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.
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.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
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.
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?
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.
ModernAndy said:
When this business is super successful in 3 years or so, how will you have got more than 30%?
I think it's the number 1 thing you need to consider seeing as you'll have done all the work.
I've been where you are and for me, the solution was to be 100% shareholder of my own enterprise. As it happens, we are doing much better than the business I left and it only took about 9 months of trading to get to a better position (I did take a 6 month holiday inbetween I'd add).
Yes, exactly, great point. It'll be doing really well and it'll have been mostly down to me doing a low paid job in it for 3 years.I think it's the number 1 thing you need to consider seeing as you'll have done all the work.
I've been where you are and for me, the solution was to be 100% shareholder of my own enterprise. As it happens, we are doing much better than the business I left and it only took about 9 months of trading to get to a better position (I did take a 6 month holiday inbetween I'd add).
What exactly did you do?
Had a bit of an impromptu chat about things today. Nothing decided but it began with him asking me if I'd sorted some element of our marketing out and I told him it was his job to do that. He said that I was being paid by the company I should do it. He's sort of right but its another thing I am doing. Of courser he said he did lots of other things (none of which take much time at all) and wasn't being paid either. We could employ someone but I am not confident about leaving things in their hands, albeit with some supervision. Our intern was good this summer but still cost us a few orders through her mistakes and having a junior person to drive the business is not the right thing to do. I guess until I am happy he is pulling his weight this will be an issue. More thinking still to do...
Thanks all, been away for a few days. I guess my frustration is that with this other interests I don't feel he is committed to it as I am.
I do see it from both sides. For him he started something up which I have a part of now and we both have specific roles within the business however mine are almost full time operational meaning I have little time to do other things whereas it is effectively a sideline for him. From my side I am driving this, mostly for his benefit and could be on low wages for 3 years albeit with a 30% chunk of hte business but who is to say if that will be compensatory enough?
We could employ someone on the day to day operational side but IMO this person still needs close monitoring and we should both be much more hands on in these early years, not giving a lot of stuff to a junior.
I do see it from both sides. For him he started something up which I have a part of now and we both have specific roles within the business however mine are almost full time operational meaning I have little time to do other things whereas it is effectively a sideline for him. From my side I am driving this, mostly for his benefit and could be on low wages for 3 years albeit with a 30% chunk of hte business but who is to say if that will be compensatory enough?
We could employ someone on the day to day operational side but IMO this person still needs close monitoring and we should both be much more hands on in these early years, not giving a lot of stuff to a junior.
Thankyou4calling said:
I have a few questions.
what does the business do? In a nutshell.
Does it operate from premises? Which name are these in an individual or Ltd company?
Is it a simple partnership or Ltd company.
With a turnover of 65k it must run at very high margins to pay any salary, what is the EBITDA on that 65k.
I ask these questions as it sounds like you have bought yourself a job and with the level of turnover you have paying a good salary, which i'd define as 50k plus is a fair way off.
Are you able to answer the above as without it's all a bit shot in the dark.
Without saying too much, light outdoor constructionwhat does the business do? In a nutshell.
Does it operate from premises? Which name are these in an individual or Ltd company?
Is it a simple partnership or Ltd company.
With a turnover of 65k it must run at very high margins to pay any salary, what is the EBITDA on that 65k.
I ask these questions as it sounds like you have bought yourself a job and with the level of turnover you have paying a good salary, which i'd define as 50k plus is a fair way off.
Are you able to answer the above as without it's all a bit shot in the dark.
We have a main office but our material comes from a supplier and we use contractors for building
Limited Co
Yes it does
Yes, I guess so
My business partner is aiming to build 4 businesses, one has prob £100k investment (I suspect) and is still barely off the ground but is getting a junior employe to build it/drive it, one is a stable small co with high margins which has an employee but is struggling for growth and has low workload due to it relying on referrals in the past which have dried up, one is a new bit of software that is new and unproven and struggling to launch.
EDIT Just been thinking about this last part. He is employing people to drive his new businesses and this is fine but I am not a junior employee. I do have 30% of the business but i bought that so, excluding that, I am working as a junior employee but doing a much better job. Hmmm.. I don't think he could cope with the business employing a junior person and having to manage them (as I don't need managing).
Edited by Undirection on Thursday 10th September 17:28
More thoughts and atm it seems I have 2 options:
1. Bail
2. Stay
If I stay, although the business is exciting and has lots of potential that we have discussed, I am going to be tied to little or no income for 2-3 years yet. No guarantees of success of course but I am optimistic based on last 2 years. So shortish term pain/long term potential gain.
