How to split profits in a Design/Development company

L

louiswol94

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Hi guys,

So I'm thinking about starting a partnership with someone. (A Graphic/Web Design company).

My question is: How does the profit get split?

I will do all the development (HTML,CSS,JS,PHP,MYSQL,WORDPRESS etc).

And my partner will do all the Graphic related stuff (Design, Logos, letterheads etc).

Do we just split everything 50/50?

Or do we split it another way... For example I get 80% of my own work and 20% of his and vica versa.

How does this normally work?

Regards,
Louis
 
O

oomjan

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Last edited:
B

Beachless

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Why dont you just work based on the quotes? if its 90% dev work and 10% design then you take the corresponding percentage in profit?
 
P

paul5186

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Your split and potential loss should be based upon what each party is contributing, be it physical work, knowledge or capital.
 
T

TheDarkOne

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Lets put an interesting twist to this.

Say you open a Design and Development company as a 50 50 partnership. A designer and a developer.
But during the year you only get Design work, no Development work.
How would you split it then?
 
scudsucker

scudsucker

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TheDarkOne said:
Lets put an interesting twist to this.

Say you open a Design and Development company as a 50 50 partnership. A designer and a developer.
But during the year you only get Design work, no Development work.
How would you split it then?
Click to expand...

The only way you can divide the profits (if you are lucky enough to make them) is 50/50

Else your business is not going to last too long.
 
C

Cicero

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Yip, as soon as you start splitting differently than 50/50, the one who's short changed will leave.

Its up to both of you to find enough billable work to keep yourselves busy. If either of you is sitting there doing nothing whilst the other works, or one of you is grossly overworked, then the other should be FINDING work to match and contribute.
 
konfab

konfab

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Cicero said:
Yip, as soon as you start splitting differently than 50/50, the one who's short changed will leave.

Its up to both of you to find enough billable work to keep yourselves busy. If either of you is sitting there doing nothing whilst the other works, or one of you is grossly overworked, then the other should be FINDING work to match and contribute.
Click to expand...

^^This x10^50
 
Idiosyncratic

Idiosyncratic

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I reckon it's best to stay away from a partnership. Period.
But, if you insist, I'd say that you should work with 75% of the profit for the one who does the work, 15% for the other guy. That means, if you build a website - you get 75% of the money the client paid for the site - he then has to do a little CRM to get 15%. If he does a logo, then he'll get 75% and you get 15%. Why, because in the end the one guy will work his butt off while the other sits around. No work, no pay. Plus, your skills (in general) are more valuable than his (from a monetary perspective). To split the money 50/50 would be unfair to both of you.
 
SauRoNZA

SauRoNZA

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Split it based on cost codes and invoicing? Seems like the most logical option.
 
R

rward

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Thor187 said:
How do you define that?
Click to expand...

You get an enquiry, he estimates design time, you estimate dev time.

Total dev cost = dev hourly rate x estimated hours
Total design cost = design hourly rate x estimated hours

Quote on job = Total dev cost + Total design cost


Percentage to go to developer = Total dev cost / Quote on job *100
Percentage to go to designer = Total design cost / Quote on job *100


How do you estimate a job?
Experience.

Or break it down into as small pieces as you can and guess how long each small piece is going to take.
Add it all up to get a total.
Multiply by 2 or 3 or 5 or X
Then see if the final cost is worth it.
If you come out at R 80 000 for a 5 page website for a non-profit organisation aligned with a cause you like then maybe you drop it to R 60 000
If you come out at R 20 000 for an awesome site for a highly profitable business then maybe you increase it a bit to R 50 000.

I've posted it before but go read this: https://www.freshbooks.com/ebooks/breaking-the-time-barrier
Should take 40 min to an hour and you'll be very happy afterwards.
 
Thor

Thor

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rward said:
You get an enquiry, he estimates design time, you estimate dev time.

