Founders and Partners
What to do with a NEW partner.
Have been working with a new client, as well as an older client that has been going through the same issues and didn't think it was worth it to write about it here, but, I have to.
What do you do with a new partner (or founder) that wants to be (and you want them to be) a part of your new company? Do you immediately make them a partner and give them 50% of the company? (or if there are two of you, you split again and give them 33%?)
If the person is experienced and definitely feels an immediate need (like bringing in funding or having the knowledge to build the product) then, by all means, split and get them on board.
But, this is more about bringing someone on that may not bring in immediate funding or bringing on partners or, as one of my clients experienced, is holding the company ransom since all their money is locked up with this one outside vendor and if you don't bring them on board, the whole company will go under.
Let's take the last scenerio first - let the company fold. It is not worth it to bring on a partner/co-owner who will own the majority of the business because they have the money. Shut the company down, reform it, and learn from your lesson and find funding from numerous people (instead of 100% in one person, get 20% from five different people). You will end up the loser and it is better to end up the loser by shutting down the company then by losing control of the company, your patents, your payroll, your employee's, etc. because someone is holding you hostage.
But, if you are a young company and you want to bring on new clients who will start the revenue flow and an individual is telling you that they will bring on new clients only if they are made a partner, then, by all means, bring them on. BUT, and this is a big but, HIRE A LAWYER who will write a contract that will protect you and your business until that person proves themselves in what they promised.
For example, two founders of a company have a product, but, they have no idea how to sell it (they know where to sell it, but, are engineers and don't trust themselves to sell it). An outside individual comes to them and says "I can bring on a client that will buy your product, bring in millions of revenue, but, I want 33% of the company". What do you do?
My suggestion would be (as I suggested to my current client), bring them on under contract with these stipulations. Give them 5% initially, that expires after one year if they don't bring on a client. Give them another 5% for every client they bring on, up to 33%. It guarantee's that you will have six/seven clients, it guarantee's that the individual will continue to work (and not sit back and just keep taking 5% of the profits), and it shows that you are committed to them, if they are committed to you.
Pretty easy, huh? Make it a win/win for everyone involved. The founders can't be unhappy if their new partner brings in six new clients and starts the company going in the direction that they want it to be. And the new partner can't be unhappy because they are rewarded for their work and gain what they are looking for, a percentage of the company.
Think things through before giving up a percentage of your company - a lawyer or business mentor will give you helpful advice; all you need to do is listen to it.
Good luck.