Should I quit?

[Mr. E]

Im new to be an entrepreneur. Im in my late 20s. I was working 60hrs/week and then ACA got upheld by the SCOTUS and I realized I would never be wealthy as long as I am working for someone.

On a related note, I started a business that is seeking a patent, but thats not what this thread is about. I was approached by a college friend about a business idea. It is not a revolutionary (B2B) business, but it undercut competitors by 50% while providing more services. He works FT and he did the new business as a hobby and got like 3 clients (Mom/Pops). I immediately saw the potential for this business, but he had some misconceptions. He asked me to join him and do this FT to help get the business off the ground, figure out a business model, a pitch, find out what works and what does not, etc. while he gives me support. He told me "if the business takes off we will discuss making you co-founder." So I always expected to have part equity because I was building this company for him, while he works FT.

Four months later I have a supermajority of the clients, like 20:10, we have changed prices, and services based upon my work and insight. Now I get 65% commission on sales and that is the only compensation I have received. For the most part I have taken a loss over these 4 months because his price structure ensured it. More or less, I have been working for free, or at a loss. I open up the door to soliciting bigger entities, now that we have a few dozen clients and excellent quantifiable results.

Now a friend of a friend talked to him and is setting him up with a client that is worth 250 clients. At first I was elated because I knew what it meant for the business. Then he says my job would be salaried working for 125 (half) clients. But he has to win these clients first, so we are discussing the pitch and his wife asks how do we introduce Mr.E, and he says "idk" I say "how about co-founder?". Resoundingly, they both say "no."

I talked to him afterwards and he pretty much told me, he wont give up equity unless it was someone who was a game-changer for his business and even then it would only be 30%. Me if I work for him for 2 years and get an MBA then I may get 10-15%... (another promise)

The problem is, he wants to sell the business after 5 years. And if Im taking half the load for 0% or even a mythical 15% Im having a hard time staying put. I didnt get into this do to sales.

If I do stay, the only words he will hear from me are "sale" or "no sale" because apparently I have been giving him everything else for free.

 

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[MJ DeMarco]

If I were in your shoes, I'd tell your boss to go F*ck off.

You don't work for free and you were promised something early and he didn't deliver.

Tell him to pound sand.

 

[ZDS]

Why not start a competing service and take those potential clients?

 

[mayana]

Screw him! He has been totally ripping you off - he doesn't deserve you to do one more thing for him. No way.

Why not start a competing service and take those potential clients?

Definitely. And take the existing clients, too, since it doesn't sound like you have a contract or that you are even officially working for him. I would say that you even have a good case for them really being partly YOUR clients, since you had an understanding that it would be your business, too.

And for everyone reading this, PLEASE learn from the OP's mistake. Before you enter into a partnership, first examine whether you need to (sounds like the OP could have done it on his own), and then make sure that EVERY SINGLE EXPECTATION is written down and agreed upon before any work actually occurs.

Mr. E has gotten himself ripped off, and will likely not have a relationship with this guy in the future. This could have been avoided by clear, written expectations in contract form at the very beginning.

 

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[JAJT]

So, you do most of the work, bring in the most clients, work at a loss, and MAYBE sometime in the future you'll get 10%?

Start demanding what you are worth, in writing. And never take another "maybe" again.

 

[Mr. E]

Why not start a competing service and take those potential clients?

How would I execute taking the clients? All the contracts they sign are with his businesses. (I did sign on behalf of his business)



Im thinking I get the 65% commission in writing. Then wait for the big pitch, which he needs me to be at the table; but a day before, demand sizable equity. Or I GTFO... I have already stopped giving him input, because clearly I have been doing that for free.


I think he thinks the business is worth the idea, not the assets and liabilities. Basically the idea is done by other companies first, we just add more services for a lesser price. So I dont know why he thinks that is worth 100%.


If in a year or two I become litigious, would I have a claim? Im starting the process of collecting everything digitally that was done so I can prove how much I contributed.

