Hi everyone, my partner and myself are 50/50 owners in an Amazon private labelling and wholesaling business. I’m posting this for more insight and to hear your opinion as well as the reason behind your opinion on this matter. So my partner would like to do the same business that we are doing with his brother. Once again this would be the same as what we are currently doing, he would like his brother to work for us in our company then after he has experience and understands the business and how it works, he will go off and do a separate venture doing the same business with his brother, while we are still partners. In regards to both his and my role in this company - He’s the investor and strategic partner and I am head of operations for the company. Is this a red flag? Is this a conflict of interest and direct competition for our business? I understand that he wants his brother to succeed, I want his brother to succeed as well. From my side, when viewing this from a rational business standpoint now, I feel as this is not the most sensible decision for our company and partnership and isn’t something you should be wanting a business partner to do. What are your thoughts on this? Is this just an overreaction from my end? From his end, he just wants his brother to get into business, understand how business works and be successful in business which is completely understandable, and there are many products on amazon so he doesn’t see it as an issue and he definitely does not see his brother as a competitor to us. and thinks my overall picture is too small because there’s enough room for me, his brother and many other amazon sellers both private label and wholesale, In regards to market share. I agree with this and I want nothing but success for his brother as well, I just don’t think it’s fair or reasonable from my end in regards to spending a few years on this business, building software and systems, optimizing our processes then opening his brother to exactly how our business is running then him leaving to do it on his own whilst partnered with my strategic partner/investor. I would love to know what your thoughts are so I can look at this issue from an outsider's perspective rather than my own. Remember he just wants what is best for his brother and for his brother to be successful. What is your opinion on this issue? My concern with this is that this is a conflict of interest and this would be direct competition with what we are doing as this business model is fairly replicable if you know what you're doing, especially if you have the knowledge and understanding of our exact systems/software in place like he would. Since this is a fairly new business for us both, we are not too heavily invested in regards to investment and time at this point. What is the correct next step forward in your opinion? What is your opinion and why? And is this just an overreaction from my side or are my concerns warranted?
Business wise, it would not make sense to train someone who you know - in advance - is going to be a competitor. That said, there are so many competitors in the industry that you are talking about, so this makes what your partner is doing a little less strange.
The ideal solution would be to condition the little brother's training and involvement on the following:
1. a minimum time investment in your company - meaning he has to devote x amount of work hours (with no payment or minimum wage).
2. You get a percentage in any future profits he generates through his future business (assuming it is indeed in the same industry/field). So basically, you will be training someone to setup a company in which you also get percentages from the profits, which makes his training an investment, and not a competitor.
on a personal note: you could have written your question in 1/4 of the length/space - this is something that you should work on if you're going to be dealing with customers and people (please don't be offended, we learn from feedback, not praise).
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There are many layers to this situation you are in. I’ll suggest some perspective, but I am somewhat reluctant to provide bankable advice without having more specific information.
The first thing that strikes me is that your business partner is being very transparent with you, so I see that as a real positive in your current business relationship. That said, your concern is a prudent one and you are not overreacting by proceeding with caution and considering the right structure and approach for yourself.
Is it a red flag? Yes and no. On some level it’s not that different than hiring any employee who can become a competitor of yours in the future. You would have to consider and manage this as well. A few initial questions: Is the brother going to work and add value to your business, or are you just training him? Is it clear what’s in it for you? Do you have clarity on the potential business or product segment the brother wants to launch? What in your business is proprietary to you? How can you protect that?
If not already in place, one suggestion would be to safeguard yourself and require a non-compete from both your partner and the brother. In turn, you would provide this to your business partner, so you have to be careful how restrictive you make it. You have to think through how narrow to your product category and/or customer set it should be. I would like to see certain non-solicit provisions in place as well.
I would also consider how you may want to expand your own business into other product categories in the future. Does the brother’s business and the non-competes potentially limit your future plans? If you end up competing head to head, what are your rights to buyout your partner (or vice versa)?
Another potential idea is to think about having a right to an interest in the business venture that your partner and partner’s brother start after he learns from you. This should be considered and negotiated today. It could also speak to your relationship with your current business partner. Are you only going to be partners in the one business, or does it make sense for a broader partnership in similar businesses going forward? It’s the brother today, it could be another business associate or colleague tomorrow.