Your advice...
Discussion
I own 30% of a business started by my business partner. It's quite new, did £65k t/o in year 1 and will do £100k+ in year 2. We each have distinct roles in the business but mine are mostly operational and so are full time. I take a small salary from the business for this but.... my business partner has other businesses and spends little time on this business, doing the admin which is very quick easy. He is supposed to do the marketing too but I do all this because he is distracted with 3 other businesses (none of which are doing very well because, IMO, he's spreading himself to thin).
My wife says that he has got it easy, with me driving the business while he does very little and tbh she's right. If I ignore my stake in the business, essentially I am being employed at a very junior rate despite me being quite senior in terms of my overall career level (held management roles in companies previously)to drive his business.
So, what to do about it?
1. He could buy me out, we part ways amicably and that was that - that would be a shame because its a great business with lots of potential and I think it'll struggle without the input he needs to give it but can't and doesn't really want to.
2. I could buy him out but this depends on how realistic his/our valuation is. he did briefly mention this option (him buy me out or the other way around) a few months ago but I am unsure if he was serious.
3. We could employ someone full time to run it operationally but we've done that in the past and that person still needs quite a bit of input from me so I would need to work alongside them and that limits me doing something else. I'd have to start something that would fit in with the business and that'd be challenging and stop me from doing a lot of other things.
4. Something else?
Just really struggling to get my head round this but I don't want to be paid peanuts (relatively) to build (mostly) my business partner's business. Am I being unfair? I don't know. Really struggling to get my head around this.
My wife says that he has got it easy, with me driving the business while he does very little and tbh she's right. If I ignore my stake in the business, essentially I am being employed at a very junior rate despite me being quite senior in terms of my overall career level (held management roles in companies previously)to drive his business.
So, what to do about it?
1. He could buy me out, we part ways amicably and that was that - that would be a shame because its a great business with lots of potential and I think it'll struggle without the input he needs to give it but can't and doesn't really want to.
2. I could buy him out but this depends on how realistic his/our valuation is. he did briefly mention this option (him buy me out or the other way around) a few months ago but I am unsure if he was serious.
3. We could employ someone full time to run it operationally but we've done that in the past and that person still needs quite a bit of input from me so I would need to work alongside them and that limits me doing something else. I'd have to start something that would fit in with the business and that'd be challenging and stop me from doing a lot of other things.
4. Something else?
Just really struggling to get my head round this but I don't want to be paid peanuts (relatively) to build (mostly) my business partner's business. Am I being unfair? I don't know. Really struggling to get my head around this.
so...
- you are less than two years in
- you own c. 1/3
- your business partner is putting virtually no effort into the business, but taking 2/3 of the profit
why do you need the business partner? does he own IP you need / did he finance the business?
if he enabled the business to happen and without him you wouldn't have started it, then the suggestion above ref. salary is a good one...
otherwise, quit and set up your own
- you are less than two years in
- you own c. 1/3
- your business partner is putting virtually no effort into the business, but taking 2/3 of the profit
why do you need the business partner? does he own IP you need / did he finance the business?
if he enabled the business to happen and without him you wouldn't have started it, then the suggestion above ref. salary is a good one...
otherwise, quit and set up your own
PurpleMoonlight said:
How about you suggest to him that your salary should reflect the work you do, and you split any remaining profit in accordance with the shareholding.
This 
I think my first port of call would be to point out that I was underpaid for the role that I was doing and that I could get paid a lot more elsewhere. This will have the effect of reducing the profitability of the business because you're being paid properly, at which point he may well be inclined to sell you the business. Have a chat with him, see where you get.
I would start by sitting the guy down and talking to him openly about this, after all, he is your partner? tell him how you feel and ask for his views. try to remove the emotion from the conversation from your side, and ask him to do the same. try not to decide anything at the first meeting, ask him to sleep on it, and meet again in a couple of days when you have both had time to think. chances are he will agree with you if you are being reasonable, and you can then have a productive discussion of how to fix it.
Hmmm, yes, I think these are good suggestions. The business will exceed T/O of his other 3 businesses put together next year but that's only because I have been driving it hard. As you say, if I get paid what I am worth it'll put a big strain on the company and reduce our money available to spend on further expansion. He does really migrate towards online marketing and that I think is his passion. Dealing with customers, managing suppliers etc is something he can do but is not keen on doing. If I say I am off to get a proper salary then I am not sure what he'd do tbh. He can't afford another me and doesn't want to do it himself. We have a shareholders’ agreement and I am able to pull the equity I put in out of the business if I want to.
