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How to structure a partnership deal
dfernanda
subscriber Posts: 6
I have a business that is already working and making some modest money. www.playground-earth.comI need a partner and was happy to give 40% of the business with no investment to the rigth person. But I don`t know how to do the deal.Do I offer the 40% upfront and risk not liking the work the other person will do?Do we set objectives and give 10% at the time once the work is done and published? Any ideas?
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Haven`t trolled through any of your prior messages here on this forum, so thought I`d invite myself to respond to this one! First of all, looks like you`ve built yourself a nice business with Playground Earth, and you have some strong industry affiliations. I`m not a travel industry person, but I am an avid traveler, and I`d venture to say that you have the ability right now to build some real value in your business to extend to your potential customers and do some good for the industry (it`s definitely in a sad state of affairs right now). I`ve actually got some ideas that I wouldn`t mind sharing with you in future discussions.
As for inking a partnership deal, things get a bit sticky. First of all, before even considering a partnership deal rather than another working arrangement, you should do a solid valuation of your business. If you`ve already done this, then the next step would be to do a realistic and honest forecast. I`ve been through about 4 separate partnership deals with my own businesses and I`ve found that a 5 year projection serves best for this purpose. With the travel industry as fickle as it is, I assume this will pose a slight challenge, but nothing you can`t handle.
Then, you`ll really need to analyze the capacity and extent of the partnership. Countless times I`ve reached this point in my stepped plan only to realize that a partnership wasn`t in my best interest, or that of my potential partner. You may come to this realization as well. If not, then forge on!
I`ll use your 40% share with no investment as a baseline for my next rabid assumptions about your situation . I`d never even entertain this option to an uninitiated partner with no sweat equity interest in the company. I work on trust and instinct...and I need information to develop both of those. Work with the person first...then offer.
The second option in your post is more plausible by leaps and bounds, and would be in your most prudent interest. If you are sole principal/owner right now, I don`t think it would be a stretch to offer 10%-15% upfront (depending on what valuation numbers you come up with for your company) and set milestones based on a formula that accounts for sweat equity, completed projects, and time. This formula is entirely intangible by most accounts, and is generally an inherent feeling within yourself of how much you value and trust your partner. However, allowing yourself set times as boundaries, and creating milestone projects allows you a tangible barometer to judge your partner`s worthiness.
This is really a very general guideline of basic rules to follow. E-mail me at andrew.shcs@gmail.com</A> and I`ll be glad to discuss more about this with you. Inking a partnership deal can be, at once, one of the greatest and worst things you do for yourself and your potential partner.
P.S. I am not a pessimist by trade!!
Best Regards!