Profit Split??

Discussion in 'Growing and Managing a Business' started by bixby77, Dec 2, 2012.

  1. bixby77

    bixby77
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    cliffnotes:
    -I had the idea to start a youtube channel doing pranks
    -approached two friends about doing it with me
    -I financed the entire project to buy camera equipment / audio equipment / necessities (with minor contributions from both friends, I've funded 95% of total expenses)
    -I'm responsible for the majority of the work (filming, editing, marketing, managing the account etc etc)
    -1 month after starting, the channel is growing in popularity - we've been scouted to become YT partners
    -We need to discuss how we intend to split profits (have not talked about it with them)
    -They'll probably want equal split

    Please read below for more details though!

    Anyways, I'll try to keep it as concise as possible. I had approached a friend of mine months ago about starting a youtube channel, us doing silly things / pranks, comedy type stuff. Lets call this friend, Friend 1.

    Finally after much convincing I get him to agree to participate. Another friend of mine had a similar idea (starting a youtube channel) but he wanted to do it with someone else.

    Me and my friend made a "demo" video so to speak (after me investing about $500 initially for the camera). The other friend of mine saw the video, and was impressed, along with his friend not being particularly enthusiastic about working on a youtube channel.

    So he "joined" us. Lets call him Friend 2.

    Now, I've funded the entire project. I invested $1,000 alone on a camera / audio equipment / other necessary equipment. We occasionally use props / costumes in our videos, so including that I've invested approximately $1,500 TOTAL (equipment + props combined + editing software etc). Friend 1 has contributed perhaps $10, and Friend 2 has contributed no more than $100.

    I decided on / created the name myself, and decided on it before friend 2 joined in.

    I'm responsible for all graphic design, all video editing (this is the most time intensive part), I registered and manage the youtube channel, I manage the uploading of the videos, I have a background in web design so I'll be registering / creating the website, I manage and operate our social media profiles. I've done the majority of filming. I've done the majority of marketing and been most responsible for getting our channel to where it is now, within 1 month of uploading our first video, we have 100,000 views.

    We've been approached by 2 partner networks to sign contracts with them, so I think it's obviously time we form an LLC and draft some contract.

    I've done the vast majority of the work, and have been financing the entire project (aside from minor contributions from friend 2).

    As far as the TALENT in the videos, it's more or less an equal split in terms of whose in front of the camera.

    I more or less am the boss / director however you want to see it. I have creative control over the projects and do a lot of the logistical work.

    Friend 1 contributes very minimally in terms of his "dedication" to the project, and may or may not even be in the country in 6 months. He is constantly busy, and hasn't contributed financially at all (aside from spending no more than $10 on a prop). He has done very limited marketing.

    Friend 2 is particularly enthusiastic about the project, and has invested some money in equipment / props, and has done a fair amount of marketing (though I'd say I'm responsible for the majority of it).

    Now, I want to maintain 100% ownership of the name / the youtube channel as a property as well as 100% of the actual content we upload to the channel. So basically the entire business aside from the money we bring in.

    On top of that I also do NOT think it would be fair to me to do an equal profit split, my argument being I've invested the most money and most time. I've thought that I could consider it given that my partners make a significant financial investment + time investment, but quite frankly I can not imagine a scenario where they could invest as much time as me (they've offered to help with editing, but I have a better eye for it, plus I've already been doing it, and I'll produce a better finished product so I don't think I'd be willing to relinquish editing duties).

    Basically, I can't envision a scenario where they could possibly take on equal responsibility.

    With that said, I want to get your opinion on how I should proceed. I think a 75/20/5 split would be fair, or friend 1 might not even be part of it so 75/25 or 70/30. Or maybe even more? Thoughts?

    I'm a bit nervous, because I almost know they'll want equal share and I don't want this conversation to damage the future of this enterprise...at the same time, I don't want to be resentful that I'm doing all the work and we're all making equal $$$....