As said, if I look at it from the other side he has a business that he started up with little cash, requires very little of his time and pays a small salary to a very experienced and skilled person who is doing almost all the work. We do have defined roles we cover but tbh they vary widely in terms of time requirements.
As said, if I look at it from the other side he has a business that he started up with little cash, requires very little of his time and pays a small salary to a very experienced and skilled person who is doing almost all the work. We do have defined roles we cover but tbh they vary widely in terms of time requirements.
daver777 said:
I would start by sitting the guy down and talking to him openly about this, after all, he is your partner? tell him how you feel and ask for his views. try to remove the emotion from the conversation from your side, and ask him to do the same. try not to decide anything at the first meeting, ask him to sleep on it, and meet again in a couple of days when you have both had time to think. chances are he will agree with you if you are being reasonable, and you can then have a productive discussion of how to fix it.
Yes I will, he's very reasonable and we've talked in the past about workload and my concerns. He said that he did lots of things that were 'behind the scenes' and whilst there was some its still much less than managing the actual operations of the company. This thread is just helping me clarify the situation and options.Undirection said:
He said that he did lots of things that were 'behind the scenes'
really ?! 
what is behind the scenes to the other business partner?
that sounds like complete rubbish and an attempt to pretend that value is being added...
as above - unless you are tied in, take your equity out, leave, set up your own - why are you carrying someone else?
Undirection said:
my business partner has other businesses and spends little time on this business, doing the admin which is very quick easy.
He says it's quick and easy, or you think it's quick and easy? Different things and 'admin' can actually be a complete ballache in some industries...Why 70:30 in the first place?
Is the business profitable?
Are profits being distributed as dividends?
How much are you being underpaid (compared to market rate for the role), how does this compare to the potential upside?
What is he supposed to do for his 70%?
What is he not doing that was previously agreed?
Could the business survive (grow) without him?
Is the business profitable?
Are profits being distributed as dividends?
How much are you being underpaid (compared to market rate for the role), how does this compare to the potential upside?
What is he supposed to do for his 70%?
What is he not doing that was previously agreed?
Could the business survive (grow) without him?
Why 70:30 in the first place? Thats just what we agreed given the money I put in
Is the business profitable? Yes
Are profits being distributed as dividends? Yes but we haven't done this yet, we didn't take anything in the first year and its not the end of the second year quite yet.
How much are you being underpaid (compared to market rate for the role), how does this compare to the potential upside? £35k
What is he supposed to do for his 70%? He does the invoicing, accounts (well our accountant does it), sorted some employment stuff out for our intern, marketing (although this year we jsut revised the main site jointly, he does PPC, I do all Sociai Media, managed blog writers an some other stuff. He even said we should be on Instagram and Pintrest and I said e'd been on it for a year!)
What is he not doing that was previously agreed? See above, I think I just want him to be as focussed on it as I am and he's not.
Could the business survive (grow) without him? Easily although I'd use him for online marketing
Is the business profitable? Yes
Are profits being distributed as dividends? Yes but we haven't done this yet, we didn't take anything in the first year and its not the end of the second year quite yet.
How much are you being underpaid (compared to market rate for the role), how does this compare to the potential upside? £35k
What is he supposed to do for his 70%? He does the invoicing, accounts (well our accountant does it), sorted some employment stuff out for our intern, marketing (although this year we jsut revised the main site jointly, he does PPC, I do all Sociai Media, managed blog writers an some other stuff. He even said we should be on Instagram and Pintrest and I said e'd been on it for a year!)
What is he not doing that was previously agreed? See above, I think I just want him to be as focussed on it as I am and he's not.
Could the business survive (grow) without him? Easily although I'd use him for online marketing
Did you enter into this arrangement to be an equal partner (equal as in receiving a fair share for your effort and/or investment) or as an employee with the benefit of shareholding?
I don't know the exact circumstances but the arrangement isn't necessarily unfair, particularly if your partner put a lot of effort or investment in before you came to be involved.
I don't know the exact circumstances but the arrangement isn't necessarily unfair, particularly if your partner put a lot of effort or investment in before you came to be involved.
ModernAndy said:
Did you enter into this arrangement to be an equal partner (equal as in receiving a fair share for your effort and/or investment) or as an employee with the benefit of shareholding?
I don't know the exact circumstances but the arrangement isn't necessarily unfair, particularly if your partner put a lot of effort or investment in before you came to be involved.
He started the business and got it going, (£3k) website and contractor. I bought in at agreed 30% (because he didn't want to give more away). I am only paid because otherwise I'd have left the business (I said I'd do this late last year). However its not enough for me and I do not see the same level of commitment from him.I don't know the exact circumstances but the arrangement isn't necessarily unfair, particularly if your partner put a lot of effort or investment in before you came to be involved.
