AboutTimmy Chou Expertise I am a experienced Mediator and a partner in a management consulting firm. As a mediator I work as a third-party neutral and specialize in partnership/shareholder disputes, management/labor issues, company culture difficulties, and family-owned business problems. I can help describe why alternative dispute resolution may be a good choice for you. As an experienced management consultant I may be able to offer creative ideas to help resolve your organizational and business problems and disputes. "If you say conflict, I say opportunity".
My question is almost identical to Skip's question posted before. With changes, here is my question. My buddy owns a successful small business and wants to grow it. He has approached me to work for him as I have about 10 years of sales and marketing experience. I have no money to give to him to be a business partner, but what I have to offer is my years of experience, the fact that I can grow his business and he trusts me. In addition, I am an American and he wants his Canadian company to grow to the States. I want to know what is fair in joining his company since I have no monetary equity, but can give him valuable sweat equity, where should I begin? Base Salary and % of ownership? Base Salary and % of his company, with terms, that I successfully grow his business. One day this will be big, and I want to be apart of the success as a partner. Please advise. Thanks
Answer JC,
My apologies to you. The Allexperts site has changed its format and your question did not show up in my inbox. I noticed it when answering another questioner.
This is not a mediation question but I can give you some ideas based on my business consulting experience.
The first place to begin is to create a financial model of the company's development and operations over at least two years. This should be a very careful and detailed model -- as accurate as you can possibly be at this stage. You should model the business as if you were buying on the open market each and every product and service you will need to run the business including every employee and manager including your own position.
Once this is done you have a fair-market analysis of what the value of each component is including your own, and what the business can generate in terms of actual value. Remember that you are looking at the business like an investor, if everyone got paid, what would be left for you?
You can now see the value of your own contribution to the business by valuing that skills and knowledge to to the table. Be sure and be fair and accurate about your own contribution. So, for example, if you are the general manager and you happen to know quite a bit about marketing and sales, be sure to count the value of an experienced marketing and sales professional together with your value as a general manager. if the business had to buy this expertise, what would it have to pay?
Same for every other measure of value you bring to the table.
Now that you have you value calculated, your subtract your expected salary from this number and you are left with a number you should be compensated with ownership for. You want to have ownership that you can convert into cash at some point in order to be able to actually realize the value. Be sure there is some described exit for you.
Be sure and have an employment agreement that provides you with additional stock and bonuses tied to performance. As the company grows you should get the benefits as well and an increased stake in it.
Finally, you will want a buy-sell agreement so that if your partner dies or you die, the other partner has a mechanism to purchase the other persons interest.