 

[Twiki]

I talked to him afterwards and he pretty much told me, he wont give up equity unless it was someone who was a game-changer for his business and even then it would only be 30%. Me if I work for him for 2 years and get an MBA then I may get 10-15%... (another promise)

Well, he just told you that you aren't a game-changer for his business. Therefore you don't matter, you are viewed as an interchangeable cog, disposable at any time. The question is whether or not you are going to accept that role. You are either a game-changer and compensated as such, or not. PS. You could also be a game-changer as their competitor, maybe?

 

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[ZDS]

These upcoming clients haven't signed contracts and you're trying to close them right?

For clients currently in contract, how long do they last? Are they month to month? If you were doing the selling / closing, odds are you've developed a relationship with some of these clients, those are your best bets starting off.

The others... you know the best better than anyone else. Figure out a way you can offer them more value(if you're working with them on a regular basis, you can easily find out what there pains are)

 

[JAJT]

If in a year or two

Dude. Are you serious?

 

[theBiz]

Not nice but im giving my opinion

The only reason i say this guy sucks is because he lied, otherwise... that's life, you work, he reaps the benefits, not you... he owns the business, maybe he misled you, but that in all honestly is your fault, sign a contract like your supposed to with option to buy in or something. Money changes almost everyone, you should know that your an adult, before you start putting in sweat equity, sign a contract.....? So him = already smarter than you in business on day 1 to get you to work without signing anything... maybe smarter isnt the best word, but you get it..

People screw each other in business every minute of everyday:

if the business takes off we will discuss making you co-founder." So I always expected to have part equity because I was building this company for him, while he works FT.

Again, him having full leverage over this business and YOU, while you sat back and continued to work with no contract.

while he gives me support.

does that mean he has been paying you?

think he thinks the business is worth the idea, not the assets and liabilities. Basically the idea is done by other companies first, we just add more services for a lesser price. So I dont know why he thinks that is worth 100%.

If this is REALLY true... you can leave tomorrow and go do it yourself/copy with nothing. If your (for example) going door to door signing small businesses for merchant services at a 50% off.... there is no science or breaking news like you said its just b2b... its about execution.. if its something like that, i wouldent waste time... just go start it again yourself.

Now a friend of a friend talked to him and is setting him up with a client that is worth 250 clients.

Your friend of a friend... or his friend of a friend brought this to the table?

Consider it a lesson and leave, hes obviously going to do this again, just like sorry to say 90% of successful people do, i wish it wasn't like that but i know very shrewd people especially in some business like that, they will do that all day, especially startups with people on foot... you just validated his idea as a salesmen. Rather than him paying a draw to a successful salesperson he used you for free.. thats what just happened.

 

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[rocksolid]

Im thinking I get the 65% commission in writing. Then wait for the big pitch, which he needs me to be at the table; but a day before, demand sizable equity. Or I GTFO... I have already stopped giving him input, because clearly I have been doing that for free.

Don't wait to lose another potential customer. What if he tells you no.....then what? Are you going to close another client for him instead of you? F that. Start your own business and take that big fish with you.

 

[Mr. E]

These upcoming clients haven't signed contracts and you're trying to close them right?

For clients currently in contract, how long do they last? Are they month to month? If you were doing the selling / closing, odds are you've developed a relationship with some of these clients, those are your best bets starting off.

The others... you know the best better than anyone else. Figure out a way you can offer them more value(if you're working with them on a regular basis, you can easily find out what there pains are)

1) Yes. Ever since this revelation, I have not closed a sale.

2) Current contracts, the majority of clients can leave anytime because they paid for a full year upfront. Only about a quarter are locked into a 6 month contract, because they are on a recurring monthly fee.

3) The clients love me, and have no idea who the other guy is. The problem with the existing clients is we have been undercharging them to validate his price points.

The annual value of my clients is ~$6000 at my commission we are looking so my take is ~$3900 annually. I havent realized that full $3900 because of recurring payments.

while he gives me support.

does that mean he has been paying you?

No, my sales pay me, he isnt supporting me financially. By "support", he would help develop more leads and the materials that I take into the sale. But the leads are still cold outside sales. I can spend an hour online figuring out which businesses around me need my service.

