Selling/losing half the business

[c4l]

Having a bit of a dilemma and not sure what to do!!?

I’ve sorted of offered half of my business to someone else!?!

Basically, the website has been online since June 2004 and has made a bit of progress since. I was dealing with 2 suppliers originally up until August last year when one of the suppliers sacked it’s manager, the guy who I dealt with and the new manager just really can’t come up with the goods. Then, in December 05, my main supplier went bust leaving me with just one supplier who isn’t as competitive as the others. Also, SEAT, the main manufacturer I deal with stopped making the main model that I sold and replaced it with something new – something that the dealers took as an opportunity to raise their percentage slightly and reduce my discount.

So, basically, since October 05, I’ve not sold a single car – first reason being as due to the above – second being that I’ve not really had a lot of time with everything else going on in life – wedding for example.

Over the weekend, I was chatting to a past customer who’s become more of a friend to be honest and he said he was looking for a new job. I suggested he take the website over. Thinking back, I still think this wasn’t a bad move but have a few options. Do I:

1. Rent him the site/domain/hosting on a monthly basis and take a small percentage of his sales.
2. Sell him 50% of the business outright.
3. PREFERRED OPTION – Give him an email address and let him get on with it, for free, and then take 50% of the profit that he makes for the first 12 months or so and look at the situation in 12 months time.

What do we think?

I don’t want to charge him a lot of money upfront but also want to retain some of the business. I use email addresses at my domain, also use the hosting space for ‘personal’ things too rather than by the business. The domain is up for renewal in June and at present, I’ve really not got any reason to renew it. Money’s tight at present with the hard hit of the wedding still in the air and I just cant afford to re-launch the site and market it actively with my own funds. My other half thinks the first 2 options above are a bad idea but I’m just not sure. The third option would get me a free member of staff basically for a year but would chop my margin by 50%. What does this matter though – the margin is 0 at the moment as there is no business taking place – I just need someone to resurrect it and in him doing so, I’ve got a new man on board, new contacts maybe and new ways of working.

Any thoughts guys and gals??

[DuaneJackson]

I'd go with Option 3, but make sure you are both aware that in 12 months it will all be reviewed and that you are both happy with this. Maybe even 3 months or 6 - you don't HAVE to change anything in 3/6 months, you can just say"lets carry on 'as is' for another 3" - but atleast you have the opportunity to change the game if you want to - 12 months is a long time.

Oh, and make sure the agreement is in writing. Others will tell you to make sure this is all legally binding. But I'm feeling the pinch of a wedding too and know legal fees aren't something you just have laying around right now.

I'd suggest you just write it all up so you both have a record of what was agreed more so that neither of you misunderstand what was agreed and end up in a situation whereby you are saying "but we said..." ... "no we didn't!"

Good luck!

[c4l]

Thanks for that Duane! Most helpful!!

[Top Hat]

Okay first you need to asses a few things

1) What the business is worth to you, reading your post, if you do nothing its worth nothing, zip zilch, correct?

2) What's it worth to your new partner? Basically it’s a leg up, a few systems in place, a supplier, something, but not much (he could start himself and own 100%)


Next you need to remember that all successful deals benefit all parties.

Option 3 IMHO is far to heavily weighted in your favour, if he goes for it, he's a fool who will very quickly loose interest.

Personally I would give him the business based on performance.

So if for each unit he sells during the first year, he gets a %, upto a max of 49%. He does nothing, he gets nothing.

Then after the a year (or whatever period) you review it, if you're still not going to work at the business, you need to give him more % over the next period, basically the same deal with higher targets, and lower % (You should end up with a small %)

So in the end you’ve sold your business, you've got a percentage of the profit for a few years and own a % of the business.

[D & J BOOKKEEPING SER]

good suggestions in here

1. how well do you know this person
2. can you trust him or her

im an accountant/bookkeeper and work from home and put it this way i have seen a lot of good companys go bust because of mistakes of either giving the business a way to someone or 50/50
with a partner

then things bad happen freinds start arguing and nearly fighting over money trust me i have seen this happen more than once

if he has got no job why dont you just say to him that you will make up an agreement stating thatyou will have 60% and he can have 40% of business

so after all the sales and everything you still end up with more because the fact is that its your business. And you have took time out there to build up business ok yeah you havent had much sales but it seems like you have just gave up

thats the wrong thing to do

do you work fulltime doing something else
email me at donna_spilsbury@yahoo.co.uk i would like to talk further about your ideas

[Cornish Steve]

This appears to be an ideal situation for a win-win agreement. In other words, think a little more creatively to come up with a scenario in which you both win. As others have pointed out, you're looking at this right now from your perspective. Try to think from the other person's perspective too. What would (s)he hope to get from this? How can you structure a deal such that you benefit if your potential partner meets his/her goals?