If I leave i go back to FT employment with all its pros (regular good salary, benefits etc.) but doing what I have always done. Short term gain, long term status quo
1. Bail
2. Stay
If I stay, although the business is exciting and has lots of potential that we have discussed, I am going to be tied to little or no income for 2-3 years yet. No guarantees of success of course but I am optimistic based on last 2 years. So shortish term pain/long term potential gain.
If I leave i go back to FT employment with all its pros (regular good salary, benefits etc.) but doing what I have always done. Short term gain, long term status quo
Yes, we have an agreement in place and I realise I will still own 30%. Negotiation was fine but things change and the set up ultimately didn't work for me. My business partner has a good income from other areas whereas I don't really.
I'd like to continue but have to be realistic. I can't spend potentially 3 years earning a small salary. Its put enough pressure on my OH and even though we are fairly comfortable financially I understand he frustration of getting to a good financial situation and then taking 3 years back.
Will have 'the chat' on Monday about pulling out. I can take my investment out but this will really leave the business without anyone to drive it when, after a challenging second year where we learnt a lot, it really needs someone to drive it. I will be doing something else and so can't be there to do this and so leaving my investment with the company might not be wise.
I'd like to continue but have to be realistic. I can't spend potentially 3 years earning a small salary. Its put enough pressure on my OH and even though we are fairly comfortable financially I understand he frustration of getting to a good financial situation and then taking 3 years back.
Will have 'the chat' on Monday about pulling out. I can take my investment out but this will really leave the business without anyone to drive it when, after a challenging second year where we learnt a lot, it really needs someone to drive it. I will be doing something else and so can't be there to do this and so leaving my investment with the company might not be wise.
Thankyou4calling said:
Neither a business as small as you say, YOU are the business. Without you it'll never hit the levels it does now so if you move on getting your 30% back would be nice as the alternative, taking 30% of profit but not working in the business will realistically not pay a penny.
First as I said the business will flounder without you and second, if by some remote possibility it doesn't, it'll never show a profit!
So either stay on better terms or try and cash out though unless you previously agreed either of you found it may well be your partner values your 30% at less than you do.
Good luck though as its not an easy situation.
Yes, its hard to see what will happen to it. He has recruited someone to work on one of his other businesses but I have no idea why because that business isn't doing much at the moment and (even if he is) I am not sure it has the future he thinks it does and it really needs him to get it going properly first. He's just going down the 'I'll get someone to drive it' route without realising or understanding how much supervision and input it will still require from him.First as I said the business will flounder without you and second, if by some remote possibility it doesn't, it'll never show a profit!
So either stay on better terms or try and cash out though unless you previously agreed either of you found it may well be your partner values your 30% at less than you do.
Good luck though as its not an easy situation.
I feel disappointed that the business I put so much time and effort into won't be a part of my life going forward but, just as a small start i posted my CV on a few job sites and had a lot of call and two interviews lined up on around £60k each. Its hard not to be very tempted (although I accept I haven't even been to them yet) by the benefits of these, both with good companies too. Its hard to let go.
Just a little update on this, we decided to split. We had a bumpy (but predicted) Year 2 in which we made little financial improvement and although things look positive for next year with some good potential partnerships in the offing I can't really get around the fact that my business partner does not seem as committed to the business as me. I want to really drive it but I am not doing it for free and the business, once we get an administrator in, can't afford to pay me. A real shame as it was exciting but such is life. I'll get my original stake back out of the business too. My BP did vaguely talked about buying him out at £30-45k but its not worth that. I could start up on my own but I am not sure if I'd feel ok doing that, it sort of goes against our friendship and I'd want to use the contractors I have now (which I found and have relationships with). Oddly, when talking about leaving the business he said something about getting me to sign a non-compete but I don't believe I have to?
The business I am leaving behind. He's mentioned it but I don't think I am under any obligation to do so and although there are no plans to start up in competition, who knows what will happen in the future. I'll be out of it by Xmas with my initial investment back so no real harm done and some valuable learnings. I was talking to him yesterday and he has all these new ideas which I think only complicate and undo the proposition and so I can only see it going one way (like his other businesses): trickling along and into oblivion at some point. Oh well.... SEP
Gassing Station | Business | Top of Page | What's New | My Stuff