Some advice needed on partering up with someone

M

MisterBigglesworth

Expert Member
Joined
Aug 15, 2006
Messages
3,334
Reaction score
13
Location
/\\/¯¯¯\//\
Hi,

Im developing a website for someone with no payment upfront. His idea was I would get a percentage made from advertising we would sell on the website. I wasn't very sure about this so did some research etc. It seems like a good idea so I said it was fine and have started work.

One of the major players in the area we are targeting wants to advertise with us...which is great news. The other companies will most likely follow suit once they are onboard. We are presenting to them and once we have presented they will let us know where they want to advertise on the website. So thats great, all fine.

Now the issue is Im doing dev work for this site. He paid for the design of it, a web designer did the home page and I have taken that and created the needed pages and have started adding code and doing dev work. I have also been adding my thoughts etc and ideas for the website.

We are going to be signing an agreement doc in the next week and I now need to decide if the 20% he offered I can take from the advertising we will make is going to work for me. I am doing quite a bit and adding my own ideas etc so even thought the website idea is his, Im adding quite a bit extra in terms of ideas...so not just development. Im thinking I should ask for 40% as I feel thats fair. Im also going to state that the source code belongs to me (this way I protect myself and he cant just get another dev guy in if he wanted and change my code).

All the work I have done is on my pc...so all fine there. Will get the docs signed before I hand anything over...but wanted to check if any other devs have been in the same situation and what they did? Also, is 40% unreasonable in terms of my share?

Cheers
 
Has he made monetary investments in the site/idea/company? You both need to quantify your investment in terms of money. Ideas aren't really worth much. Your investment would be the number of hours you have spent on it times the rate you would normally ask. His would be any monetary stuff or perhaps contacts etc. 40% doesn't sound unreasonable to me.
 
You haven't given info on the exact nature of the deal made or where you know this person from.

Asking for a percentage of income does sound small scale and something you will regret signing as he can spin it later saying the intention was only to do this for X period and your cut out and making it out like you worked for fixed since you agreed to be paid later from ad revenue.

If the idea has potential rather form a partnership i.e. equity so you can get ad revenue as well as shareholding.
 
make sure that the 40% payments are paid to you automatically. Via debit order, or handled by 3rd party.

i.e. in order to stop them they need to take definite action to stop the payments, thus putting them in intentional breach of the agreement.
 
As twicode said, rather go for equity than a percentage of profits/revenue.

Either way, if you're not happy with 20% then raise it NOW, otherwise this relationship is going to go sour very quickly. Also if these aren't standard agreements then it is probably costing him money to have them drawn up, so rather speak to him/her now and get it out of the way.

Remember, business is not personal, so you can and must raise these types of questions and issues without making it personal.
 
rorz0r said:
Has he made monetary investments in the site/idea/company? You both need to quantify your investment in terms of money. Ideas aren't really worth much. Your investment would be the number of hours you have spent on it times the rate you would normally ask. His would be any monetary stuff or perhaps contacts etc. 40% doesn't sound unreasonable to me.
Click to expand...

He paid a few grand for the design for the home page. I have been keeping track of time spent. He does have a helluva lot of contacts which will help a lot. So maybe 40% is a bit much...I dunno. Just feel 20% is not that great? :confused:

twicode said:
You haven't given info on the exact nature of the deal made or where you know this person from.

Asking for a percentage of income does sound small scale and something you will regret signing as he can spin it later saying the intention was only to do this for X period and your cut out and making it out like you worked for fixed since you agreed to be paid later from ad revenue.

If the idea has potential rather form a partnership i.e. equity so you can get ad revenue as well as shareholding.
Click to expand...

He contacted me looking for someone to dev his website, so didnt know him before then. I will make sure its all clear in the agreement we sign.

Sapphiron said:
make sure that the 40% payments are paid to you automatically. Via debit order, or handled by 3rd party.

i.e. in order to stop them they need to take definite action to stop the payments, thus putting them in intentional breach of the agreement.
Click to expand...

This has been another concern, how would I know for sure that the customer paid R5000 for example. He could hay they are paying R5000, but they are actually paying R10 000. Its all going through his bank account and he will have to pay me my share when he gets paid etc. I find this worrying...

Frikkenator said:
As twicode said, rather go for equity than a percentage of profits/revenue.

Either way, if you're not happy with 20% then raise it NOW, otherwise this relationship is going to go sour very quickly. Also if these aren't standard agreements then it is probably costing him money to have them drawn up, so rather speak to him/her now and get it out of the way.

Remember, business is not personal, so you can and must raise these types of questions and issues without making it personal.
Click to expand...

Thanks for the tip here ;)
 
Going forward, I have but on my business hat here. 1st draft of a mail I will send regarding our agreement (before its drafted with details). Is this ok?

Howzit,

Ok so regarding going forward and an agreement between us, I have made some points below.

1. In terms of revenue I will receive, I feel my earning percentage should be about 40% of the amount paid for all adverts by suppliers or members. Reasons being:
  • The initial creation of the website
  • The continued support that will be needed for the website
  • The continuous updates and improvements that will be needed for the website, both on the level of improving it and keeping up with technology changes
  • Ideas supplied to better the website and better the functionality of the website - mobile website to come

2. The revenue portion I will be paid will continue until the website is shut down or closed.

3. Once a payment for an advert is made by a supplier, a proof of payment needs to be sent to me. This is to manage my expectations.

4. All revenue due to me is to be paid by the 1st of every month.

5. The source code I write and the intellectual property therein will belong to me and can not be used or changed by anyone else without my permission.
Click to expand...

We get on well, so Im trying to write this as "nice" as possible without being an ******. :o
 
CrazyFig said:
Going forward, I have but on my business hat here. 1st draft of a mail I will send regarding our agreement (before its drafted with details). Is this ok?



We get on well, so Im trying to write this as "nice" as possible without being an ******. :o
Click to expand...

Looks good, apart from the proof of payment, depending on the number of suppliers that could become quite a bit of admin.

Other than that I think it's good. Keep the email and any responses.
 
This Line:
"The revenue portion I will be paid will continue until the website is shut down or closed." ... Opens you up to a loophole.

If his idea starts making big bucks, he might get greedy and get someone to copy the ideas and stuff you put in without actually copying your code ... what is R200,000 for a decent developer if he's making 50k per month. He can then shut down your website, while retaining your ideas ... you can't patent the idea so much as the code, and the idea is the more important part here.

If I were you ... discuss the idea of registering a Private Company with him ... tell him you want 40% of the shares and justify it with your hourly cost put in ... my guess is he will negotiate down ... so if he does, don't go under 30%.

This way you get shares and profits. Only issue with profits, is it is post expenses, and the issue with that is with a controlling share, he can decide on a decent directors salary for him and approve it and then you are stuck with screw all profits. So then maybe have an agreement that you are entitled to to 20% of the revenue as a salary, and a remaining split in a share of profits. Make this into a contract he signs.

Above all, after you have decided how to go about it .. pay a lawyer 1k or 2k to review it!
 
Rather create a Business account where your'll both have access.
Also - make it a pty with your share stated as such.
 
You must log in or register to reply here.
Back
Top
Sign up to the MyBroadband newsletter
X