Money, contracts, and entrepreneurial work; where to set the bar?

[JAB Creations]

So I've made an interesting connection with someone who's hot out of a big name college and is looking to do an entrepreneurial start-up of sorts. I've only spoken a couple times with this person about the idea though they've made it clear that they will be looking for investors. If this person did not impress me enough credential speaking I wouldn't have gained any interest in the first place so the main issue for me is as the sole developer to work on code how high should I set the bar for dedicating my time for this job?

What sort of payment options should I expect/request?

What is the general range investors are willing to invest in to new companies and do I have a right to know what that amount is if I'm doing all the code? I would presume so...

Contractually speaking since the site will make money over time and I would have coded everything myself I would presume I would be entitled to a percentage of money both during my time doing maintenance once it's finished and even after I've moved on to different things so what can I expect in that regards?

What other things should I be aware of? The idea of working on an entrepreneurial job is exciting though if I decide this job is right for me I want to make sure I venture forth with both eyes open. Any useful advice would be greatly appreciated!

- John

[buckworks]

I would presume I would be entitled

You cannot presume anything in a context like this.

You will be entitled to what the contract says you're entitled to.

What the contract says will depend on your negotiating skills.

What kind of deal do you want to make here? You have to ask for that very explicitly, and get it in writing, you cannot just assume things.

[JAB Creations]

I'm essentially trying to make sure I get a fair offer and don't end up walking in to something I'll regret at a later time so I'd appreciate other people sharing their experiences essentially.

- John

[caribguy]

It all boils down to how much risk you're prepared to take.

Regrets may be possible in situations where in hindsight you feel that your time might have been better spent on another project, when the other parties don't seem to pull their weight, or when the decision making process takes the project in directions you don't like.

As buckworks already said, your decision as to "what deal you want to make" should direct everything that comes next. The term "exit strategy" comes to mind.

Off topic: I've noticed that general, open-ended questions like yours (and mine [webmasterworld.com] further down in this forum) tend to be hard to answer on WebmasterWorld. Maybe it's because every situation hinges on the details...

[LifeinAsia]

Contractually speaking since the site will make money over time and I would have coded everything myself I would presume I would be entitled to a percentage of money both during my time doing maintenance once it's finished and even after I've moved on to different things so what can I expect in that regards?

If you are working under a contract that specifically states that, then that's one thing (in which case, you are technically becoming an investor/partner in the company and there should be a signed partnership agreement that has been approved by your and the other person's lawyers).

IANAL, but my understanding is that work done for hire belongs to the company. You're getting paid to do it, so they work belongs to the company. As such, they are free to do whatever they want with it- use it to make money, toss it out, or bring someone else in to modify it.

So if you want "a piece of the pie," you will need to negotiate for that upfront. Most likely, it will be a trade-off between higher pay now in exchange for potential profit sharing in the future.

[JAB Creations]

Thanks guys, it's a vague beginning so I suppose the best way to summarize things at this point is to inquire more about the nature of the beast and how far they want to take the project in the long term.

In example should I decide some of my existing code would be very useful for the project I should have a clause stating that I should be paid for that work especially if it saves time. Any code though that I import from other projects I do feel I should be paid for up-front, otherwise they have my code and I don't have the money. I fully understand that work I contribute will be owned by someone else so it's my goal to determine how much I will know about money changing hands so I don't end up being ripped off for my time even if I think I'm getting paid well. I don't have a lot of experience in this part of the market though I do know there are bare minimal levels I would expect to earn.

An exit strategy and stalled payment strategy would be important too I imagine. There would need to be a mutual exit clause should a disagreement that we can't get around come up as well as a pause until paid clause of some kind...I simply won't work for someone after they stop making payments even at the promise of endless riches, bills have to be paid. At the same time I want to go about this in the most pleasant manner possible as if it could work out then it would probably work out nicely in this given situation. As I find out more details I'll post what I know...and if anyone has anything to suggest that I should inquire about please feel free to add that as well. Thanks!

- John

[ken_b]

Since we never really know who is reading, and maybe even posting here, it might be wise to use caution when posting about negotiations, contracts, etc.
.

[buckworks]

I fully understand that work I contribute will be owned by someone else so it's my goal to determine how much I will know about money changing hands so I don't end up being ripped off for my time even if I think I'm getting paid well.

If you want to be paid in full, as you go, for whatever work you do, there's nothing wrong with that, but it would mean you are making no investment, you are simply doing work for hire. That doesn't entitle you to know anything about money changing hands, other than your own invoices.

If you reject "the promise of endless riches" as the basis for doing work now, then that is the choice you make. You cannot decide later that you feel ripped off if it turns out that someone else is able to make buckets of money by leveraging your work which they paid for.

Feel regretful? Yes, perhaps. Feel ripped off? No.

If you want to have an ongoing share in whatever financial success the site achieves, you will have to share the risks somehow. What are you willing/able to contribute that could match the investments that others would be making?

[JAB Creations]

ken_b, obviously I wouldn't post any names or specific details, mostly just an idea of how the situation is structured in a way that others could understand and make analogies with.

Buckworks, it's an industry I'm not well acquainted with so I'm not sure how to gauge the long term income potential from the site.

Let me pose a question then in a hypothetical situation...if your bills total about $900 a month including everything and you're pretty much capable of doing it all (client and server side work) with few or no one else being able to do the level of quality of your work what would you charge say on a weekly basis? My situation is a bit different though I want to gauge what others feel is necessary for their full time commitment to an entrepreneurial project. Again thanks for the replies!

- John

[LifeinAsia]

Look at it from a different point of view- what do you feel is your time worth? If you accepted a full-time position, what would your minimum weekly rate be for 40 hours/week (or whatever the typical work week is in your area)? I'd use that as a basis and go from there.

if your bills total about $900 a month

This is not really relevant, except as a reality check. (If you're not covering at least your expenses, you should usually hold out for something better.) Setting a target revenue just on current expenses will cause problems in the future when your expenses go up. And what about banking money for the future? (See the thread on Cash is King [webmasterworld.com] for some other comments about cash flow.)

[aspdaddy]

Unless you are investing any capital you wouldn't usually be entitled to any share in any profit during or after development.

Any sane investor would just pay someone to write & maintain the code and keep the profits themselves.

What other things should I be aware of?

If you really believe it will make money longer term, offer to invest intellectual property (functional spec & actual code) instead of capital. For start-up I'd value this using %age of additional year 1 sales attributed to your unique design + development estimates to build the solution. But then you cant ask to paid to do the work as well!

[JAB Creations]

Thank you for the replies; it seems compensation should either be either long term investment with little or no monetary compensation during development or a set minimal or walk away altogether.

So does that leave me with a proposition of desired income to do the job then? I'm only interested in a set minimal level of income to be interested in the project so what would be a good approach in showing both interest in the project while holding my ground on how much I think I'm worth? I presume I should start somewhat higher then what I'm looking for if I know they won't find someone more capable?

- John

[aspdaddy]

I would be asking myself what else do you bring other than writing the code?

Maybe offering to build a quick prototype to show potential investors is a way in, on the condition its your IP until any company is formed at which point you invest the IP and take a minimum salary to develop the live solution

[JAB Creations]

@aspdaddy This was actually sort of an issue as it was asked if the entire project could be done within the span of a single quarter, obviously not. I explained that the best approach would be to get a basic core with a single branch of basic functionality working first.

I should have more details sometime this week. Thanks for the reply!

- John