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    9 Replies Latest reply on Nov 21, 2008 1:09 PM by kevhan

    Question on whether to hire or to form a partnership

    Anadllc Newbie

      I am new and love this site! I have this business idea for about 3 years now. It is an online business. My background is sales and marketing but I need a lot of things done on the computer side. That is the thing that has held me back. I am a firm believer in doing what you do best, and hire out for what you don't. I got to know someone that knows a lot about computers, that I hit it off with. I approached her with my idea and she is very interested. I told her that it will be a lot of work and she is alright with that. We were going to do a 50/50 partnership to save on costs to hire out. Now I am questioning whether this is a good idea. She is accepting a full time postition with a large company and says she can do both. I do have a bit of a problem with this, because I will be working my *** off doing everything BUT the computer side. What if things don't get done in a timely manner on her side that holds us up? It is difficult to back down now, but here are some options that I can think of and would be interested in knowing if you have any ideas or thoughts. BTW I don't have a problem with a split because this is not about just building a website...

      First, a partnership agreement would be written up with an exit strategy already in place and agreed on while we are on friendly terms. I will use my attorney so that it is a fair contract, but will protect me.

      1) set up a 51%/49% partnership split so I will have more say.

      2) Set up a pay scale where I will pay her for her work, and as the company grows, provide some way for her to work full time with a % (but less) of the business.

      Thanks for your help and looking forward to what you have to say!
        • Re: Question on whether to hire or to form a partnership
          DomainDiva Ranger

          As someone who works outside the start up and has team members that do as well..its tough on deadlines. We manage to get it done most of the time ... but our team has a certain structure about it that allows stretch time as we call it on deadlines since we are not to market yet and these don't affect the programming.

          You may want to re assess your partnership offer...a new job is going to be very demanding and your friend may not have as much information about the new situtation as they would need to be able to commit to your venture.

          Option 2 is good only eliminate the partnership .... a broken partnership could cost you a lot of money (speaking from experience on another business issue).
          • Re: Question on whether to hire or to form a partnership
            screenname Newbie
            I agree, I would let her feel the job out first before setting
            anything up, unless you have an exit plan in place that allow you to back out
            of the partnership if you feel she's not holding her end of the bargain.
            Just make sure you have a way to measure her commitment. As far as the
            percentages goes, I would make sure that she has a clear understanding of your
            goals and where you are trying to take your company. If the commitment is 50/50
            and you feel that she has the missing link that you need to be successful. Then
            51%/49% sounds good. I would shoot for more like 60/40 then negotiate from
            there, but that's just me.

            Now if money is not a problem; you understand what you need to have
            done, and its really just getting someone to do the work, then by all means go
            for it. The problem is, with custom solutions,
            cost could get very expensive.

            So long story short, I'm in favor of
            the partnership as long as you have the necessary things in place that allow
            you to back out if you need to. You mentioned a little of this in your initial post;
            a partnership should give the project a better chance of being successful by
            allowing partners to focus on areas that they are skilled in, which eliminate high
            overhead that all small business owners should try to avoid.
            • Re: Question on whether to hire or to form a partnership
              LUCKIEST Guide
              A partnership exists when two persons join together (like a marrage). A formal partnership agreement
              is recommended in order to address potential conflicts. You should use a lawyer.
              Why worry about an exit strategy. The goal is to succeed.
              I like "Screen Name"s answer that
              the partnership is great as long as you have the necessary things in place.
              To be successful in business (as well as marrage) think positive.
              Then there is always SCORE. SCORE will help you for FREE in person or on line .
              Good luck, LUCKIEST
              • Re: Question on whether to hire or to form a partnership
                Lighthouse24 Ranger

                Personally, I hate "partnerships" like this -- it's sort of like dating someone who is already married. Yet, I do understand your situation, so my suggestion would be to abandon the "partnership" solution and handle her as a primary stakeholder or investor.

                1. Make a list of your current business assets (mostly intangible at this point, I'd guess) and determine who really created them. (It sounds like it could be 100 percent you at this point.)
                2. Incorporate the business, assign dollar values to those assets, and issue shares of common stock according to whatever you believe your current ownership contribution has been (100/0, 80/20, or whatever you think is appropriate).
                3. Outline and agree upon the "computer side" assets she will deliver or the services she will provide in the future, and establish how many additional shares of common stock she will receive in exchange for the timely delivery of each of those things to the company.

                In effect, the two of you would then have a profit-sharing agreement -- in exchange for adding value to the company, she would get ownership of a progressively larger part of it (and of the profit her work would be helping to create) -- yet you would retain management control.

                This is not a complex or unusual arrangement at all, so it should be fairly easy and inexpensive to find any legal assistance you might need to put this in place. Best wishes!
                • Re: Question on whether to hire or to form a partnership
                  Ed O'Gee Adventurer
                  Wow - I personally don't think this is a good idea. You'd be btter off finding funding to pay her for here work. Think about it, while you are working 16 hour days on your business, your partner will be working 10 hours on her new job and 4 hours on your site. Talk about inequity. Beyond that read your own post, you already seem like you'll be disgruntle about the inequity.

                  I'd definitely would let her do the work, especially if you trust her but the partnership idea does not make sense in this situation.
                  • Re: Question on whether to hire or to form a partnership
                    Momentum Wayfarer
                    I would suggest that you should offer her 50% in the net profits than in the company itself. And as your company grows and she gets more involved you can start giving her ownership % every year/quarter (or when a certain goal is acheived e.g. sales= $1 million) until she gets 49%. I think this kind of agreement should work best for both of you, as it demands commitment.
                    • Re: Question on whether to hire or to form a partnership
                      Anadllc Newbie

                      Thank you! Thank you! ALL for such valuable input! I am really thankful for the widely diverse answers. Which tells me that this is not an easy solution.

                      I realize that the agreement can be anything that the two of us agree on. My friend that is starting the new job is a fair person, so I think she would not have a problem doing something along the lines of the last reply...getting a percentage of the profits to start, and then as things grow, she can attain ownership. I would do this if she quits her job, and committs to "my business" on a full time basis.

                      I was thinking of asking her for a proposal on what her costs would be to build the site, and then to maintain it. I can then use this as a benchmark as to what percentage she would get ect. I feel passionately about this business, I feel 200% that it will be successful! It is a win-win for anyone that will do business with us, and it is a product that they cannot do themselves for the same cost. Oh, and it is an income producing product. Every day that goes by, is a day wasted!

                      Thanks again for all the well thought out ideas!
                      • Re: Question on whether to hire or to form a partnership
                        kevhan Adventurer

                        Give equity onwership only as a last resort!!! Equity, even if only 5% will bring many problems that will mostly be legal if the deal go's south.


                        I would recommend that you give her a percentage of the profit for the work that she is doing. So rather then 20% equity give her 20% of the profit or 50% of the profit whatever you need to get heR to do the job you need her to do. Then if things don't work out with her all you have to do is fire her....... you won't have to deal with laywers and buying her out of a company that may be very valuable. Just be clear with your agreements with her.

                        When the time comes and if you need bookkeeping/accounting help check out - outside the headache to us