How do I structure a partnership with someone who brought a deal to the table but I'm doing all the leg work?

[olimits7]

Hi,

I have a business partner in who has brought a deal to the table, unrelated to our current partnership. This deal is basically us taking over part of the business because the current owner of this contract does not want to do this anymore because it’s not a part of their core business.

So for example, let’s say the current owner wants $150K to have me and my business partner take this part of the business/contract over; so we would do a profit share over the next 3 years where we would give $50K each year until we absorb the rights to this new contract and customers.

However, over the next 3 years I’m doing all the work; nurturing leads, making sales, customer support, cutting the POs, collecting payment, working with manufacturer to ship products to end-customer, re-negotiating rates with manufacturer, etc…while my business partner does NOT help with any of this, he just had the connection to this deal. So without me keeping this contract/business running smoothly by doing all the above day in, day out work…then this business would not exist.

It just seems like a lot to commit to with an even 50/50 split when I’m the one that’s going to be doing all the work. If he came into this as investing $100K and then doing a profit share of $50K, then me doing all the work it would seem more fair because then it would only take 1 year to payoff the current owner and have complete ownership of this contract/business.

Thank you!

 

Dislike ads? Remove them and support the forum: Subscribe to Fastlane Insiders.

[Johnny boy]

Own the business and pay them well to bring you the leads.

 

[Knugs]

If you feel unfairly treated and still do the deal, you will hate doing the work and be ineffective. When it gets hard you will get angry and it will negatively affect your current relationship.

How can it be an even 50/50 split, when only one does the work? Your profit sharing agreement should handsomely reward your time & performance and perhaps not even be tied to the money invested from both sides.

The alternative and better option for you is to purchase the contract and own it 100%, since you also do 100% of the work. Here you can offer some kind of referral deal for bringing in the business based on the purchasing value and perhaps pay it over the coming 3 years. You have to calculate the risk properly though.

You need to sit down with your partner and have a long detailed discussion about this.

 

[olimits7]

If you feel unfairly treated and still do the deal, you will hate doing the work and be ineffective. When it gets hard you will get angry and it will negatively affect your current relationship.

How can it be an even 50/50 split, when only one does the work? Your profit sharing agreement should handsomely reward your time & performance and perhaps not even be tied to the money invested from both sides.

The alternative and better option for you is to purchase the contract and own it 100%, since you also do 100% of the work. Here you can offer some kind of referral deal for bringing in the business based on the purchasing value and perhaps pay it over the coming 3 years. You have to calculate the risk properly though.

You need to sit down with your partner and have a long detailed discussion about this.

Thank you for your reply!

Yes, I definitely want to sit down with him and talk about this but just trying to get some advice/feedback from others before I do so.

Exactly what you said, I don't want to take this on and then be annoyed/angry when I'm doing all the work keeping this afloat while he doesn't have a care in the world.

I was thinking that, maybe I can propose it as all profits from this will go towards our other business partnership that we have where we're 50/50 but the more I think about that; of course he would agree to that because that business is already setup as 50/50 split.

I'm just trying to think what other ways I can structure this so it feels like it's an even deal and I feel more incentivized to do this without it feeling like I'm getting taken advantage of. Neither of us have to put any money up since we will be doing a "profit share" with this business over the next 3 years.

I can easily just say "no" and then just go back to focusing on the other business partnership we have already, but this does seem like it would be a good revenue/profit stream to add that I could probably use towards the main business partnership I have with my business partner but it also will be adding a lot of work on my end.

Any other ideas on what would be a good way to structure this deal that would sound fair to both of us?

Thank you!

 

Dislike ads? Remove them and support the forum: Subscribe to Fastlane Insiders.

[Knugs]

If you have 50/50 partnerships already with him then what happens to these businesses that suddenly lack your time and attention? Does he takeover what you are leaving so that you can take care off the venture we are talking about right now?

If yes then it might work under the assumption of: We are both putting in this much amount of work in all of our businesses. And we both get the same out of it.

 

[olimits7]

If you have 50/50 partnerships already with him then what happens to these businesses that suddenly lack your time and attention? Does he takeover what you are leaving so that you can take care off the venture we are talking about right now?

If yes then it might work under the assumption of: We are both putting in this much amount of work in all of our businesses. And we both get the same out of it.

That's the tricky part, in the other 50/50 split business he has invested money into that business; so in that partnership he brought the "capital equity" for his 50% share and I brought in "sweat equity" for my 50% share since I'm doing all the work in that business but didn't need to put in any investment out-of-pocket from my end.

I just don't know how to apply this to the new deal on the table, if this time around he's not contributing any "capital" and it's just going to be paid out of a "profit share", but on my end I'm still doing all the "sweat equity" again.

Thank you!

 

[Nick Catricala]

Hi,

I have a business partner in who has brought a deal to the table, unrelated to our current partnership. This deal is basically us taking over part of the business because the current owner of this contract does not want to do this anymore because it’s not a part of their core business.

So for example, let’s say the current owner wants $150K to have me and my business partner take this part of the business/contract over; so we would do a profit share over the next 3 years where we would give $50K each year until we absorb the rights to this new contract and customers.

