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Help needed: What percentage of profit share to offer collaborator?

Discussion in 'People Mgmt: Customers, Employees, Investors' started by Overdrive, Nov 8, 2018.

  1. Overdrive
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    Overdrive Contributor Read Millionaire Fastlane I've Read UNSCRIPTED

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    Hi everyone! I've posted basically the same question a week before but unfortunately got exactly ZERO replies. Maybe I was being too vague in my first attempt and pls excuse me if my question seems trivial to you, but I just need to ask again. Please, please someone reply this time (and pls excuse the length of this post). So here goes...

    I'm currently building a business that is about selling digital content on a dedicated website. Just think of the digital content as a kind of course materials in text form (like in a PDF file). Creating the content is time-consuming and requires expertise and lots of thinking (I definitely think it has high entry barrier). In an ideal situation, on average and per unit of content it takes maybe 20~30 (or more?) hours of work spread over 2 weeks for one person to complete (as I'm doing this in the evenings during my spare time).

    The plan is to create around a dozen units of digital content which should be sufficient for the launch of the website and then I would increase content gradually from then on (so far I've completed three units on my own). Each unit of digital content will be sold on average for $70 per download. The biz is scalable globally in all major markets, meaning potential customers in practically all developed or developing countries, it's all B2B, no consumers.

    I consider the biz idea as such to be at least slightly above average, if not better (competition exist, but I'm adding significant innovation so my model will stand out). I'm trying my best to execute it at a level well above average, of course. If I can do that, I'm definitely aiming at 5-figure gross revenue per month within a year. I know it sounds crazy now, but I do believe in it. To hit 10K revenue per month would require 5 downloads per day on average on a global scale, which sounds possible provided my execution is sound.

    Now here's my problem I've been pondering for days:

    I intend to bring in a collaborator to help me with content creation. He is an expert with the necessary domain experience and his level of expertise and experience is actually a little higher than and and also complementary to mine, but his enthusiasm for getting the job done is of course nowhere near mine. (edit: I've known this expert for the past 13 years have worked with him, know his capabilities and trust him like a friend, though we're not close.) My expectation for bringing him onboard is to significantly accelerate content creation because we would be working as a team now, bouncing ideas between us back and forth, slugging it out side by side, synergy effects and also higher quality and better quality control. In fact, I believe if I were to work on the content all by myself it would probably burn me out soon and drag out the launch date by months.

    So, I don't think paying him cash for his help is the ideal solution and he actually agrees. In an almost two hour long discussion in which I pitched my idea to my would be collaborator today, I managed to sell him on my biz idea from 0 (very skeptical) to around 80% ("sounds promising, I like your enthusiasm").

    Now here's the deal: I told him I'm willing to give him a profit share in return for his collaboration for as long as he's onboard and for a certain time beyond that point, but I'm still not able to pinpoint those variables, namely the percentage of profit share. He only is expected to invest perhaps 3 or 4 hours per week including a weekly Skype call in which we will churn out content together, that is during the period before launch, that means maybe for 4-6 months, then the workload for him will relax as the first bunch of content is ready. There is no investment of capital on his part at all, only time and effort. I will be solely responsible for the business operation, all costs involved, including web development, registering a company, hiring an accountant, marketing, branding and possibly other things that I will outsource at my own expense. And I'm solely responsible to sell the website and make it a success. Thus, I don't intend to share equity in the company, which is a dealbreaker for me, and which he has accepted.

    Finally, given all of the above, including potential revenue development of the biz, what would be a reasonable profit share percentage to offer? Myself, I was thinking of 5~10% of profits for as long as he's onboard and for additional 6~12 months beyond that point. But I really have no idea if this offer is too low or too high, etc. Is this ridiculous to offer or just right? I'm really clueless.

    Of course, I understand I'm the only one able to make that assessment in the end, but I would really like to hear if anyone has some pointers or advice for me.

    Thank you!
     
    Last edited: Nov 8, 2018
  2. Startup Steve
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    Startup Steve Contributor

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    The first thing you need to do is ensure that you separate the platform from the content. It is not clear to me if you have offered an equity position in the venture both from a platform development and from a content creation standpoint.

    I personally would independently develop the platform and then work on a commission's Model to engage content creators. Highly incentivize content creators in creating the first few pieces. They're going to be reluctant and doing so on your platform because they would have low assurance that you're actually going to be able to bring eyeballs. In addition to also not having many initial sales they're also going to have to be your platform testing team working out issues in the content creation user experience.

    As for specific percentages that can be easily researched on the internet as there are many content platforms and content creation compensation models out there.
     
    Last edited: Nov 8, 2018
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  3. Overdrive
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    Overdrive Contributor Read Millionaire Fastlane I've Read UNSCRIPTED

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    Hi Startup Steve, thx so much for your reply. I really appreciate your feedback. It's interesting that you're looking at my idea as a platform for offering content created by third parties. I've never looked at my biz that way, but I can see that there are similarities and it's definitely food for thought for me.

    Just to clarify, my original idea was that I create all content by myself because that content is the main value that I offer. If I bring in a collaborator (or perhaps more than one) it is so they can help me create the content faster and at a higher quality, they're acting like a turbo charger. Their contribution in any piece of content would be 30-50% max. I would contribute the remaining 50-70%. The reason is that I want to make sure that all content is consistent with the quality, look and feel, etc of what I envision for my biz. So the collaborators would be providing work-for-hire and I would own 100% of IP in all works. In return they would receive a cut of future profits on a commission basis (exactly like you mentioned). Platform and content would be indeed separate. I will be solely in charge of the platform. The content collaborators will have nothing to do with the platform.

    I like your advice to highly incentivize early collaborators. So now I'm thinking of offering a higher percentage of profit share in an initial term, say 20% of profit during the first 6 months from launch and then gradually reduce the percentage as the sales increase (whereby profit is defined as monthly gross revenue minus tax and monthly overhead).

    I might also offer cash incentives upfront, but these collaborators are usually not strapped for cash as they are highly-paid (slowlane) professionals who trade hours for dollars. The bigger incentive for them is to receive future passive income as a ROI.

    As for the content platforms that you mentioned and their percentages offered, could you give me any pointers where to look? Thx a lot!
     
    Last edited: Nov 8, 2018

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