Proposing a partnership, what's fair?

February 10, 2014 1:32 PM

I am working on a website which is going to be a community and blog. A friend of mine shares a similar interest, and I want to invite him to partner up because I think it will be more fun and easier to get up and running with a partner. I'd like to propose we officially create a partnership with a contact and all that so he has incentive. But I've done or/am doing the lion's share of the work, at least initially. What's a fair deal?

I've got a web development background and have been thinking of an idea for a website for a while around our shared interest. I've finally started to put it together, gotten a few people interested in some involvement, like article writing. Said friend is interested too, which got me thinking "wouldn't it be great if we both worked on it together?"

Eventually, I'd like to see if it's successful to see if I can make some money on it. Even if not a lot, a little back for the time and effort would be nice in a "follow your dream" kind of way. And thus, I'd like to offer my friend some ownership in the site. But even if it never makes money, I'd like him to feel like he has some say in the destiny of the site, and therefore feels like he's got a reason to keep invested in the site.

Now, as for why I'm looking for a partner - honestly, having another person to bounce ideas off of, to get excited with, to help with organization and then just to talk to each other over it. I want him to be as inspired as I am in not just the area of our interest, in the web site itself. Plus, I think the community aspect will be so much easier if I have a friend to openly talk in forums to and generate content. I've done it in a vacuum and it was hard - I'm sure it's even more difficult now.

I'm not sure what to do though as in what is fair and yet something that will be motivating. My initial idea was to offer him 50% ownership, whatever that means. But then I started to wonder if that really makes sense, after all, I'm doing most of the work, and even with his involved, this will probably be my baby first and foremost. Another reason I wondered if that made sense is if we both have an equal share, things could get ugly if we disagree. There is no third person to break ties, so what then.

Another more complicated reason is I helped on a website once many years ago, and gave many many many hours of free work to it, but I was not the owner and had no ownership stake in it, and so when the owner sold it to someone else, all that effort was pulled out from under me because I did it for free for a web site I believed in, never considering my hard, free work would be sold to someone else. (It was early in the world wide web days, I was naive.)

I both don't want to ever be in a situation where that could happen to me again, but I also am acutely aware of the need to protect his interest from something like this ever happening to him. I've also seen many websites implode with website where partnerships were started without clearly defined roles and ownerships. I don't want THE INTERNET DRAMA that comes form many poorly thought out partnerships.

So thusly, I'm trying to decide what to offer him. The web page idea is a good one in my head, and I really think it will be a benefit to numerous people. I've gotten a lot of positive feedback about the idea. Having a friend involved in the very core would be more motivating to me, and I think would give them an interesting opportunity they never thought about. But I don't know what to do. Should I be looking at "Sweat equity"? I could build and manage this site without him as a partner, but I think it will make many things both easier and more enjoyable.

How does one navigate these waters? How does one decide?

Ultimately, I'd propose we have an official law type person write up a contact once the details are decided, but I need a starting point of what to propose.

I have mentioned the idea of partnering up in passing, and he's interested. We didn't go into details, and I realized before I took it any further, I needed to be sure that I at least some idea how to create this proposal.

One last idea I had was to try and find two partners instead, so there are three of us. I floated the idea of the site to a few people who really interested, and maybe a third partner could help as a tie breaking vote. These other people I don't know as well, but they are influencers in the community, and are frankly amazing people.

The thing I really want to avoid at all costs is having the site taken form me. I'm also afraid that if said partner wants to "leave" depending on the terms, I may not have finances available to buy out their portion, what happens then?

Also, I am fully aware I might be making this much more complicated than it needs to be. but I'd like all parties to be fairly compensated and not blow up because there was a misunderstanding of what being a partner would mean. I've seen this happen on various websites as well.

I should mention that this is a shoestring budget idea, that is mostly being put together by my man power.

posted by LANA! to Work & Money (2 answers total)

I think offering 30% of the profit is a good way to start things off. For the first three years it might be useful to offer a commission on a sales target, between 15% and 30%, on say twice editda in the first year.

You need to give your friend a job description. Are they prepared to make this their business?
posted by parmanparman at 4:35 PM on February 10, 2014 [1 favorite]

IANYL. IANABO (I am not a business owner) but based on what you've described - and if you want to keep things between 2 owners (you and your friend), I'd say you might want to consider a contract that's roughly 70/30 in ownership. Since you're doing most of the leg-work and development, you'd be in control of 70% and your friend would be in control of 30%. You still have majority control, would profit the most in a sale, and could reasonably buy him out if it came to that. The downside to 70/30 is that he may not feel his input is valued (since you can easily override it) and you'd have no one to challenge your ideas (which you may or may not want). Also, you could adjust based on what you perceive his contribution level to be (ie: 80/20).

Alternately, your idea of bringing in a 3rd party to break potential stalemates is a good idea. In that instance, I would probably make things more 'fair' between all parties while still retaining the ability for them to override your decision should they both agree on something that you disagree with. 45/35/20 seems like a nice balance in that situation IMHO. The downside to this more equal distribution is that you're taking less for the work you've done, you can have your ideas trumped by the other 2 parties, and it'd be more difficult to buy the other parties out.

Were I in your situation, I'd probably go with a 70/30 or 65/35 split, as it seems like you want to keep pretty tight grips on your project. If situations come up where there's disagreement, you could always use a third-party mediator, rather than bringing on a 3rd person to the board.
posted by stubbehtail at 4:46 PM on February 10, 2014 [2 favorites]