Your friend of a friend... or his friend of a friend brought this to the table?

His friend brought the big opportunity to us. Which I think is why he thinks he is 100% entitled to the business. I had a big fish on the hook about a month ago, something I made happen, and they went with a different company. In retrospect, even if I closed it, nothing would tie me to the company but the commission rate...

If in a year or two

Dude. Are you serious?

Im saying hypothetically if I quit selling, and just manage my clients, then "his" business takes off, what legal leg do I have to stand on, if any?

 

[Mr. E]

Also, he doesnt have any of my signed contracts. The only paper trail he has is the 4-5 clients who we have on recurring monthly payments so credit card info.

And even then, I hold those contracts. If I lose those contracts, the clients arent tied into the 6 months and are free to be resigned. Or at the very least not contributing to "his" business.

 

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[edpaiz]

Dude take your clients somewhere else start your own company or go to a competitor, make him give you the equity you deserve, if you dont play hardball you will never receive wht you have worked for, he is not much of a friend if he is treating you like that...

 

[Twiki]

I asked my friend Tony what he thought about your "friend" and this is what he had to say:

[video=youtube;zIRwd1S26Ik]http://www.youtube.com/watch?v=zIRwd1S26Ik[/video]

I think you've got a chivato for a boss (the worst kind, the kind who pretends he's your friend). And if he runs his business on the backs of chivatos, his judgment stinks. It makes me think, what other mistakes has this guy made? How can I trust his organization?

Hey, for all I know, he had my friend Angel Fernandez killed. Time to make your move.

 

[Alchemy]

As long as you didn't sign a no compete, I would form a company of your own and sign all those clients under it. You obviously know enough of the business to run it by yourself. What is holding you back? The friendship is already kaput. Pull the trigger.

 

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[JAJT]

It sounds like you are trying to find some way to avoid confrontation, continue what you're doing, then maybe try a legal battle later - this isn't a plan.

A plan is any of the following:

- Washing your hands of this guy, and going your own way, free and clear
- Taking your clients with you to your own business
- Demanding your worth, legally, in writing.
- Staying where you, doing what you're doing, but DEMANDING your role and compensation and plan be set out in writing, signed by both of you.
- Etc...

So, Mr. E, what's your plan? Everyone here says you are being taken for a ride - are you going to continue being taken for a ride and save yourself discomfort? Or are you going to change something?

 

[Mr. E]

I plan on meeting him this weekend at a public place. I have outlined my role and my contributions in a succinct manner, crescendo-ing to an ultimatum of partnership or I walk.

My material assets:
1. All my contracts
2. Emails showing my contributions
3. Potential clients list

My new business assets:
1. Inter-workings of the business
2. Worked up a new name, domain, and email
3. Getting a DBA Monday
4. Got all information saved with State to apply for sales tax for Monday
5. Developing business model to include services we didn't offer, training up personal skill-set to make me more proficient in these services.

"Playing dirty" assets:
1. All the passwords to the online portion of the business, which is important to deliverables to my existing clients.
2. Website for reporting pirated software.


Am I missing anything?

 

[Twiki]

Mr. E. Just want to wish you the best in your meeting and glad to see you're planning and taking steps. Curious: you mentioned his wife had some input in rejecting you as the founder? Is she involved in the business? Remember that in negotiations there is usually some other third party (like a spouse) that might be a factor in his mind, even if they aren't physically present at the meeting.

It's great you've got those assets outlined or lined up, but remember: your biggest asset is your ability to walk away - aka. the big middle finger. The thing that makes "Win/Win or No Deal" powerful is the No Deal option, not the Win/Win.

PS. Before the meeting, practice "power posing" --- sounds silly but there is research behind it: Boost Power Through Body Language - Video - Harvard Business Review

Good luck! It sounds like either way, whatever they decide, by taking this decisive action, you win in the end anyway.

 

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[Mr. E]

Mr. E. Just want to wish you the best in your meeting and glad to see you're planning and taking steps. Curious: you mentioned his wife had some input in rejecting you as the founder? Is she involved in the business? Remember that in negotiations there is usually some other third party (like a spouse) that might be a factor in his mind, even if they aren't physically present at the meeting.