However, over the next 3 years I’m doing all the work; nurturing leads, making sales, customer support, cutting the POs, collecting payment, working with manufacturer to ship products to end-customer, re-negotiating rates with manufacturer, etc…while my business partner does NOT help with any of this, he just had the connection to this deal. So without me keeping this contract/business running smoothly by doing all the above day in, day out work…then this business would not exist.

It just seems like a lot to commit to with an even 50/50 split when I’m the one that’s going to be doing all the work. If he came into this as investing $100K and then doing a profit share of $50K, then me doing all the work it would seem more fair because then it would only take 1 year to payoff the current owner and have complete ownership of this contract/business.

Thank you!

I would NOT go in 50?50 unless the other partner balance things off with what the business require to be done... in your situation.. I would say to the partner.. NO, thank you, I am not certain that we would be happy with the 50/50 deal and I have to do all the work to keep it going.. but I can say yes if you advance the funds ($150,000) and I do the work.. than we can split 50/50 ... I hope this helps

 

Dislike ads? Remove them and support the forum: Subscribe to Fastlane Insiders.

[olimits7]

I would NOT go in 50?50 unless the other partner balance things off with what the business require to be done... in your situation.. I would say to the partner.. NO, thank you, I am not certain that we would be happy with the 50/50 deal and I have to do all the work to keep it going.. but I can say yes if you advance the funds ($150,000) and I do the work.. than we can split 50/50 ... I hope this helps

Thank you for the reply!

Yeah, I don't think he's looking to make an advance for this deal; that's why we discussed a 3 year "profit earning" to pay off $150K selling price.

I think he sees this deal as a way to provide more revenue/profit to our existing business partnership; which makes sense, but my only concern is how much more work/time/etc. it will take out of my already busy schedule.

Thank you!

 

[WJK]

Hi,

I have a business partner in who has brought a deal to the table, unrelated to our current partnership. This deal is basically us taking over part of the business because the current owner of this contract does not want to do this anymore because it’s not a part of their core business.

So for example, let’s say the current owner wants $150K to have me and my business partner take this part of the business/contract over; so we would do a profit share over the next 3 years where we would give $50K each year until we absorb the rights to this new contract and customers.

However, over the next 3 years I’m doing all the work; nurturing leads, making sales, customer support, cutting the POs, collecting payment, working with manufacturer to ship products to end-customer, re-negotiating rates with manufacturer, etc…while my business partner does NOT help with any of this, he just had the connection to this deal. So without me keeping this contract/business running smoothly by doing all the above day in, day out work…then this business would not exist.

It just seems like a lot to commit to with an even 50/50 split when I’m the one that’s going to be doing all the work. If he came into this as investing $100K and then doing a profit share of $50K, then me doing all the work it would seem more fair because then it would only take 1 year to payoff the current owner and have complete ownership of this contract/business.

Thank you!

Like all questions -- it depends...

How valuable is this partner to you? Is it worth risking the relationship to say no to this deal? Is your relationship strong enough to talk about how you are feeling? Can you rewrite your agreement with him without things blowing up?

How much of your time will it take out of your day? Can you handle more? Can you hire someone to help? How about that expense coming out of his half to create better equity?

Will your business come out with the "bump" you get for this contract after the 3 years are up? Is the bump big enough for you to overlook the work you'll need to put in for the next 3 years?

Are you at the crossroad in your business where you must take the next step to move from being a start-up business to simply managing things without doing the hands-on day to day work? This happens to a lot of founders. They must transition into being the business managers and let the business grow up into a self-sustaining organization. That usually entails hiring staffing and creating processes that others can follow. (A lot of this work can also be outsourced rather than directly hiring people to do it.)

 

[BizyDad]

I have a similar situation in my partnership. We are technically 50/50, but we chop up revenue in various ways so that we feel properly compensated. It's a long story how we got here, but the short version is this... It works for us.

With that in mind, could you ask your partner to allow you to take or increase your salary from the business to compensate you properly for your time spent, and then do a split of profit left over.

Otherwise, could you hire someone to do this work, considering the extra revenue coming in, thus saving you time, which seems to be your main gripe in the deal.

 

Dislike ads? Remove them and support the forum: Subscribe to Fastlane Insiders.

[olimits7]

I have a similar situation in my partnership. We are technically 50/50, but we chop up revenue in various ways so that we feel properly compensated. It's a long story how we got here, but the short version is this... It works for us.

With that in mind, could you ask your partner to allow you to take or increase your salary from the business to compensate you properly for your time spent, and then do a split of profit left over.

Otherwise, could you hire someone to do this work, considering the extra revenue coming in, thus saving you time, which seems to be your main gripe in the deal.

Thank you for the reply!

Yes, I think that might be the fairest way to handle this; either me increasing my salary for the extra work or hire someone to take over the extra work that this will bring in.

 

[bracknelson]

Bring a deal on the table isn't enough for calling a partnership. Both should maintain the balance to run a business if I were you so I set a profit percentage 70/30 for bringing a deal only.