Business Partner Dillemma

Discussion in 'Growing and Managing a Business' started by mn9, Aug 11, 2011.

  1. mn9

    mn9
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    Hello all,

    I'm currently in a business/friendship predicament. I can't decide what to do about my business partner (let him go or not). There are several factors affecting this situation and it's currently driving me nuts! I need a third person perspective and I don't know who to turn to for advice, so any feedback is greatly appreciated. Before I get into the details, one of the biggest concerns for me is not screwing him over b/c he is a friend of mine. If I am to let him go, I want to do it quickly so he can move on with his life and take on a new career path. Ok, so here it goes:

    I started a web marketing business about a two years ago. I followed my father's footsteps, he runs a successful web marketing company and he's been my mentor through whole process. Although it is a sole proprietorship by the books, I started this company with my college roommate (I am currently 22 years old, he is 24). At the time, I only knew him for 6 months before we started the company. My role was to do the work (web design and other web dev.) and his role was in sales. He's worked in a few sale positions before, so I figured he'd be alright at it. We did this for about a year and really did not make any progress. We barely covered our expenses (rent and internet). We had a few small projects from some people we knew and small businesses around our office. Once again, his job was to get sales. The problem was, he didn't. He didn't want to make cold calls because he had to make too many to actually get through to anybody. He said we needed money for him to market effectively. This is not true. When your a startup, you use guerilla tactics and "fake it til you make it". He had opportunities to go to free business conventions during business hours, both ME and HIM went to them. There were a few after-hours convention and he didn't go because it cut into his "gym" time.

    In my honest opinion there are two types of people in this world. People who want things and explore every possible opportunity to get what they want and if attainable, they go get it or at least try. And there are people who want things, but make excuses to not follow through because in reality, they don't want to put in the effort in and possibly get nothing out of their effort. Unfortunately, he is the worse of the two of types. I've come to realize, I am an entrepreneur, he's not. This may sound harsh, but sometimes reality is.

    I re-evaluated our situation and came up with a new business model. My father's company specializes in creating e-commerce sites. They are very good at it and can develop very quickly after doing it for so long. My idea was to partner up with retailers/wholesalers who have established successful operations in niche markets, but have not yet penetrated the power of the internet. In this partnership, we would build a new e-commerce website for them and implement ongoing internet marketing (seo, email marketing). We split the margins 50/50 with retailer who is happy with that b/c we are basically handing them sales that never would have existed without us. Win-win. I contacted a decent size medical company about a 9 months ago and we landed the deal. We made our first partnership. I had to seal the deal b/c I understood how this worked and benefited us both. For the past 6 months, me and my partner have been mining through product data getting it organized for the site. When we were done, my father's company built the site and we will continue market the site online (we split our 50% margin with my father's company). Another win-win. The site went live about 3 months ago and we have already increased their online sales by 120% and total company sales by 8%.

    Everyone is happy. I'll even admit, he put equal amount of work into the data organization we did for 3 months. We're on pace to make some serious money. In the next month or so, I will have an outsource network lined up that will be doing ongoing marketing for the site now that we have enough money to do so. I will be virtually managing it. Sorry for the amount of detail, but I felt everything was important. The dilemma I'm in right now, is I don't know what to do with my business partner. Honestly, he's not a computer guy and after completely analyzing his ability, the data work is all he can do. And we're done with the data work. I no longer have clients, just partners who practically answer to me b/c they are so happy with the what we're doing. I will be pursuing additional partnership deals, but I can already tell, I will be getting them, which I have no problem doing. When that time comes, there will be data work again, but I'll have the money to pay someone 10-15K to do it for me. I'm trying to find a place for him in this new business model, but I'm not seeing it. This is just not his thing. I work 9 to 5 from the office and then go home and think about work until I go to bed. He goes to the office 9 to 5 and doesn't think about work until the next day. He never contributes ideas, he'd rather talk about girls (which is not always bad, but I'm thinking about business until I go to the bar on Friday night). We've talked about putting together an operations/revenue share agreement a few times, but I just haven't mentioned it b/c this has been on my mind. Besides his lack of business value and ability, he is my friend so I don't want to screw him over. But at the same time, I don't want to be throwing him meaningless work so we both feel he is contributing. Everything is under my name so realistically, I could cut him out tomorrow, but that would be unethical in my book. If I am to let him go, I will give him his 50% profit share for the next year (his involvement in the operations would cease immediately).

    Again, sorry for the length, but this is torturing me. I'd hate to keep this going for another 3 years and cut him loose then, being 27 years and having no idea what he is to do for a career. Please, any advice is helpful.
     
  2. Fergal

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    Welcome to Business Advice Forum mn9. Well done on bringing your business to this level of success and congratulations on working out that deal with the medical company. I have sympathy with you and the situation you now find yourself in. We have had other discussions here regarding going into business with friends and unfortunately it is not easy.

    From everything you say, it really does sound as if your partner does not have a long term role in the future of the business. What I'd suggest is that you arrange a meeting with him and ask him how he sees his role and contribution to the business going forward. Perhaps he'll surprise you and agree that it is time for him to move on. If he feels that he has a valuable role to play share some of your concerns with him and try to keep the meeting as calm as possible. Don't make any decision at the meeting but arrange another time to sit down and talk about the situation again.

