jmasterj — 2012-11-21T03:48:04-05:00 — #1
Hi! Quick question for someone who has worked as an internet/marketer for a satrtup... as minority partner in a company, how do you prevent yourself from simply being "fired" or dissolved?
The reason? I dont like to work on commission (as they first proposed) in internet marketing because 90% of the work is done in the first 10% time of the company's services. So either I can charge 10x the rate for my work or I think a partnership is much more realistic to the rewards of the company. But then if they do make me say, a 10% partner with commissions only on net sales above current net sales (to be fair so I only earn what I am bringing in), how do I prevent them from getting rid of me next year when the company is flourishing and they think they dont need me anymore?
Btw, I am not making any capital investment/donation, only services and time, and most of my time will be on internet marketing, and some on general marketing and business advice since I am more experienced in some things than my partner. I am favoring the partnership type of deal over commission because as we all know, internet marketing for a small site is very start heavy, and unless I charge a lot, I like the motivation factor and future payoff more than making a few bucks now. Besides he has very little sales now and very little funds, so he wouldnt be able to pay me my regular hourly/weekly rate for something like this.
shadowbox — 2012-11-21T08:55:19-05:00 — #2
Commission based on sales? The problem with that is that you personally don't have control over the sales process - marketing is all about bringing in targeted traffic, but once they arrive at the site, that's your job done. The site itself could be awful, the product useless, the calls to action non-existant, sales team could be lazy and never answer questions, not enough info on the product, bad reviews etc etc. If you are working on commission, you should be paid on something you have more control over, such as how much traffic you generate etc. So I feel you are correct to wish to avoid this, although you seem to want to avoid it for different reasons.
I believe the easiest solution to your problem is to just charge them for your time. Why can't they pay you the going rate for your services? Start ups borrow money to pay their suppliers, that's how it works. Do you think they ask their web hosts, their insurance company, their accountant etc to work on a promise, or did they borrow the money to pay for all that? Sure they can offer you equity in the company, but you'd need to assess whether or not you feel it's worth the risk based on how confident you are in their possible success, so you'd need to ask for their business plan and some financial forecasts etc. The fact they cannot afford to pay for one of the most fundamental aspects of any business should raise alarm bells IMO. However, if your gut tells you to give it a go, ask for shares in the company and take it from there.
jmasterj — 2012-11-26T02:59:10-05:00 — #3
Thank you for your thorough reply, and yes everything you say makes sense. If its ok, a few followup points......
• I understand that I have no control over any process after a visitor lands on the web site. However since I am a web designer I can or have them make edits to the site that will raise the probability of better ROI. • In my professional opinion, from talking with the guy, and knowing my friend who referred him to me, he is driven and wants to make this is primary business, so I have little doubt that once we start, he will not screw around... of course this is my opinion and it is a risk that I consider low
• The only bad part is the business is in high competition, especially online... we will try to extract some niche portions of the business to exploit, and that is up for discussion still... if we cannot find that, I will probably stay away
• I personally do not think it is fair to compare utility type bills to "additional services" type of bills. I understand building a web site without any marketing is basically suicide today in competitive markets, but if i charge him hourly, what he may deem is "necessary" might be a budget of like $300 for example. Honestly, I do not need to rob someone of $300 to basically scratch the surface of effectiveness. We all know an honest internet marketer should admit that very little can be done for $300. If he were a family member or friend, I would rather charge that and train him how to do it himself. However, I am in the business of wanting some long term income, not a quick buck, therefore, I feel like a partnership was a better option, especially when he also seemed interested in that.
I guess my fear is that the percentages may be unreasonable. I have had experience with this, and many startup people over-value their company, or whatever they have, even though they have no or very little income coming in. Doing this for say, a 10% share is just worthless as well, because I dont see this company making thousands in the first month, or even in the second or third, even though it will take me a lot of hours to build up the initial phases of marketing.
Hence we go back to my initial query of how do I protect myself in the long term, where for the first ~6 months, I put in like 10-15 hours per week in marketing/content alone, very little income, and then some things start clicking and we start seeing a nice cash flow for the next 6, and then he thinks, well, we are going well now, we dont need much more marketing anymore, so lets get rid of him and continue with what we have.
I guess I'll just have to have a lawyer write up a partnership agreement where it states the majority owners can not buy me out without my consent or without a compensation package that I must agree to?