Quickest synopsis I can produce: I started an Internet marketing company 2 years ago. Originally did websites and social media, eventually went to just social media with success. I have 3 people working with me at this point (2 salesman on strictly commission, 1 partner with a small stake) and we've went from 6 to 11 contracted social clients in the past 90 days -- in other words, some signs of growth (not to mention the quality and size/budget of our clients is improving too). All though we still are a smaller operation as we are on track for only about 30k in sales for this year at conservative projections. We have no capital so we're very restricted financially which makes faster growth tougher. Recently I was approached by one someone (a client I did work for actually) who owns a large flower shop and flower distribution business and is also tied in with a local television station in my city. He told me he is impressed with me and what we have going and he wants to team up. He is willing to finance an office (we've been working out of my home office which certainly can't last forever) and add a few more employees in various areas. He wants to be hands on to grow the business, not so much just an outside investor. He also wants to begin offering video production in addition to the Internet marketing services as part of this company. He wants to basically hit the reset button and rebrand from the beginning but now offering a larger array of marketing services. He wants to split the company 60/40. 60 to him. This is my dilemma. I'm very excited to partner with someone who's more experienced than me and also well connected in the area which will bode well, but am I discounting what I've built? I do feel we could continue being successful without him, but I also feel the financial backing is appealing in that it's extremely difficult to set yourself up for large amounts of growth with limited capital so it would be nice. Lastly, I'm giving up the controlling stake. My dream has always been to be at the forefront of my own company, but with this arrangement I essentially fall to second in command. Am I on an ego trip to be questioning if I'm okay with that? I keep going back to the saying, it's better to have 1% of something huge than 100% of something small.... My gut tells me I can't pass up partnering with this business man and this opportunity, but I don't want to get taken advantage of either... Any and all help is extremely appreciated. Thank you so much in advance!
I think you nailed it with the 1% vs. 100% comment.
It really depends on what you want to do and where you want you business to end up.
It sounds like you would like to grow the business and have additional capital to do so. Just because he offered 60/40 with him in charge does not mean that is what it has to be. I would see how negotiable he is on that point and what his concerns are with you being in control.
I suspect that it has to do with how his dollars will be spent, which is understandable.
Just spit-balling here but maybe you could counter with something along these lines. Make a 51/49 split with you in control, but setup a "release schedule" in which he would have to approve specific investments before he gives you the cash.
There are a variety of other things you could do, this is just one idea. This way he had more control over what happens to the money and is not just giving you a "blank check", but you maintain control over the company.
This scenario requires you to establish a good financial reporting and forecasting process/system. But this is something you absolutely must do no matter how you proceed.
Answered 10 years ago
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