OP, what were your aspirations when you joined?
It sounds like you left a well-paid role, bought into a company, took a lower-paid role, presumably expected great things to happen, that presumably haven't happened.
Similarly, what were his?
It sounds like he started something up, took you on, sold part of the company to you, and discussed you taking over in the future, providing him with an exit.
What has changed?
Sorry if this sounds harsh given limited info, but is it possible that you both thought you would increase the value of the business more than you have?
It sounds like you left a well-paid role, bought into a company, took a lower-paid role, presumably expected great things to happen, that presumably haven't happened.
Similarly, what were his?
It sounds like he started something up, took you on, sold part of the company to you, and discussed you taking over in the future, providing him with an exit.
What has changed?
Sorry if this sounds harsh given limited info, but is it possible that you both thought you would increase the value of the business more than you have?
sideways sid said:
OP, what were your aspirations when you joined?
It sounds like you left a well-paid role, bought into a company, took a lower-paid role, presumably expected great things to happen, that presumably haven't happened.
Similarly, what were his?
It sounds like he started something up, took you on, sold part of the company to you, and discussed you taking over in the future, providing him with an exit.
What has changed?
Sorry if this sounds harsh given limited info, but is it possible that you both thought you would increase the value of the business more than you have?
Well not quite, I was previously working in well paid roles but then spent some time freelancing and we both ended up working together on joint projects. He'd started this company and it looked interesting so I bought in and we both agreed roles and worked on it without taking money out in the first year. We did not discuss me taking over until a chance comment made me wonder if he was open to that. Ultimately I guess the issue is that I don't see him giving it the attention it should get with 3 other businesses and one employee (in the other business) to manage. With him and I both working as hard as I have it would be doing even better but he's distracted and doesn't realise he's spread himself too thin (I have mentioned this).It sounds like you left a well-paid role, bought into a company, took a lower-paid role, presumably expected great things to happen, that presumably haven't happened.
Similarly, what were his?
It sounds like he started something up, took you on, sold part of the company to you, and discussed you taking over in the future, providing him with an exit.
What has changed?
Sorry if this sounds harsh given limited info, but is it possible that you both thought you would increase the value of the business more than you have?
Another option might be to sell the business to a competitor who already does what you do. The acquiring business might immediately be able to strip out costs such as the under-performing partner's salary, rent, IT and phone maintenance, accountants fees which makes it an attractive proposition to them. And you might be able to join their existing team.
you need to renegotiate or do something else. If it can't support a member of staff then it's not really a business. You're self employed but limited by somebody who is effectively your boss so unless you're learning some mighty interesting stuff at the moment that you can use in future through this arrangement, I'd not hang about doing what you're doing for long.
In my experience, it's very difficult for the working partner to get a transfer of shares from the company founder once the work is in motion. It's something that needs to be sorted out properly in writing before even starting.
In my experience, it's very difficult for the working partner to get a transfer of shares from the company founder once the work is in motion. It's something that needs to be sorted out properly in writing before even starting.
Sometimes getting a business off the ground can be 3/4/5 years sacrifice but then when it comes good very very financially rewarding.
If you were to continue and feel motivated where do you see it in 1, 2 and 3 years and will the financial rewards then be worthwhile ?
Speak to your partner. Communication is key.
If you were to continue and feel motivated where do you see it in 1, 2 and 3 years and will the financial rewards then be worthwhile ?
Speak to your partner. Communication is key.
Thanks guys, really helpful comments.
Yes, the business is a job for now but as it expands I will have someone managing the day to day operations. We've had a graduate over the summer doing this and it worked well and so proved that this can work.
The business is too small really to make it worthwhile selling.
The long term benefits will be great and there's lots of exciting expansion possibilities and I am happy to be in it for the long game but just not without my business partner being as dedicated to it as I am. It's silly of him really because, of the 4 businesses he has, this is the one with the most potential by far, it's also growing the fastest and in 3 years will be the largest of them by some margin.
Yes, the business is a job for now but as it expands I will have someone managing the day to day operations. We've had a graduate over the summer doing this and it worked well and so proved that this can work.
The business is too small really to make it worthwhile selling.
The long term benefits will be great and there's lots of exciting expansion possibilities and I am happy to be in it for the long game but just not without my business partner being as dedicated to it as I am. It's silly of him really because, of the 4 businesses he has, this is the one with the most potential by far, it's also growing the fastest and in 3 years will be the largest of them by some margin.
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