Control of company?

[Mr4213]

Right now there are 4 partners,

Myself at 51%

Two at 21%

And one at 7%

Legally on paper I own 100%. We haven't sat down and signed any papers yet.

Through networking I met an individual who owns another company and has a little money. He's been wanting to start a company like mine for a little while now. Honestly it seems like a perfect business partnership. When I first met him we talked for like two hours about how trading time for money is slavery and how he thought I was smart for not going to college. He never did either. We get a long pretty well and I like the mind-set he has.

We met and talked. He wants to be a partner. Here is what he is offering.

- Outright buying a piece of equipment for the company ($30k- $40k)

- Fronting money for a few other things ($5k- $10k) he would be paid back overtime from the company.

- Use of his employees

- Use of his secretary to answer all inbound and outbound calls and to do scheduling

- Use of his land and storage facilities

- Storefront/office location on the same piece of land

- Handling tax side of things

- He also has a giant a$$ billboard on a busy highway I can use

- Use of his business systems

- He would be an active partner

- A few other things

To sum it up, he would pretty much provide about 90% of the business structure and automate a significant portion of my company. And he is providing I'd say near $100k in money and assets. He would be propelling the company leagues ahead overnight. It would take me years to get these things internally.

What he wants

51% of the company

*None of the assets would be placed in the company. Which I foresaw and understand.

He's a cash flow guy at this point. He wants to pull money out.

My main concerns

The two partners at 21% would need to be removed. They provide no where near the value this guy would. They haven't invested any money or really done too much work to this point. From a purely unbiased business perspective it makes sense to cut them. But personally I don't feel too good about it.

We would create a new operating agreement. Voting rights and control wouldn't be based off percent. Not sure how we would do this. The third partner at 7% has no voting rights.

Obviously I want to retain 51%. But he is bringing a lot of value and leap frogging the business. Thoughts?

I'm also worried about him providing pretty much all of the systems and automation. In the future when the company is heavily dependant on the systems he could threaten to pull them if he didn't get what he wanted, or for whatever reason. I can't ask him to place these things in the company. That would be ludicrous. I'm thinking a non-compete and some other writing saying he has to guarantee the use of everything unobstructed for X years.

My reasons for believing I deserve 51%

- He is an active partner. But at the end of the day he has other business ventures. It is impossible for him to put in as much time and work as me. I'd be out on most of the jobs supervising. The business would get far more of my time and energy than him.

- His risk is pretty minimal. None of the assets are in the the company. He is pretty much lending the use of resources he already has. If the company went under he wouldn't lose anything really.

- I'd say my risk is higher. Everything I have is in this company. My only income comes from this (and the guard) if the company went under I would be far more affected than him.

I'm on a bus right now going to a month long field training. I have plenty of time to consider things and would love to get some opinions.

 

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[Guest34764]

Yeah, I think JScott hit in on the mark.

You're slowly giving away the control of your company, and you already have 49% given up.

This man is all about making money, I hope you don't get clouded by all the stuff he's trying to give away.

Honestly, I wouldn't go with it, and if the other two at 21% aren't doing shit either I'd boot them if you could.That's just too much equity to be tied to people who aren't doing anything.

 

[Mr4213]

This is the reason I always recommend not giving away equity in return for things that don't absolutely, positively require giving away equity.

You gave away 42% of the equity to two people who aren't providing value and now you're not considering giving away half the company (that you don't own) to someone else that it sounds like you don't implicitly trust.

What is driving you to continue giving away large percentages of your company?

I'd say it's mainly due to lack of business knowledge/experience in the past. I'm not perfect, lots of flaws and learning I still have

I still have much to learn when it comes to business and life in general. I f**** up, but I've learned from it. In hindsight they can both be replaced with employees and in no way deserved what they got. I let emotions cloud my judgment.

@Omega I never said they didn't do anything. They just don't bring anywhere close to the value the other man does. And they have obligations that prevent them from putting in the time and work that I do.

Those two partners were a mistake.(As far as what I gave them)

But I do not believe this partner would be. My main goal at the moment is an automated system generating at least $100/day passively. With what he's providing the whole business would mostly be automated overnight + a month or two to work out kinks. He would shift a lot of work off my shoulders. His crews would be trained and used for my companies jobs. That alone is a huge obstacle solved over night. The other things he is offering allow my company to provide more value to the customer and make more money.

The offer is not set in stone. We are still negotiating so it's not a take it or leave it kind of thing.

Do you not think his offer is worth considering? I believe it is at least worth considering.

I think with his help there is a great chance of the company being fully automated and generating passive income by 2017

He would literally save me years.

 

[Mr4213]

I appreciate the advice. I like the forums because they keep me in check and provide good advice.

I will be thinking about this the entire month. I have not accepted it by any means. Only considering.

 

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[ApparentHorizon]

"50% of something is better than 100% of nothing."

Call up your lawyer and put everything you want out of this deal in writing.

 

[Jon L]

People have done this kind of thing and made a killing on it. I think its more of a personal decision. For me, I would much rather be making $1M/year and own my company than be making $10M/year and not be in control. For two reasons: 1) I like to be in control and 2) I like the learning experience it brings - that experience may end up making me $100M/year later on

 

[Andy Black]

People have done this kind of thing and made a killing on it. I think its more of a personal decision. For me, I would much rather be making $1M/year and own my company than be making $10M/year and not be in control. For two reasons: 1) I like to be in control and 2) I like the learning experience it brings - that experience may end up making me $100M/year later on

I'm with you on this.

I've gone into partnership before and, whilst nothing bad happened between us, I couldn't take my business in the direction I wanted, why I wanted, how I wanted, or change my mind as quick as I wanted.

It's more than just growing a business for me - it's my own journey.

Plus, I just don't want any bosses...

 

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[Jon L]

I'm with you on this.

I've gone into partnership before and, whilst nothing bad happened between us, I couldn't take my business in the direction I wanted, why I wanted, how I wanted, or change my mind as quick as I wanted.

It's more than just growing a business for me - it's my own journey.

Plus, I just don't want any bosses...

exactly...I'm quite done with bosses. Even really good ones. I'd rather have customers. I recently said 'no bid' to a potential customer. He started pursuing us a bit because of that. Still stuck to my guns ... this guy would have been a nightmare client. Felt great.

 

[devine]

First, read this.
Second, to have a control over a business it's not enough to throw in some money and other resources (read: everything that can be bought with money).
It's a definition of a sponsor/lesser partner, not owner.

Third, why do you want to keep a partner who has 7%? If his value is so small - get rid of him and just hire a specialist.