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Thread: How to Pay a Partner

  1. #1
    Silver Member Norri's Avatar
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    How to Pay a Partner

    I'm about to introduce a partner to my business to help me out with most of my daily tasks including project management, support, taking sales calls and so on.

    Now the question is, how do I pay them? I can only afford to pay them a percentage of profits but how do I work out what to pay them? How do I make sure I'm not over- or under-paying them their dues? What calculation method do we agree on before we start?

    How is this normally done?

    Thanks!
    Norio De Sousa - Done4U.co.za (Web Design & Copywriting)
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    Site Caretaker Dave A's Avatar
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    Quote Originally Posted by Norri View Post
    I can only afford to pay them a percentage of profits but how do I work out what to pay them? How do I make sure I'm not over- or under-paying them their dues?
    Based on your advert for a partner, be honest here for a moment and accept that you're going to be under-paying them intitially. You're offering the possibility of a delayed reward to compensate (otherwise you'd just offer a salary, or salary + comm/incentive bonus).

    How much ownership are you prepared to give away?
    What is their delay to percentage ownership tolerance?
    Have you found someone where you both can live with a mutually agreed number?
    ...short term and long term?

    That's about as rational as I can get - maybe someone else might be able to do better.

    My experience is many things in business don't have an optimal answer - you end up having to pick the best of a less-than-optimal bunch of options.
    Which option to pick is normally less about the option itself and more about your definition of "best."

    Personally I'd offer a basic salary with an incentive scheme. Save equity for capitalisation, mergers and acquisitions.
    But if partnership is your answer, at least make sure you've catered for a divorce.
    The trouble with opportunity is it normally comes dressed up as work.

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    Silver Member Norri's Avatar
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    Thanks Dave

    I've found someone who is happy with 1/3rd of profits (with a 3rd going to me and a 3rd staying in the business for growth) and who is also happy with 2 probation periods. One for 3 months to see if the work situation works and one after that (if we get there) for 12 months to see if she's partnership material.

    She seems like a HARD worker, willing to give it all but who is, also, level-headed enough to accept my conditions and she understands that there's really not much money in it in the beginning. So I'm kinda chuffed. That sort of hard-working, level-headed attitude is what I think it takes to get something off the ground.

    I agree with the salary and a lot of people have suggested that, including my coach, but I literally can't afford it right now and can't afford to wait, either. There's just too much on my plate and I will burn out in a month or 2 without some serious help and pronto!

    I'm going to get my sister (she's an attorney) to draw up the contract. She always covers my ass (and the ass of whomever I'm doing business with) in at least 20 extra ways that I haven't yet thought of :P Gotta love having talent in the family, eh? :P

    So now I just need to find an acceptable method to determine profits and we're A for away. I've got reporting that I keep track of but I'm not 100% sure of it, so methinks I just need to give her a heads-up that my calculations might not be 100% and may need to be tweaked over time.

    Oh fun, a whole new challenge :P
    Norio De Sousa - Done4U.co.za (Web Design & Copywriting)
    Maxiware CC Reg no. 2000/048244/23 (Maxiware CC)

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    Hi All
    Hope this is the correct area in which to pose this question.
    My husband worked in a family owned busines (closed corporation) for almost 7 years, 2.5 years ago he was given 15% interest of this business, due to issues unrelated to the business but personal he has left the company in the sense that he no longer works there. the remaining shareholders his brothers are now avoiding the payment of the 15% - what are his rights? how can he be assured he gets paid? is he owed the monetary value? it has been agreed that he will not be returning to "work"

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    with regard to profit share, should the minority 15% interest holder not be in the employ of the company (and is still waiting for the payout of his shares) be entitled to profit share ? I imagine that he would until such time as he has been paid out and his name be removed from the CC documentation - is this correct? please advise

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