Determining pay percentages on new est. busn

[Jlaliberte]

Hey how's it going everyone. I'm new to this site/ forum. Well anyways just recently 2 friends and I started a mobile detailing business. Now let me explain how things started. First we found a nice van with all the proper machines. 100 gallon water tank, Honda generator, Honda pressure washer. Now the Van cost $4000. One of my friends invested $3000 and the other $1000. Now technically they invested in the van because I have been detailing cars on the side for a good 5 years and decided I wanted to start my own business. Ive only contributed a couple hundred in supplies. But plan on investing back into the business with some of the money I make. But now that we have started working. My friends are already money hungry. Both asking for a 30% each on every job that I work.( I am the only worker detailing the cars.) and 40% for me. The one friend that invested $3000 will not being doing any work w/ the business and just will provide money when needed. The friend that invested a $1000 dollars will be doing minimum work. So far he has set up a couple weekly accounts with some of his well off family members. One a lawyer, the other a doctor. The law firm will be once a week 7 cars with basic washes $25ech($175 a week). The doctors office 4 cars, two basic washes($25 x2=$50), and two full details($120 X2=$240). Now that gives you input of so far what's happening. I need a fair percentage split. I was thinking 70% for me, 10% back into the nest egg, and my friends 10% each. Now is that in unfair to them since I'm doing all the work. They both make ok/ good money already and I quit my job for this. So I need a minimum amount to pay my bills and eat. I will being doing more later down the road. Now the friend that invested $1000 wants to already start making business cards, flyers, and t-shirts. But I feel he is getting to far ahead. One, because we technically aren't established as a true business with the city. I'm pushing for our business license and business insurance. And then getting those things made, and from there I will do advertising myself. I've got some college credits for a few business classes. But I feel he is being naive towards my input. As for the business ownership percentage. I said 51% to my friend that invested $3000. And to my friend that invested $1000, 39% and me 10% because we wouldn't have made this business if it wasn't for my ability and skills detailing cars. And as time goes by I will buy into it more for a stronger percentage of it. Please someone give me some advice. I would very much appreciate it.

[vangogh]

It sounds like you and your friends need to have a long discussion about how this business will work. It sounds like you all have your own ideas for what each of you deserves and you're making the assumption the others feel the same way without asking.

You can't start a business that way. The three of you absolutely need to decide how this will work and you personally should be prepared to give both of your friends their money back if you can't come to an agreement with them. That conversation should include what each of you is responsible for in the business.


I need a fair percentage split. I was thinking 70% for me, 10% back into the nest egg, and my friends 10% each


As for the business ownership percentage. I said 51% to my friend that invested $3000. And to my friend that invested $1000, 39% and me 10%

Those 2 statements don't make a lot of sense together. If you're thinking you'll own 10% of the business, you're not talking home 70% of the money. If you give your friend 51% ownership of the business, then he gets to make every decision on his own and you and your other friend have no choice but to listen since your 49% combined can never out vote his 51%.

What I'd suggest doing is for each of you to write down what you'll each be contributing to the business immediately, in the near future, and long term. Then you'll have a better idea how much of the business makes sense for each of you to own. You have to come up with a split that all 3 of you think is fair. If all 3 of you can't agree on what's fair, you should give your friends their money back and either go it alone or find other partners.

What you can't do is continue to make assumptions about how each other other views the business, because that only lead to the 3 of you arguing with other.

[Pita]

In addition to Vangogh's comments, I think you should first establish what your time is worth in doing the detailing jobs and allocate yourself and your working partner a good wage (hourly or by the car) from the revenue off the top. Once you have paid yourselves then you should work with your partners on how the remainder will be divided.

If you're not there to do the work then you would have to pay someone else to do it. So it only makes sense that your company should pay you for your time and effort.

[turboguy]

I agree with everyone that you need to sit down and work things out before you start. Otherwise my prediction is that the business won't last 2 years.

I would suggest that no one should own over 49% of the business. If someone owns 51% they have full control and can do whatever they want. If no one owns more than 49% then any two can agree on the course of action but no one person can dictate anything.

Secondly not only does the fact that you are doing the work have value but the fact that you have 5 years of experience and know how to detail a car has value. My suggestion as far as ownership would be 45% to the one who invested the most, 20% to the one that invested a grand and 35% to you. I would then set up something where any supplies are paid for first, then you are compensated for your time as is your minority partner who will work a little. That can either be an hourly rate or a percentage. I would then set a certain amount towards building working capital and a reserve. Then perhaps set 5-10% aside to pay back the cash the investors have put in at the same percentage as they invested which would be currently 75% to the 3 grand guy and 25% to the other. Once they have their investment back that stops but they still get a percent of the profit.