Shares in a friend's company as a form of payment?

by piperp
3 replies
I have experience in internet marketing, as I've been working as an affiliate marketer for quite a long time. Over the years I realized that if I would have my own product, things might be much easier, as I wouldn't be dependent on affiliate managers, pricing matters, too many competing similar affiliate offers, and other affiliate-related issues. Also, the hard work I do will also be leveraged to build my brand reputation in the long run (which means returning customers), which is something you can't enjoy when you market a brand which you do not own.

I have a friend who owns his own small company that manufactures some line of products. He currently owns 100% of the shares, and offered me to work with him to promote his brand (which is not successful currently), in exchange for some sort of partnership.

Basically he offered me some percentage of the total sales that will occur (for example, 25%). However, I'm not sure how to define the period of such an arrangement. I'm not looking for something that will last just a year or two, as it wouldn't lead me anywhere significant. And I don't think there's a way to state that this kind of arrangement will last "As long as the company exists".

If I'll work with him, then I want to treat it as some kind of an investment, that would have the advantages that I listed in the first paragraph, which I currently don't enjoy as an affiliate.

I also probably wouldn't want to do this type of marketing work on a constant basis (unless it would be extremely successful) - I believe that the initial work that I'll put on for the first 6 months will be the most important part, and considering that there will be positive growth by that time frame, then we can hire someone to maintain/monitor most parts.

Therefore, I suppose that the only mechanism that would allow me to enjoy the potential fruits of my work in the long-run, on a constant basis, even if I don't actively work for the company anymore, would be to own some shares in the company. So I guess we can agree to add some option that I will receive shares if the company passes a certain a threshold of sales during the first year (what should be such percentage though? I suppose 25% of shares is much less than 25% of the revenues, so should it be much more?).

But still, I'm not sure how can this guarantee that I will see money form it?
theoretically, he will still be the majority shareholder, so he can decide to not give out any dividends, and pull money from the company as his salary, for example.

Therefore I was wondering if anyone has ever been in a similar situation, and can offer some mechanism that I should pursue?

I know that at this stage is still all hypothetical, but it is obviously in my best interest to to figure this all out in advance.
#company #friend #payment #shares
  • Profile picture of the author aizaku
    did you test if there is market demand for this product?

    I'd begin there before I'd sign any papers with your friends.


    take care,
    Ike Paz
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  • Profile picture of the author Kay King
    There is no guarantee you'll see money from it. It's a risk just as opening your own new business is.

    Stop looking at numbers for now and research the product line - you say it's not currently successful...why not? What holds it back? Is the product line in demand? How much competition is there - how big is the market?

    Is the friend in profit? Is the business breaking even? What is the projected income in one year, 3 yrs, 5 years? What is that projection based on?

    If your "investment" is to be time and effort - define what is expected so both you and your friend have the same expectations.
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  • Profile picture of the author piperp
    It is in a big market, with a lot of competition.
    product is not successful possibly because of inefficient marketing and conversion funnels. The advantage is that all the logistics are already set up (manufacturing, licenses, product design, shipping methods).

    Of course there is no way to project the revenues if the whole promotional method is going to change. It is something that we will see on-the-fly.

    I've already decide I want to give it a shot. so my concrete question is about a possible mechanism.
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