Bringing on a new partner

[EC51]

Hello,
I've had small side business for years and last year in November I left my job and am now doing my business full-time. I have built a small list of clients. Sales from November to July is aproximately 120k.

I am bringing on a partner and we are planning to incorporate as a new business. We are trying to figure out what is a fair way to develop this partnership. He would like for both of us to invest $10k into the business and I bring all of the existing clients and receive 10% of the profits for each of the existing clients that I bring with me.

On the otherhand, I believe the existing client base has value and I shouldn't have to invest additional funds because of the existing client base I bring to the new partnership. My thought is that I will now have to split the profit between myself and my partner. I hope this makes sense. Can someone offer us any advice?

Also, is there a formula in which you can figure out how to pay ourselves. Do we do a base then the hours we work on projects?

[Steve B]

I think you're crazy for getting a partner. It's hard enough to make things fair when you're starting off from scratch. In your situation, I can't imagine how it could be divided up in a way that would make sense.

I would suggest you hire this person instead and put him/her on a small salary plus commision. Or, my second idea would be for both of you to invest the 10k and you get 100% of the profit from all the existing customers forever and ever. Your partner is still getting a bonus from all the goodwill and branding you've established in the business.

[huggytree]

partnerships are doomed to fail....no matter what % or $ you pick for yourself your partner will most likely think its too much and you will think its too little...

ive known very--veeeerry few partnerships that succeed......i know one thats breaking up right now....the only ones that succeed that i see are ones where the owners are extremely easy going and dont care about pushing themselves....you both have to be a personality type that doesnt like to compete...just happy to exist

if your successful by yourself stay away from the partnership...in a couple of years you'll wonder why you bothered

[MyITGuy]

Hello,
I've had small side business for years and last year in November I left my job and am now doing my business full-time. I have built a small list of clients. Sales from November to July is aproximately 120k.

I am bringing on a partner and we are planning to incorporate as a new business. We are trying to figure out what is a fair way to develop this partnership. He would like for both of us to invest $10k into the business and I bring all of the existing clients and receive 10% of the profits for each of the existing clients that I bring with me.

On the otherhand, I believe the existing client base has value and I shouldn't have to invest additional funds because of the existing client base I bring to the new partnership. My thought is that I will now have to split the profit between myself and my partner. I hope this makes sense. Can someone offer us any advice?

Also, is there a formula in which you can figure out how to pay ourselves. Do we do a base then the hours we work on projects?

This wouldn't make sense to me...why are you partnering up in the first place?

To go from 120K in 6 months to 12K for the same period just wouldn't sit right with me...

[EC51]

Thanks so far for the input. I wanted to answer the question why would I bring on this partner. The talent He brings will help diversify the scope services we provide and will replace several services I currently contract out at this point. He is incredibly talented. Combine his talent with mine and I envision greater possibilities than if I were doing this alone. The other part is that I trust this person. I've know him for a very long time (went to college together).

[Harold Mansfield]

I'm not a big fan of a partnership after the fact either, unless the other is bringing something of equal value including revenue.

I work with Agencies and other individuals all of the time, some excusively. Even promote thier services as part of my own, and we still keep our seperate identities and revenue.
It's just easier that way.

[libra]

It will be beneficial if you can fill us in on how you do it. Examples will be good.

... I work with Agencies and other individuals all of the time, some excusively. Even promote thier services as part of my own, and we still keep our seperate identities and revenue.
It's just easier that way.

[MyITGuy]

Thanks so far for the input. I wanted to answer the question why would I bring on this partner. The talent He brings will help diversify the scope services we provide and will replace several services I currently contract out at this point. He is incredibly talented. Combine his talent with mine and I envision greater possibilities than if I were doing this alone. The other part is that I trust this person. I've know him for a very long time (went to college together).

So he's only bringing talent to the table and wants to knock down your revenue from 100% to 10%.

Move past the partnership and hire him as an employee

[huggytree]

making him a partner will end that friendship

why not just hire him? give him a % of the sales if you want to be generous....dont GIVE him your business

most partnerships will fail...odds are yours will too...keep that in mind

[StefanT]

Unless this is extremely specialized talent that could potentially skyrocket your business, I just don't see how you would benefit from a partnership. It makes better sense to hire this person as an employee with commensurate compensation. Do not give out your golden goose.