need advice...

Discussion in 'Growing and Managing a Business' started by r0yalty, Nov 2, 2010.

  1. r0yalty

    r0yalty
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    Scenario

    A business is run by rick & joe (brothers). They are 50/50 partners. Their business is 1 store in a 45 advertising co-op that advertises on TV, radio, and print. As a thank you for advertising on TV, the TV stations give the co-op 2 round trips to Hong Kong and 1 round trip to Australia. So in fairness, the co-op decides to play a game similar to "the lottery" to give these trips to 3 different members of the co-op. Rick and Joe's franchise wins 1 of the trips to Hong Kong.

    Joe finds out that the trip is during a vacation that he already planned to take with his wife, so he informs Rick that Rick should take it with his own wife. A couple of days later, Joe's wife says "shouldn't you get monetary compensation for the trip since you're 50/50 partners"? Joe agrees and asks Rick if that's ok with him. Rick says "yes that's ok". Nobody has any idea of what the trip is worth, so Joe asks the TV station. The trip is worth $9,000 (includes airfare, expensive hotel, food, activities). So figuring that it was worth that amount, Joe takes a draw out of the business for $4,500, because that would be 50% of $9,000.

    Rick goes on the trip to Hong Kong and has a great time.

    A month passes, Rick asks Joe how much he took in compensation for the trip. Joe tells Rick $4,500. Rick feels his heart drop, "$4,500?" he asks... Joe replies, the trip was worth $9,000. "Why not just take $9,000", Rick says sarcastically. Joe says "you didn't have a problem with it when I discussed this with you before".

    Rick now feels like Joe has stolen $4,500 from his hard earned money because he would rather have not taken the trip if Joe was going to take that much compensation. So now Rick wants $4,500 in compensation because, in his eyes, the trip is worthless and he'd rather have the money.

    Is it fair for Rick to take the $9000 trip and Joe to have $4500 in monetary compensation in this situation? or unfair? explain your reasoning.
     
  2. Fergal

    Fergal
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    Welcome to our business forum r0yalty, it sounds like a bit of a tricky situation and is more of a moral dilemma than a business dilemma. It's a shame that the details were not worked out before Rick took the trip.

    If Joe has drawn $4,500 out of the business, can we assume that half of that money was already his and that the other $2,250 would be Rick's share? If that's the case then Rick is really only down $2,500 for the trip.

    The TV station will put a large value on the trip and the reality is that if someone was to book the exact same trip themselves, they might get it for a lot less. It might help both parties to agree on the value of the trip if one of them took the time to price the trip from a travel agent or tour operator.

    My answer would depend on some factors, such as what's the real value of the trip and did Joe get any other advantages or perks from the business. Partnerships generally work on a "swings and roundabouts" principal, sometimes one partner will be ahead and sometimes the other partner will be ahead. Over-analysing and comparing what each partner is getting at any given time, can cause conflict in the partnership. This is even more dangerous when spouses of the partners get involved in making the comparisons.

    I can see both sides to the story. On the one hand Rick has done quite well for himself, if got a $9,000 trip that only cost him $2,500. On the other hand I can understand that Rick may not have wanted to take the trip, had he have known the cost. If I was in Rick's shoes I probably would have expected to take the trip and then give Joe a cash sum or a gift to thank him, and the gift would have had a value of a lot less than $4,500.

    I'm looking forward to reading what other members have to say about the situation.
     
  3. Kay

    Kay
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    From the minute Rick said yes that's okay to Joe and left it at that, he only has himself to blame if he's unhappy with the compensation Joe decided upon. There should have been more discussion at the time about exactly how much that would be and what the trip's value would be based upon. It could well have been assessed at a much cheaper price as Fergal mentioned if it had been done via the net instead of taking the TV station's word for it.

    Rick was too busy enjoying his vacation to care. Now that's over and he's back to reality, he's thinking about it and trying to no doubt recoup some of that spending money he would have used. Too little, too late. I don't think I would have assessed it any different than Joe did had I been in Joe's shoes.
     
  4. John Million

    John Million
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    I agree with Kay, once Rick says it's ok to take some compensation and doesn't agree to how much, Joe went about this the right way by finding the actual dollar amount and cutting it in half. HOWEVER, being realistic, the trip wasn't worth $9000: you probably couldn't have sold it on ebay for that price, and the reality of "value" is that if both of you hate Hong Kong, the trip is worthless to you both. Rick had a great time and a family vacation is rarely less than $3K. I think Joe, out of brotherly respect, ought to take $3.5 or $3K, then have a serious talk about how to avoid this in the future. Notably, put a dollar amount on any "compensation" no matter what.
     
  5. Mountain Man

    Mountain Man
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    It sounds like we have a communications problem or a business agreement issue. Although technically Joe had the approval to be compensated, there does not appear to be a clear policy in place and why would there be (How often do you win a $9000 trip?). You are dealing with hypothetical situations, would Rick ever CHOOSE to go on a trip to Hong Kong? And the $9000 is not real money since no one received a check for that amount, the business never had the $4500 to give away in the first place. Perhaps what should have happened is Rick should have purchased the trip from the business and then both partners would get 50% of this amount.
    In the future clearer communications may help, not an easy situation to be in.
     
  6. fbl000

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    The partnership enterprise, partner needs a Shared values, want to have the team common prosperity and progress of the spirit, actually enterprise really it well to amway.
    Or a word
    Enterprises should have the belief that can go too long
     

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