Total dev cost = dev hourly rate x estimated hours
Total design cost = design hourly rate x estimated hours

Quote on job = Total dev cost + Total design cost


Percentage to go to developer = Total dev cost / Quote on job *100
Percentage to go to designer = Total design cost / Quote on job *100


How do you estimate a job?
Experience.

Or break it down into as small pieces as you can and guess how long each small piece is going to take.
Add it all up to get a total.
Multiply by 2 or 3 or 5 or X
Then see if the final cost is worth it.
If you come out at R 80 000 for a 5 page website for a non-profit organisation aligned with a cause you like then maybe you drop it to R 60 000
If you come out at R 20 000 for an awesome site for a highly profitable business then maybe you increase it a bit to R 50 000.

I've posted it before but go read this: https://www.freshbooks.com/ebooks/breaking-the-time-barrier
Should take 40 min to an hour and you'll be very happy afterwards.
Click to expand...

Wow man thanks!!

Going to read that now.

I like this, I like this Web dev business luv it!
 
Swa

Swa

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Idiosyncratic said:
I reckon it's best to stay away from a partnership. Period.
But, if you insist, I'd say that you should work with 75% of the profit for the one who does the work, 15% for the other guy. That means, if you build a website - you get 75% of the money the client paid for the site - he then has to do a little CRM to get 15%. If he does a logo, then he'll get 75% and you get 15%. Why, because in the end the one guy will work his butt off while the other sits around. No work, no pay. Plus, your skills (in general) are more valuable than his (from a monetary perspective). To split the money 50/50 would be unfair to both of you.
Click to expand...
^This. Partnerships of inequality rarely work. There's always going to be someone who feels they were short changed by doing most of the work and getting the least amount of pay for it. The only way I'll do something like this is if each one gets the pay for their work.
 
G

gfmalan

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Everyone has strengths and weaknesses, and likes and dislikes, so if you enjoy doing the programming part (CSS, PHP etc.) and the person you are partnering with enjoy the design, then it look like a match made in heaven. You guys just need a sales person to sell your work.

In my experience, both parties have a vital role in the completion of a web based project. The one is nothing without the other, and you must appreciate the other ones skills. You can't make the business run by yourself. (yes you can but the ones website would look flippen great, but is broken in the background, the other ones website would work excellent, but look crap)

Out of experience the only partnership that worked for me/us was a 50/50 arrangement. The moment when it change to anything else, the other party start feeling unhappy and before you know it, your business suffer.
But to make a 50/50 business work, each partner need to bring the same quantity to the partnership. Get a way to measure your inputs, and contribute 50/50. Then you would work well together!

If my partner buy a 80k server, then I buy one as well for redundancy, if not needed, I use 80k on things that the business really need, like furniture, or hardware for employees, or just 80k for cash flow. Use your member/director accounts on your accounting package to show contributions, then everything stay crystal clear with no unhappiness.

Maybe you can measure your input (programming or development) in a monetary value (what would you get if you or him outsources that service to a external company), this way you guys know how much %-wise each contribute. The one contributing less, need to then add extra cash or work to make up his 50%, to stay the same. If over time both see the one always contribute 40%, then make a decision then that you are changing the arrangement to 60/40, because both parties know that and wouldn't feel negative about it then. (in agreement)

Then after a few months, get someone into the business that is talkative, and like people, then pay that person a salary plus commission. This person would get new clients, project manage the projects and liaise with clients. If you really like this person, and lets call it a she, then offer her % of your business, but do your homework before you do that!
 
F

FarligOpptreden

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Idiosyncratic said:
I reckon it's best to stay away from a partnership. Period.
But, if you insist, I'd say that you should work with 75% of the profit for the one who does the work, 15% for the other guy. That means, if you build a website - you get 75% of the money the client paid for the site - he then has to do a little CRM to get 15%. If he does a logo, then he'll get 75% and you get 15%. Why, because in the end the one guy will work his butt off while the other sits around. No work, no pay. Plus, your skills (in general) are more valuable than his (from a monetary perspective). To split the money 50/50 would be unfair to both of you.
Click to expand...

My maths must be failing me today. What happens to the other 10%?
 
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