Hi Chris,

You are getting ready to place yourself into a very dangerous situation. Investing money and efforts to build a business that you have no control, or no equity in places you in a very vulnerable position. You future involvement in this business basically is controlled by the owner. If he decided to kick you out after you have rebuilt this into a successful business, there is nothing you can do to stop him. You have to know your partner and trust him that he will never do that, regardless of the circumstances. Many people will advise you to NEVER do this. I can not do that, because I am currently in the same situation... but I am the owner of the business. My partner is loyally working with me without any equity ownership at this time. He is basically at my mercy. I however am a person with a very strong moral character and integrity and will under any circumstances be unfair to him or his family and plan to give him equity ownership once he has earned it. However, in business many people are greedy and do not have this character. If you want to be certain, and sleep comfortable at night you are better starting your own business. Why are you not doing that? What benefit do you get from rebuilding his site rather then starting your own? You can email me at nick@cinetell.com if you want any more personal advice. tx, good luck edit

Hey Nick,
Thanks for such a great response.

My reasons for thinking of partnering with the owner are these:

He has a wealth of allready developed content.
A system that worked successfully for three years.
Old paying subscribers-some of which can likely be resurrected.

I do plan on asking for some sort of equity arrangement. In your experience, what would make sense for a revenue and equity share?

The owner was actively shopping the domain, but I think he still in his heart wanted to keep the business alive.

Would the revenue share be equivalent to the amount of work provided by each individual? And if I spend my money in getting the site to where it needs to be, would it be fair to ask for a 50% equity position up front. Along with say a revenue split tilted in my favor-since i would be doing more of the work?

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Hello Chris,

As on who has over 20 websites online (though most are for fun and the ones that bring in revenue are not big money makers) I am interested in what you are thinking on the legal lines. In the event later on down the road this person continues his website without you.

There are many online companies that will give a fair assessment of value on any website for your negotiations for equity share in return for your investment. This is where I would start.

Good Luck.... sounds fun!

Patsy

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Chris,

There are many ways you can do this. I personally will never give someone 50% equity of my business. I would like to stay in control of the business. The business needs to have a majority owner, someone who can make the final decision on certain issues. If you are both 50% owners, if you come to a disagreement, how will you decide who has the final word. A friend of mine says "Anything with more then one head is a monster". It's a good idea to either give him control with 51% if you want it split evenly or you ask for the 51% if you think you can get it.

Before you do anything, go over who is responsible for what duties, who is investing what, what happens in case one of you gets hurt or passes away God forbid ... pretty much you have to go over all of the worst case scenarios that can arise from a partnership and have a plan on how to deal with them. Most partnerships fail because people never plan for this, they think everything will be happy and dandy all the time, be smart, plan for everything and get everything on paper, notarized!!! If you do all these things, you will stand the greatest chance for success.

It doesn't matter how the equity is split, 51/49, 60/40, 70/30 etc. the profit should be split separate from the equity. For example: You can take 100% of the NET profit every month, 25% of that gets reinvested back into the business for growth and development. From the remaining money he can take 40% as an owner and you can take 60% since you are doing the work. If you are investing all the money and all the work, I would offer him a 70/30 split in my favor since he doesn't have to do anything, and I am doing all the work and taking the financial risk. Most importantly, he should value your offer and your commitment. If you find this guy difficult to work with, if you get the feeling that he is greedy and he will try to exploit you in any way, just pass up this opportunity and go get your own thing going. Especially if you have the funds to do it. It's not worth loosing your money and crushing your spirit on a bad deal gone bad!

My business is helping new businesses develop strategies to make them profitable with the goal of long term success. We do everything from brand development to marketing optimization to sophisticated web/it development and implementation ... If you would like to share some more detailed information with me, I can tell you what you need to do specifically in your case. It will be free advice, I don't want anything from you ... some say the advice is worth what you pay for it, lol. Send me an email to nick@cinetell.com and I would be glad to help a fellow entrepreneur out!!! edit