Renting the site benefits you and not your partner. What about giving this person your site and adjusting the percentage on sales? Why not increase your partner's commission percentage if certain targets are met? What about allowing him/her to expand the website to include new products? I don't know whether these are practical ideas of not, but you can see what I am getting at. Come up with the deal that truly is win-win, one in which your goals are well aligned.

[c4l]

Thanks guys.

I was thinking that 50% may be quite high. Good idea Steve - i could start at say 60% to him and 40% for me at first and then say that it would adjust to 75% 25% to him should he do say 10 sales within the first 6 months.

He would have every opportunity to change the website and introduce new products.

The way I see it though is that this guy is sat at home wondering how he can make some money - i could give him an email address and website access and the world is his oyster! He could get straight on the phone and introduce new dealers and new deals to the situation and could make us a lot of money. The website is still getting a steady amount of hits - just need some nicer deals to keep interest.

We've arranged to meet either late this week or early next week to discuss further. See how it goes then.

Any other thoughts greatly appreciated though in the meantime.

Donna - i have emailed you!

Cheers chaps - as ever UKBF proving to be a great source of information and advice!!

[c4l]

Top Hat - also a very good point. As you say, he does nothing - he loses nothing. An incentive would be nice.

Right. Cheers.

[directmarketingadvice]

I think it's hard to give advice here without knowing more about the business.

For example

(1) you've not sold a car for 4 months. Is this because you're not getting enough traffic to teh site or because the traffic isn't converting (or a bit of both)?

(2) What the best the site was doing when you were working on it?

(3) How does the traffic compare now to then? Why is there a difference?

(4) This guy is looking for a "job". How many cars a month would he have to sell to make what he was making before (assuming he keeps 100% of the profit per sale). Has the site been doing this consistently at any time in the past? Can it realistically do it again?

(5) If you were to put time and effort into the site, would you make a living from the site?

(6) If not, why would he make a living from it? What's he going to be bringing to the table that you can't?

(7) Does he know the current state of the business? If so, what's he planning to do differently to change the results? Will his ideas work? Is there something other than money that stops you doing this for yourself?

And there's probably a whole load of other questions you need to think about.

Looking at the options, option 3 has some promise, but without the 12 month rethink. If he manages to build up the site, you shouldn't have the right to pull the plug on his good work.

However, on the flipside, if he doesn't perform, you shouldn't have to keep the site going.

I think you need to think about what each side is bringing to the table and the expectations your friend has and whether they're realistic.

Steve

[VeryMark]

I'd suggest speaking to Jonathan at Hands On who's on here for legal advice on whatever you decide - it's important to get the right legal agreement in advance as you can't change it later and winging it might turn out expensive.

[c4l]

Cheers guys.

Reason that i've not sold many cars is that i just don't have a great deal of time at present to either market the site or convert the sales. This should change in summer but i could really do with a bit of a lift in sales to turn the site around now.

Most sales i've ever done in a month was 7 last April. That was with 4 x the hits that i'm getting now, so really i should be converting at least 1, if not 2 hits at present. That was with a lot of marketing though - i.e. £50 a month adwords. Now, i'm acheiving 25% of the hits at 0% of the cost. If i could market it a bit more, which is what i'm hoping the other guy will do, i should easily be able to get it to how it was last year.

One of my main problems was that i need to carry on working full time. This causes problems in that i cant answer phonecalls in work time - 1) for fear of being caught by my 'day job' boss; 2) the signal for mobiles in the office is poor. This meant i was spending 95% of my lunch break rining people back, then ringing dealers and so on and so on. Emailing isn't a problem - phones are though. The other chap works a variety of hours and is the boss too of his current place so will be able to speak a lot of the time if need be.

He is i suppose looking for a job, which i think is a major incentive! If he can get enough sales, he can quit work and do this full time. If not, it's just a bit of extra cash for his pocket. Same with me, if doing this as a partnership can get a lot more hits to the site, then maybe i could look at doing this and my profession of Quantity Surveying freelance and making a living that way.

I've been thinking about Option 3. I do think 12 months is a long time. Maybe tell him that we will review the situation in June. This is when i'll be totally geared up to go full on into the site with him. Otherwise, i think it's quite attractive to him as i could in theory tell him to get started now and get the sales coming in.