    Maybe I should just offer to pay them as "talent" in the videos...though I doubt they would go for this.

    There is no money yet, but as I mentioned, we've already been scouted and there is potential to make a good deal of $$$ down the line.
     
    #1 bixby77, Dec 2, 2012
    Last edited: Dec 2, 2012
  2. mohamed Yasseer

    mohamed Yasseer
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    Hi i am new here and just happen to read your post.Well what am going to say is just my opinion.I believe that you have complete control on your project and you r the boss.Well i dont know you and you dont know me i dont know what kind of relationship you h fave with these 2 friends but what i can tell you is that it is important to test them.Put them on a trial and put a deadline for the project.It is then that you will know where is their sincerity about your relationship with them and how they behave.You will know if just it is for fun or for their friendship toward you that count.I have seen many people when start a business and then as soon as the business start to make profit they will want their share and even put you out of it.Me also want to start a business and have many friends who said to want to join but we just talk and nobody is willing to move on.Anyway just try to see if they want really to do business or they want to just have fun.I would be very please and grateful on your part if you could tell me more how you start your youtube channel.Your help will help me;)
     
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  3. Fergal

    Fergal
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    First of all welcome to Business Advice Forum bixby77 and congratulations on the success you have already achieved.

    From what you say above it would sound unreasonable for your friends to expect an equal share of the business. Why do you think they would expect that?

    My suggestion would be to have a very general chat with them re their views of the business going forward, what they expect to contribute and what they hope to get in return. Try to keep the tone of the chat light and easy going, your aim is to get their feelings on the subject not to seriously discuss or argue about anything at this point. This will give you a good feel for their expectations and will help you come up with specific suggestions that you could make to them re an agreement between the three of you going forward.

    When it comes to a partnership agreement you might find this article helpful - What should be in a business partnership agreement!

    Do you feel that Friend 1 contributes anything to the business? If not perhaps there is no reason for this person to be a partner at all.

    Please post back with your thoughts.
     
  4. bixby77

    bixby77
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    Well, they aren't exactly business people, and they might get the sense that "partners" means "equal".

    Do you think I should casually ask them, "so, how do you guys want to split the profits?"

    My main argument is I took all the risk and funded the project, it was my idea, I made the name and created everything, and that I do double or more the work because they might be there to film, but I'll spend an equal or greater amount of time editing and deciding the creative direction any video goes (length of the video, song selection, etc etc)

    Their main argument might be that it's not "fair" I get such a big % and that they would be willing to share in editing duties in exchange for a larger share. But they have no idea how to edit, I already do it and I'm really good at it, and I would have to approve the final version, and yeah, basically I'm not at all interested in relinquishing editing duties.

    The other issue is that it's not an equal work / investment split between friend 1 / 2 either.

    Anyways, given what I've said, let's assume we plan to split between the 3 of us. What do you think is fair? I was thinking 70 / 20 / 10.

    Another issue, is that friend 2 is good talent, he has a lot of potential to be a "star" so to speak. So this partner to me, is essential.
     
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  5. eelizasanchez121

    eelizasanchez121
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    Hello Bix. I am also new here. It is really good to know about you. I think that you are a person with good talent and that is very good. You are a person with lots of good ideas. I am also planning to start a new business. May Be I get some good tips from you.
     
  6. Fergal

    Fergal
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    bixby77 rather than asking them that I'd suggest that you ask questions that are a little more general and subtle. Perhaps something along the lines of the following;

    • How do you see the business developing in the future?
    • What do you think is the potential for this business?
    • How would you like to be involved in it in the future?
    Your friends might surprise you, they probably understand that it was your idea and that you have put more into the business than them. Perhaps they are even more interested in helping you to get started, than they are in getting something out of it themselves. You probably won't know until you talk to them about it and it is better to know than not know, so you do need to have the conversation.

    Good luck with it and please do keep us updated.
     

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