and reasonable way. But the paranoia in me has this sense of putting pen to paper and within a year or less finding I have signed off a percent of the company and he's walked away. I have absolutely NO sense that this is what will happen but any agreement needs to accomodate the pessimistic as well as the optimistic. That's what a legal document is for, right? I want to ensure that anything offered / accepted is balanced on both sides.
Frankly, I don't know where to start! There's a legal element to this (which an attorney can help with, I guess) but there's also the "ethical" / fairness filter that I want to apply.
I welcome any thoughts.
Thanks.
Topic starter
Posted : 09/07/2007 9:16 pm
Re: Fair and reasonable ownership
I had a similiar situation in that my wife had been working almost full time on a site for 2 years and a good friend wanted to join our efforts (I was working part time) one thing that we did differently was that we put together an agreement upfront that covered the percentage ownership and break up clauses. It may be a little more difficult to do that now but I would go ahead and try. It was a very helpful process because I wrote most of it and I was looking at it from my view point and not his and we were able to discuss difficult issues because the document brought them up. I happened to have multiple sites and I took out ones that I had fully developed which does not seem to be your case.
To make a long story short though it did not work out and we broke up amicably and I think it was because we were friends and we had talked about a lot of the issues - specifically he was not putting his time in - so it was not a surprise to him that we needed to part ways.
Posted : 15/07/2007 11:37 am
Re: Fair and reasonable ownership
If he has only been involved for one year and each year you put the same amount of effort into the business you could just provide him 1/13 of the business reflecting his contribution. I would value that contribution and allow him to buy up to 6/13 of the company and that will still keep you in control of the business.
Posted : 22/07/2007 11:38 am
Re: Fair and reasonable ownership
Good luck Steve I went through the same issue and it did not work out so well with my friend primarily because he was married and I was not and he was not putting the time into the business that I was.
Posted : 27/07/2007 12:26 pm
Re: Fair and reasonable ownership
DON'T DO IT!
Partnerships NEVER work out. It is rare.
The best thing that you can do is maybe bring on that other person as hired help, but maintain 100% ownership in your company. Partnerships have a tendency in ruining relationships, marriages, families, friendships, etc.
I would totally advise against any sort of partnership.
Aaron
Posted : 17/11/2007 5:34 am
Re: Fair and reasonable ownership
smallbizcoach;33120 wrote: DON'T DO IT!
Partnerships NEVER work out. It is rare.
The best thing that you can do is maybe bring on that other person as hired help, but maintain 100% ownership in your company. Partnerships have a tendency in ruining relationships, marriages, families, friendships, etc.
I would totally advise against any sort of partnership.
Aaron
I agree it is rare but it can work out. The most important thing you can do is put everything down in writing especially what happens if the company disolves
Posted : 19/11/2007 12:22 pm
Re: Fair and reasonable ownership
salisbury;33132 wrote: I agree it is rare but it can work out. The most important thing you can do is put everything down in writing especially what happens if the company disolves
There isn't a single document or piece of paper out there that will take care of broken marriages, hurt family members, or lost friends.
That is the true price that you will pay.
Aaron
Posted : 21/11/2007 5:25 am
Re: Fair and reasonable ownership
First, just because someone has been helping you doesn't mean that you have to make them a partner in YOUR business.
You don't say what you have agree to do with this person. Did you agree to a partnership? Or a % of sales? Or what.
Yes, you need to speak to a lawyer who specializes in small business. Write down your situation and questions so that you get the best use of their time and your money.
I would also suggest that you attend as many business classes as possible. Passion and knowledge is great. As are the business skills you'll be needing.
Posted : 24/11/2007 12:56 am
sabir
Hi, This post is very informative, however I would like some specific information. If someone can help me then please send me a private message. Best Regards,
Posted : 04/01/2008 11:53 am
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