What would you do? Profit Sharing Question

6 replies
I landed a client a couple of months back through a local chamber of commerce. They paid a few hundred dollars up front and we agreed to enter into a profit sharing partnership.

The site we are creating will be a nationwide site in the financial industry. We are setting up the site, a forum, a membership site, youtube channel, facebook page, twitter page, maintaining all of it and doing all the marketing for it.
All the content is created by the client. He is the financial expert.

There are two main partners besides me. One is the content creator. The other's job is for legal help and to contact potential advertisers.

My question is: What is a good percentage for all this work? They would like to pull in $75,000 per month with the site.

At first they offered 5%, then they raised it to 7.5%. One of the partners told me it should be more. I have a meeting on Friday and would like to finalize the agreement before going any further.

Do you think I should have the right to know what each partner's percentage is and where all the money is going?
And what is a fair percentage for me?

Thank you for your input.
#profit #question #sharing
  • Profile picture of the author WillST
    Don't really know how much you bring to the table or what would stop them going for another web developer... But if you have what they need and cant fulfill it any other way...

    I'd be asking for 33%, so each of you own 33% of the business each.

    Or I would at least start at 33% and negotiate from there.
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  • Profile picture of the author CMCarlin
    Please clarify a little further on what your role is.

    I take it you are doing this:

    We are setting up the site, a forum, a membership site, youtube channel, facebook page, twitter page, maintaining all of it and doing all the marketing for it.

    7.5% OF 75K is above 5k per month. But you will be managing the site on an ongoing basis? Including the forums (which can take up a LOT of time if it takes off).

    If it's not your intellectual property and you are simply providing a service, I do not think you have the right to know what the other partners are making - BUT, that can be a very blurry line as we don't know how the idea was formed and the partnership was developed (as in, how much a part of forming the idea you were a part of).

    Honestly, it's difficult to say, but it does look like you are playing a key role in the managing of the day to day stuff.

    Ask for 12%, then settle for 9% after negotiations.


    disclaimer: Do not consider my advice to be expert advice. Do your own due diligence.
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    • Profile picture of the author Falkonator
      Thank you for your input.

      The other two came up with the original idea. Their idea was to sell webinars. They checked out a couple of other web people in the chamber but were not impressed. Then they asked us and liked what they saw. We took the webinar idea and really improved on it.

      One thing they do want is someone local and there are a few local web people here, but many web designers are not internet marketers, and fortunately we have a pretty good background in IM.

      So I do believe we have a lot to offer and that we play a key role in getting this project off the ground and maintaining it and that it will be quite time consuming. I agree the forum alone can take up a lot of time to moderate. Also we will assist in monthly webinars and setting up the affiliate program for the membership.

      I also agree that that line is very blurry. Yes I am providing just a service but I am building the entire vehicle that will bring in the money.

      I was thinking about aiming for at least 10% so going for 12% and then settling for 9% might be a good idea.
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      • Profile picture of the author BrashImpact
        Falkonator,

        Some quick thoughts...

        First, how did you position yourself with these 2 guys? Web developer, IM Marketer, Business Development Specialist, Consultant? Figuring out first how you positioned yourself will speak to the Value that is perceived of you by the other 2 guys.

        In this situation, remember, peoples perception is their own reality. Whatever they perceive is what they believe to be real in their world only.

        Get positioned Correctly, Let the Value Perception be Perceived then go after 33% of the deal straight away.

        Does this require heavy Capitalization to get it off the ground? If so, who is putting the money into the deal. Money does not automatically justify the majority of Ownership. I would encourage you to think out of the box on this one... and if it were me, i wouldn't touch this for less than 18% period. Because, if they don't perceive value now, they surely wont when the project launchs.

        If they don't bite at 18%, then go do the project yourself, raise some money, and make as much as 75% of the deal by being the Orchestrator.

        Hope this Helps.
        Regards,
        Robert
        Mobile Fusion Texting
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  • Profile picture of the author Lori Kelly
    Do you have a legally drafted partnership agreement?

    Are you going to be in this business as partners, and as such, is there a formal partnership entity going to be created through your State's Secretary of State?

    You do have a lot to offer, and definitely play a key role in getting this project up and running and maintaining it in the future.

    Since you are agreeing to a percentage interest, make sure there is no misunderstanding as to how that is calculated - net sales, gross sales, etc.

    Will you be able to see the monthly accounting? Is the accounting going to be done by a licensed CPA?

    Sounds like a good idea. Good luck!
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  • Profile picture of the author GailTrahd
    Another option to consider - If the group decides to go with a partnership idea then getting a percentage of the profits (net/gross) is a fine idea. You are all putting in a piece of your own expertise to grow a business you all have a stake in. However, if the group decides you are going to be providing a service but not really hold a stake in the growth of the business then I would consider looking at the payment differently.

    I know that the business is just now taking off and predicting how much income will materialize can be a gamble. So - what if you went for 20% in the early months when the income would be less and your workload is greater as you are setting up the processes and then could work on a reduced percentage that is graduated and you determine. That maintains a bit more coverage for your time and energies when the income is less and continues to compensate you at a level you can live with for the time you are putting in as the income increases.

    You can cover those numbers in the contract.

    Gail
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