|How should I stucture this type of partner proposal?|
I have a niche site with 10,000 members, need scripting help.
| 2:50 am on Apr 9, 2007 (gmt 0)|
I have a site that is severly undermonetized because I don't have the programming skills to get rid of the glitches, and don't have the programming skills to make it better, more appealing, etc.
The site has over 10,000 members, a very nice domain, and a lot of potential.
How do I bring someone into that now?
I've worked on the site for 4 years. I could sell the domain alone for 8k tomorrow. The whole site could maybe sold for 16k.
I'm not mentioning those numbers because they're outstanding or anything. I'm mentioning them to illustrate that I can't bring someone in as a 50-50 partner to start out with.
How can I structure a deal to bring in a partner that earns their equity? How can I make it attractive enough to find a good programmer, without giving up a large chunk of what is already there?
I would do a 50-50 split with someone, but I need to figure out a way to tie it to the performance of the site based on the help I get. I don't want to give someone half the site, and not have it progress.
Anyone ever been in that situation? Anyone have ideas on how I should go about it?
| 4:13 am on Apr 9, 2007 (gmt 0)|
I think giving somebody a partnership deal or something like that should not be wise decision, instead you should hire somebody who has a knowledge on programming skills to get all the techi stuff done for you.
Hope this will help you.
| 1:13 pm on Apr 9, 2007 (gmt 0)|
Really, I agree with you.
That's what I've always done in the past, but it led to very slow site development. It's also been very difficult because it sometimes takes weeks to find bugs in previous work, then weeks to get them fixed. Meanwhile, a buggy site makes members unhappy. Also, part of the problem is that I have problems making small changes within this language. I could nickel and dime someone to death while outsourcing.
I think I could hire someone in an office setting, but I'm reluctant to go that route for a variety of reasons.
I really think it would all go a lot better if I gave someone a stake in it, where they would want to continuously improve things. They would want to fix the nickel and dime stuff as soon as it was noticed. With a dedicated person, we could do a lot more testing, tracking, and gain a much better understanding of what works marketing-wise.
I was thinking some more about this, though, and think I came up with an idea. What if I did something like this?
Find the right candidate, of course, and set it up like this:
First $1,000 made, partner gets $800 and 5% equity.
Second $1,000 made, partner gets $700 and 7% equity
Third $1,000 made, partner gets $600 and 8% equity
Fourth $1,000 made, partner gets $600 and 12% equity
From there, it would continue at a 65-35 split.
The nature of the site is such that billing would recur, so the money would get easier as time goes on.
I'm trying to do two things with the above... give the person an incentive to work now for money now, and keep myself from giving up equity without work. Maybe the numbers should be a little different, but you can see where I'm going.
I think maybe I would need some sort of reasonable time limit, and requirement to finish the course, because I wouldn't want to have to try to make this deal again if someone goes MIA after the first $1,000.
Assuming the candidate believes the money will come (and it will)... Anyone think I might be on the right track? Is it too complicated? Some giant gaping holes in the idea?
| 2:00 pm on Apr 9, 2007 (gmt 0)|
This is really tough. I've been through this three times and in the the end I always say I'll never get involved in another one of these. But then another opportunity comes by that's hard to take advantage of
without a partner and there I go.
The only advice I have is to give yourself some kind of an "easy out" if the partner does not meet your expectations. The partner won't like this but I won't do another one of these without the "out" planned first.
| 4:44 pm on Apr 9, 2007 (gmt 0)|
I dont understand 1 thing, when you want somebody who could do the technical changes in your site why do u really share your revenue? Also if you are confident on getting recurring revenue then hire somebody and give that person salary + bonus quarterly. Bcoz according to me there is no point in sharing equity when you have all the skills.
A person who gets some equity is normally the owner/co-founder who shares equal amount of money as the other partner has shelled out. But in your case its just a clear cut employment and nothing else.
| 6:18 pm on Apr 9, 2007 (gmt 0)|
oneguy has the right idea, IMO. I was previously involved in a partnership that worked similarly to this (not a website) and it worked out very well. My partner had an idea, but no programming skills. Actually, I started out doing contract programming for him, and the relationship evolved into a partnership.
When I became available to work full-time on it, my partner had 3 big improvements in mind. We agreed to a fixed payment for each improvement, plus an increased share of equity for each improvement completed. After the 3 projects were done, there were to be no more fixed payments - only my share of the income, and then I would work on projects that we mutually-agreed upon, but with no obligation to do so. The fixed payments, of course, were less than I would have charged without the equity.
The business was structured as an LLC, which can be very flexible. In our case, my partner was responsible for all expenses, and I received a share of the GROSS income. Since my partner was the managing partner, this gave him an incentive to keep expenses down. I think a common concern in a partnership is that the managing partner will fritter-away profits in expenses until there is nothing to distribute, and this removes that concern.
A key issue, of course, is trust, which can be hard to establish. In my case, the nature of the business was that we had immediate income on a daily basis (it was a stock trading business). At the beginning of the partnership, I was paid weekly. After a while, we changed that to monthly. Of course, weekly payments, and in many cases, monthly payments, will not be practical for many types of businesses.
| 12:35 pm on Apr 10, 2007 (gmt 0)|
|Bcoz according to me there is no point in sharing equity when you have all the skills. |
That's the problem. My skills are severly lacking in some areas. I've just been fortunate enough to go so far with this site in spite of that.
I'd be a lot better off if I could just say "we need to make it easier for the user to do X by putting Y on the Z screen." In a lot of cases, it takes me longer to explain things to a programmer than it would take the programmer to change things if they were just checking out the site usability.
|Also if you are confident on getting recurring revenue then hire somebody and give that person salary + bonus quarterly. |
It's just not there yet. Maybe I'll pony up the money for it by the time I'm done thinking about it. When I said "dedicated programmer," I meant one that was dedicated to making the site the best it can be. The site only needs a few major modifications, and then maybe 5-6 hours per week of tweaks and testing changes, if that much. With everything else I have going on, maybe I could support a full time employee.
Those are some interesting points, jtara.
| 3:05 pm on Apr 10, 2007 (gmt 0)|
Most of the time programmer wont be going a step ahead from his side for developing the best of your site. Its bcoz 90% of them are hardcore programmers and only few have the skills of programming as well as entrepreneurship. So if u get a programmer who can code as well as beautify your site u will get rocking benefit from him.
Otherwise most of the times it will be you who will be needing to direct the programmer about all the enhancements to the site.
Anyways its upto you to finalize the things but the best will be if you can take somebody on price per work or number of hours or something of that kind and not sharing of your equity.
Bcoz sharing equity or hiring programmer wud be givin u the same amt of work while explaining work to a programmer.
| 10:45 pm on Apr 11, 2007 (gmt 0)|
Thanks for the thoughts dfud, ashish21cool, and jtara.
| 12:17 am on Apr 12, 2007 (gmt 0)|
|The only advice I have is to give yourself some kind of an "easy out" if the partner does not meet your expectations. The partner won't like this but I won't do another one of these without the "out" planned first. |
Ok, so after thinking some... what about this?
I go with a stucture something like I mentioned above.
Although, I add a twist. Help me here if this makes any sense.
First $1,000 made, I have an option to buy out the coder/partner with $1,000, in addition to the $800 they already get.
Maybe I give them an option to stay in somehow. I need to make this attractive to the coder/partner so I can attract good talent, since I really want it to work. I'll be burning myself too, otherwise.