    Honestly I would be a little reluctant to do that. Business can be tough and you are competing with other businesses providing similar services to your target market. Perhaps your business will need those funds in the future and perhaps you cannot afford to be so generous. It is good and probably only fair that you give him something in recognition of his contribution, however based on what you say, you are the main driver of the business and for him to receive as much as you, when he is not even working in the business over the next year, would seem overly generous.

    Please do post back with your thoughts and we will try to give you some further ideas and suggestions.
     
  3. mn9

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    Thank you for your quick reply. Before I have a meeting with him, I want to make sure this is the right thing for me to do. I think it is, but I keep questioning myself and I feel really bad. He's very excited about our growth and it's going to kill me to bring this up. I feel like this is my fault for prematurely involving him. I do like the idea of a meeting though. I don't want to just hit him with it, I want him to realize there is not really a role for him here. Unfortunately, I don't think he will understand. I know I sound like a real mean person, but he's not the brightest person out there and I can tell he sometimes skews reality in a way he wants to see over what is actually happening. It will be hard for him to understand the difference of time contribution and value contribution. We have put in equal time contribution (at least office hours, I feel like I work 24/7 b/c I'm always thinking, but I can't expect that from him), but the value we each bring to the business is significantly different. Man this is hard. What makes it even harder is I still live in the same house as him, with 2 other guys thank god. It would get real awkward with just me and him. 50% is very generous, your right. But I want to over compensate him in some way. He works a second job on the weekend to pay extra bills and he can't wait to quit that job.
     
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  4. Fergal

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    It's a difficult situation all right mn9. I think asking him for his views at the first meeting (as opposed to telling him yours) will force him to think about his contribution in a logical way and that should help make things easier.

    Have a read of this related topic, in particular post #3 by ArcSine, there are some ideas there that you might find very helpful - Dividing equity among founders.
     
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  5. td2011

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    Hi there, I hope you manage to resolve the situation as well as is possible given the circumstances. I also went into business with a best friend, having similar interests, morals and views on life etc it seemed perfect, though we didn't get on at all well as business partners. We decided that our personal friendship was more important than the company and we sold it and moved on. Some people may think what a waste but my life wouldn't be the same without him. I'm not saying you should be taking the same approach, just it's a nasty situation.
     
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  6. Stephen Ryan

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    You seem to have a very poor opinion of your friend, yet he chose you to partner with, so if nothing else he is a great judge of character. :)
    Sure, you can purchase the services he provides from anywhere, but you can never replace friends.
    It will be up to you whether you want to place business before friendship, but when you are running a multi-million dollar business, you will realise just how important good friends are.. whatever their shortcomings.
    Good luck
    Stephen
     
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  7. Mountain Man

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    You call him a business partner, but what was the understanding from the start? Did he think (from the beginning) that he was a partner or an employee? One of the reasons it is hard to work with friends is that we bring emotions into it and start thinking about that relationship more than the success of the business. It sounds like the 50% is a payoff to ease your Conscience and make you feel better about what you know you need to do. I have found that no one cares more about a project or business than the one whose vision it is. It sounds clear to me that this is not his vision but more of a job. In the end you need to do what is right for your business, if he is a true friend he will understand that. The hard part for me would be finding a way to clearly verbalize what you are thinking.
     
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  8. td2011

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    Yes, getting your point across clearly without confusion is most important if you want to continue your friendship when you pay him out of the business. I'll never go into business with a close friend again it's too complicated.
     
  9. mn9

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    replt

    Thank you for the feedback everyone. I'm very overwhelmed and I keep role-playing "the talk" in my head. I want to be clear, but not insulting and I want to preserve the friendship.


    Stephen, I will admit, I stepped into a business relationship before knowing him that well (6 months). He seemed to understand business. I made some bad assumptions. Originally, his role was in sales. Besides him not selling anything, we changed our business model and sales has no part in it. My opinion about him may seem bitter, but from a business perspective, I am frustrated. If it was his effort, I would say something immediately. It's not though. Unfortunately, its his ability. I'm frustrated at myself more than I'm frustrated at him. He cannot change his natural ability and I cannot ask him too.
     
  10. mn9

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    the talk

    OK, so we had "the talk". It was pretty hard for me to initiate. I feel like I'm getting divorced. Anyways, it went OK. The situation is far from over. It has only been brought to light. I feel like an a-hole b/c all we accomplished was realizing that there wasn't really a role for him. Basically, it just burnt his pride. I knew this was going to happen, but going through it sucks. I feel so bad. He understands there is no role for him that brings unique value. This all would be much easier if he wanted to pursue something he can excel at. He would then realize this is not the business for him...But he didn't...He says he knows I will be successful, that I'm the visionary... He wants to be a part of it and will do the busywork if he has too.