It's great you've got those assets outlined or lined up, but remember: your biggest asset is your ability to walk away - aka. the big middle finger. The thing that makes "Win/Win or No Deal" powerful is the No Deal option, not the Win/Win.

PS. Before the meeting, practice "power posing" --- sounds silly but there is research behind it: Boost Power Through Body Language - Video - Harvard Business Review

Good luck! It sounds like either way, whatever they decide, by taking this decisive action, you win in the end anyway.

She is pregnant (2nd child) and is a stay at home mom, he is programmer that works from home. She has probably given 1-2 hours 2 days a week for the latter 2 months. Her job finding leads and creating material for me to take to sales tailored to each lead. Its the same thing I do, for prep before a sale. I need about 25 leads+packets/week.

(Maybe we have been doing this wrong)
1. We research potential clients,
2. Build packets based on the clients needs,
3. Then we approach them cold.
3b. We tried calling ahead to find out the decision maker, we found that it was usually a waste of time when our business is strictly B2B.
4. If we get the decision maker, we pitch, if not we find out when the decision maker will be there and who should I ask for.


Im ready to walk away, and I may have to before he sees my value. The whole point of "his" business was so he could quit his programming job, but he isnt gonna leave it until he knows for certain he can make the same amount ($55k/y) as being a programmer. He does have a mortgage and a 2nd child on the way in 2 months...So if I walk away the company will be dead for no less than 3-4 months, if not forever. If by the chance he gets this huge fish, he has to hire 2-3 people to go out and produce (not sell).

I will definitely look up the body language link...thanks.

 

[Twiki]

Be prepared for him to pull the "I got a mortgage, a kid and another one on the way! You know my wife is pregnant, how can you do this to us???" F.U. and your mortgage and your kids. Give me my share. If it causes them stress, they should have thought about that before screwing you around. BUT it's unclear if he actually promised you anything though... you said he said "if the business takes off, we will discuss your stake, in the future"? Sounds like you already discussed it, and they said no. Ah, what a sticky situation, good luck!

 

[Mr. E]

So I talked to him, I made my case, I have him till Wednesday to decide.

We had lunch Wednesday, he told me he wasnt willing to give up any equity at this stage. He thinks someone is gonna swoop in and drop "$10M" to grow the business to enormous levels and he wont have any equity to exchange for it. Ha!

Well, we broke up amicably which is better for my clients in the short run. He has no interest in managing their accounts and I can always upsell them with my new services.

I am about 6 hours of work away from being fully functioning competitor (and he has no idea).

 

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[mayana]

Well, we broke up amicably which is better for my clients in the short run. He has no interest in managing their accounts and I can always upsell them with my new services.

Awesome, I am glad to hear that this worked out well.

I am about 6 hours of work away from being fully functioning competitor (and he has no idea).

Keep us posted!

 

[KirbyRaymund]

you said he said "if the business takes off, we will discuss your stake, in the future"? Sounds like you already discussed it, and they said no. Ah, what a sticky situation, good luck!

i agree with this... he already pretty much discussed it... actually, he informed you of his decision. the answer is a no.

 

[dknise]

The annual value of my clients is ~$6000 at my commission we are looking so my take is ~$3900 annually. I havent realized that full $3900 because of recurring payments.

Hate to say it, but at those figures there is NO business. That's about $50 per client with 125 clients per year? If you work on that at 40 hours a week for the entire year, you'll end up making $1.80 per hour.

The other harsh advice I'd have to offer is a live and learn type revelation. You should never agree to build someone's business as an employee, with hopes of becoming a co-founder. Currently there is an offer for my company under the condition I stay for 5 years to run it. They want me to turn it in to 10 times what they're paying me for. If I'm going to do the work anyway, I'm going to keep the company. Next time you run into a situation like this, it's either equity, signed agreements to equity on performance targets, or flip 'em the bird.



As Kevin O'Leary would say: "But how do I make any moneyyy."

 

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