what percentage that I give my business
partner so I got a great question from
one of my Google+ readers love you guys
Korea s Etica who wrote in and basically
she has a business and wants him to come
in and be her business partner in the
company and is wondering do I have to
give up 50% of my company to this person
so here's the thing okay you can you can
skin this cat in a lot of different ways
there's no rule that says you have to
give up half your company to a partner
coming in for me the thing that you want
to look at one is how much value is this
person bringing is the person bringing
equal value to what you're bringing yes
or no and then to how long has this
company been around is this a just a
startup idea where you haven't done
anything yet or have you been around for
a little while and you've already built
up something that you know that person
hasn't contributed to so obviously
you've been around for a longer period
of time a new person coming in doesn't
deserve as much as you have already
built this thing up but if it's brand
new startup then they have a case for
wanting to have a bigger piece of the
pie regardless of the decision of how
much percentage you're going to give up
you have to make them commit to the
business this is so important I get that
it's exciting at the beginning okay
partnerships are always exciting because
at the start you're you're struggling
right you're feeling like I can't do all
this myself I don't have the skills and
this person has great skills that can
help and I don't want to do this alone
and it's just there's so much pain of
going it alone and so much excitement in
bringing somebody new on that all you
see is the good side not a lot of
partnerships will work out all the way
to the end and you want to make sure
that you're really getting the right
person on board it really is like
choosing a spouse okay you have to know
them like them trust them love being
around them and think that it's going to
work out for many many many years and
what do you do before you get married
you date and that's what you need do
with your business as well you need the
person to commit to the company
you just give them equity and that can
come in two forms one they buy in they
have to pay they have to pay for equity
in your company your business is worth
something you're not just going to give
it away they have to buy a certain
amount at a certain price the other way
is to earn in and so instead of just
giving them X percent of the company
they earn it when they hit milestones so
remember I had a software company when
we bring on a new salesperson who
started by myself and my business
partner we're bringing on a third
partner who's going to be our sales
person and he was joining relatively
early on but I didn't know him too too
well and I didn't want to just give him
a piece of my company because the last
thing you want to have happen in your
business is have a guy who owns a piece
of your company who's just a dead weight
who isn't doing anything for the company
and is it somebody you don't want to be
around and that can happen very often
with a lot of companies so we made them
earn in and you said ok we'll give you
up to whatever it was 20% of the
business you are in your first 5% if you
can close X number of deals within this
amount of time and we set milestones so
you get your first 5% when this happens
your next 5% when this happens and so it
shows it there they have to be committed
to the business and actually get results
for you before you're going to give them
equity so it encouraged you to have some
kind of benchmark to put in if they're
not going to be buying in and giving you
money for your shares the last thing I'd
encourage you to do is for anybody who's
bringing on a partner is have a
shareholders agreement it's so important
and make sure that you include a shotgun
cause a shotgun cause basically is
something that you write into your shell
hose agreement that allows one partner
to buy out another partner if it's not
working out you know for whatever reason
it's just not working out you're
fighting you're doing all the work and
this person is not you know doing
anything and they own 50 percent of your
business how do you get them out and a
shotgun Clause says I will buy your
shares at this price or you have to buy
all of my shares at the same price so
you get to pick the price
and the other person gets to pick either
accept the deal or buy you out so one
way or the other
somebody's getting bought out of the
business you have to be smart with what
price you set but it's important part to
have in your shareholders agreement
before you bring on a partner the other
thing you might want to look at is a
piggyback clause and that's basically
where if one person is a minority
shareholder if you decide to sell that
person can come with you so you know if
you're the majority shareholders if
somebody was a minority shareholder you
sell your business that person has to go
with it
so you don't have one person holding up
a deal so if you have a deal to sell
your company that minority shareholder
can cause a lot of problems for you and
prevent the sale of the business which
you know you don't want to have happen
so that person is dragged along with the
sale of the company anyway a few things
I think and think about get a lawyer
involved but you definitely don't have
to give up 50% of your business make
sure they're offering value make sure
they're either buying or earning in and
get your shotgun clause in your
shareholders agreement before they sign
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