Questions

I am launching a second startup. What type of partnership role should I take within the new venture?

I currently own a small but very successful digital eCommerce agency that design, build, support and market enterprise eCommerce sites. My idea is to launch a separate eCommerce agency entirely focused on an eCommerce market that is more towards eCommerce SMB's. I have been trying to figure out how I can use my experience and knowledge to find a hungry young co-founder that would like to start up the company. I finally found that person who I've known for some time, he's been freelancing for several years and only making $40k a year. He isn't as experienced as myself, but with guidance and mentoring I believe he can grow into a great leader. Ultimately, I'm trying to figure out how I can eventually move away from being an active partner and into more of an advisory role once the company is profitable. I'd like this to be a separate company I start-up and is run by our team. I feel like I can set up this agency to grow with the team around it, as I have an idea to find ANOTHER co-founder who will be responsible for business development, this way we have two active partners working in the company who have more of an invested interest in the companies success. How am I contributing to the company? I'm bringing all my experience to the table and implementing this into the agency, which is the advantage I bring to the business. Here are a few details about my experience and INITIAL involvement with this startup agency: - Business Development (This would eventually be replaced with a full-time employee once the business has positive cash flow) - Strategic Partnerships - Process Implementation - SOPS Setup - Pricing Strategy - Marketing Strategy My co-founders responsibility: - Sales initially - Project Management once we have projects rolling in - Web development initially until we grow to be able to bring on a full-time hire - Payables & Receivables Questions: 1.) What type of partnership role should I be considering for myself? 2.) Should I be getting a salary if I'm not actively involved in the business after year 1/2? 3.) How should I be setting my schedule to contribute to the company from advisor role? 4.) How should the partnership ownership be split, considering my future involvement in the company? 5.) Any tips on negotiating the partnership so that its fair?

3answers

I've been in a very similar situation as yourself. In our case the company split into two for better operational flow. I was the CEO of one company and was trying to figure out how to structure the other one.

Unfortunately, the answer to many of your questions depends on further details. But I'll give some general feedback:

1. Depends on how much time you actual put into this new company. You sound like a CEO role but having a CEO that only spends 10hrs in the company a week would make the company look weak. You can start out as CEO and change roles later.
2. What's your exit strategy? If you plan on exiting soon, then you shouldn't; you'll make money when the company exits. But if it's more of a long-term play, then perhaps you should setup a dividend structure. I don't think it's good for company culture when someone takes a salary for not doing work.
3. Depends on growth but usually early founders become a board member. Depending on the company, they can meet as frequently as once a month, but typically a quarterly meeting is more likely.
4. This is a complex question which requires much more info.
5. This is tied in with #4.


Answered 4 years ago

I currently own a small but very successful digital eCommerce agency that design, build, support and market enterprise eCommerce sites.

My idea is to launch a separate eCommerce agency entirely focused on an eCommerce market that is more towards eCommerce SMB's. I have been trying to figure out how I can use my experience and knowledge to find a hungry young co-founder that would like to start up the company. I finally found that person who I've known for some time, he's been freelancing for several years and only making $40k a year. He isn't as experienced as myself, but with guidance and mentoring I believe he can grow into a great leader.

Ultimately, I'm trying to figure out how I can eventually move away from being an active partner and into more of an advisory role once the company is profitable. I'd like this to be a separate company I start-up and is run by our team. I feel like I can set up this agency to grow with the team around it, as I have an idea to find ANOTHER co-founder who will be responsible for business development, this way we have two active partners working in the company who have more of an invested interest in the companies success.

How am I contributing to the company?

I'm bringing all my experience to the table and implementing this into the agency, which is the advantage I bring to the business.

Here are a few details about my experience and INITIAL involvement with this startup agency:

- Business Development (This would eventually be replaced with a full-time employee once the business has positive cash flow)
- Strategic Partnerships
- Process Implementation
- SOPS Setup
- Pricing Strategy
- Marketing Strategy

My co-founders responsibility:

- Sales initially
- Project Management once we have projects rolling in
- Web development initially until we grow to be able to bring on a full-time hire
- Payables & Receivables

Questions:

1.) What type of partnership role should I be considering for myself?

I would think about this: How critical are you to the other founder? If massively so, and you need to work there one day of the week - it's a big distraction to the current business.

I think you should try this calculator out. It can help to keep a clear head: http://foundrs.com/

Also - make sure your partners/ stakeholders at the existing business are happy with you opening another business and diluting your focus. From a founder to another founder: we both know it's ALWAYS more work and stress than you expect.

2.) Should I be getting a salary if I'm not actively involved in the business after year 1/2?

I would say no unless you're materially contributing to the success and growth of the business regularly. Rather look to a dividend structure of some sort. It's not unusual once the company is really doing well that advisors are regularly rewarded in cash or equity. That's normally the case in a VERY mature business.

3.) How should I be setting my schedule to contribute to the company from advisor role?

Depends on how much lift the founder and business needs. Obviously year 1 and 2 will be a lot of work, and you definitely don't want a "waterfall" experience of suddenly walking in one day and seeing everything has veered off track substantially.

Either allocate 1-2 hours each day at the same time everyday or 1 day of the week which is the least intense day at your existing business.

4.) How should the partnership ownership be split, considering my future involvement in the company?

Use the calculator I gave you ;)

5.) Any tips on negotiating the partnership so that its fair?

The calculator! Also - incentives on milestones. If they build a really big pie, every slice, slightly smaller or larger will be sweeter for it. Make sure they're rewarded to build out that pie.


Answered 3 years ago

The question is too long and there are so many questions in one post. Moreover it is an year old, still I would answer you in simple terms.

You should figure out what excites you and what all challenges you love to face. There will be few challenges that you will hate to take up. Therefore prepare a list of what do you want to do and what you don't want to do.

Now you have to mention everything in the partnership agreement (deed) so that you can formalize the entire relationship in a legal way.

I hope that helps.


Answered 3 years ago

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