    It can never be easy, right? Although progress has been made by the fact the issue is now been brought up, I'm even more confused by his determination to stay involved. He understands my contribution is more valuable and he said he'd understand if he gets paid less. I feel paying him less when we both put in the same amount of time would not be the solution. It would only make things awkward. As time goes on, my role will get more important and he will seem more replaceable. I think that would put a lot more tension on our friendship.

    I'm not sure what to do here guys...:(
     
  11. Stephen Ryan

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    You seem to have a very high regard for yourself.

    Are you really that good that the guy you went into business with is now effectively obsolete?

    I think its either an ego trip for you or you have reached a point on your journey where you now have to turn into an absolute bastard.

    If you have reached that point, then you either have to have the balls to cut his throat or you have to realise that you will have to carry him.

    Either way, its your call. So better do something and stop wasting everyone's time wining about it.

    Good luck
    Stephen Ryan

     
  12. mn9

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    If this was an ego trip, I would of cut him already. My dilemma is he is my friend. Yes, unfortunately he's obsolete in this business. I'm hardly whining, just trying to consider all the perspectives before I go and break the poor kid's heart.
     
  13. Stephen Ryan

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    You just got to be a man and break that kids heart.
    Shatter his dreams.
    Smash his trust in people and reduce him to the side walk.

    If you are going to smash him, then smash him.

    You sound like you are gloating.

    To be frank, he sounds like he is better off without you now. Worst thing is is to work with indecisive leaders. Especially those who have to take advice from a forum.

    If you were that good you'd help him to remain part of your organisation.

    You obviously don't have any respect for loyalty and that means you are going to have a long hard road ahead of you in business.

    Stephen


     
  14. Gary Barzel

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    I don't think you are being mean or evil in any way. As a matter of fact you have gone out of your way and spent many sleepless nights just thinking abut it, not wanting it to affect your friendship. Now you have to make a business decision, and the sooner you do it, the better off you both will be. I suggest you write everything down on paper that way you'll be able to view it and see it more clearly. Define what your goals are for the future, what resources you will need, what you are now lacking for your enterprise and how you can contribute to that need. Next you will have to sit down with him and be clear as to how you don't think this will work out between you two. Explain him what your vision is and how you don't see him as being a part of it. You need to be firm with your resolve, otherwise this will keep dragging on and only hurt you, him, and your business.
     
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  15. Stephen Ryan

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    Nice sugar coated advice Gary. It is still kill a guy dead and i'm all broken up that the guy with the axe has taken some time to the kill.

    Reason he has taken so long is he has no killer instinct.

    He better develop one quick if he is going to go through business killing off his partners, because he will be building up enemies as he goes.


     
  16. Mountain Man

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    Wow did this ever turn nasty. It is clear to me that he needs to go. Anyone who has a peice of heart would hate to do that, but business is business. how long do you drag a partner before he pulls you under? If he truly is a partner then they need to work it out, if not then he need to find a nice way to say good-bye.
     
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  17. Stephen Ryan

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    Nothing nastier than cutting a guy out of a business he founded.
    We only heard the ops side of it, For all we know, the other guy is the linchpin of the business.
    But who the hell knows!

     
  18. HorizonPath.net

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    This is just my advice. Take it as you wish. Set yourself a dynamic business plan and follow an action plan. If you're truly friends, then encourage each other and help each other rather than judging each other. We all have strengths and weaknesses. We all change. We can change in positive or negative ways. A lot of influence comes from those we surround ourselves with. If you always believe it is not going to work together, then it won't. He believes it will it seems. If you believe it can work, then know it will and task together. But your paths have to be going the same direction with inspiration and motivation. If either of you are not in alignment in this fundamental way, then find a way to fairly separate as quick as possible. Nurturing is always better than competitiveness in business... to a point. If you're both onboard with this, then try to make it work. If you or him are not in alignment, then cut it now because its the best for the both of you. Don't worry over it.
     
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  19. Gary Barzel

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    Stephen, I don't know what your issue here is exactly. The guy started a business with his friend, his friend is clearly not the right choice for his business to expand. It's eating him up that he has to let his friend go, and he's torn up how to go about it. Would you keep a partner in business if it was hindering your success and growth? Yes it's unfortunate that it's a friend, but what if it was a stranger, would you feel it's ok for him to make a necessary business decision then? If he was trying to screw the guy he wouldn't have posted this thread in the forum.
     
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  20. Stephen Ryan

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    Gary, you make your bed, you lie on it.

    It is like any relationship in life. If you make a contract with someone you stick to it, else you will never be a credible person.

    Nothing stopping this guy starting 100 other businesses, without his partner.

    I personally don't believe his partner is a waste of space. It is more likely that his ego has got beyond him and he has become arrogant and high minded above his friend.

    Only way past this in my mind is to tell his partner how he feels and discuss how his partner can contribute more to the company.

    If the originator of this thread really is the best half of the relationship then he will overcome the communications challenge and keep his loyal friend on-board.

    A lot of people watch reality TV and believe that only the fittest survive.

    That's only true for rats and look at the state of the economy, by being run by greed and rats. :)


     
    #20 Stephen Ryan, Aug 20, 2011
    Last edited: Aug 20, 2011

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