Advice Please - Profit Share

[Stacey Jones]

Looking for some advice on how I can articulate why I want a larger percentage of profits from a company I have been working with the last year. I think I deserve more than they are offering and I am interested in whether you think I should ask for more as we are negotiating terms for the next 2 years.

Background: I have been working with the sole distributor of a niche unique product in the UK. The distributor also owns the patent for the product with the manufacturers who are based overseas. There are 4 of them in total.

Cut a long story short I approached them last year and offered to help them raise awareness of their brand and product, they agreed and we had an informal but written agreement in place for 12 months that consisted of the following remuneration incentives:

- Share options on reaching targets in 12 months

- Websales Commission (after costs 100% of UK sales and 20% of Worldwide sales) – They made profit on UK sales as they effectively sold the website the product at the wholesale price so their profits were the difference of wholesale and cost price. They also got the remainder 80% of Worldwide sales) the 100% proportion they offered me for UK is because they had zero market and demand here.

- Percentage bonus on other existing smaller distributor sales if my raising awareness impacted orders numbers

- I also could buy their product at preferential rate to start a smaller distribution network myself

I took over all their social media accounts creating all my own content and initiatives. Followers up from 200 – 12000 on IG

No salary was paid and no marketing budget was provided to me (incentived by share options initially) I worked hard to raise awareness and make sales and my commissions and bonuses effectively paid for my own marketing so haven’t really made that much myself.

First year results are below, they acknowledge that these results are solely down to me.

Websales – from zero to between £5k and 7k each month, sales are mostly UK so I got the more generous 100% - Website is seeing 6-800 hits a day just from IG account content.

Wholesale distribution – They have seen a 275% increase in sales (this includes me buying as a distributor)

Now the 12 months is up they have reneged on the share options and they also want to change the percentage commission on the website to 50/50 so that they have a bigger share in the UK sales as that’s where the money is coming in – This cuts my revenue significantly.

My issues are with

1) Websales split, I am the only one that generates sales on the site and in additional to that they offer no money towards the marketing initiatives that create the sales, I know I deserve more than 50% but just looking for another perspective on it. They aren’t offering to do anything more for this 50% share. To add it’s just one member of the team that is involved with the operational side of the business and he deals with all of the logistics for the website so packing and dispatching. The other 3 are based at the manufacturing plant overseas and have no involvement in the day to day running of the business. I want a majority profit split from these sales.


2) Share options, this was my incentive for hitting my targets kind of like a ‘sweat equity’ and meant that I was OK with pumping my own money into marketing the brand as I had a slice of something I was helping to grow. Now that is no longer on the table I feel like I have worked like this under false pretences it’s like working hard for your salary and then at the end of the year someone asking you to give them your salary back so I feel like I need to be recompensed for that some other way?


I know it’s a bit long just wondered about general thoughts.

 

[mattk]

You have two options. Firstly you can appeal to their better nature. Show them the time and money you have spend on marketing and that you haven't really made a great deal for yourself during the first 12-months. Use this as a sign of your long-term commitment and that you need the 100% of UK sales in order for your work to pay off over a 3-5 year period. Use this to justify a higher percentage share.

The second option is to simply threaten to walk away unless they offer you a greater cut. This is of course only a meaningful threat if they cannot continue your work themselves or with a cheaper replacement. Only you can judge that.

I cannot comment on the share options. How much do you think this is worth.

Overall, it seems as if they do not understand the full value of your work. I think you need to help them recognise this. It sounds as if you have delivered a huge amount of value to their company, so this shouldn't be too hard.

 

[Newchodge]

What do you mean 'reneged on the share options'? Do you mean they are not going to honour last year's contract? In which case run away now, very fast. Or do you mean they are re-negotiating the whole package and are not offering share options going forward? In which case it is part of the negotiation.

 

[AlanJ1]

What do you mean 'reneged on the share options'? Do you mean they are not going to honour last year's contract? In which case run away now, very fast. Or do you mean they are re-negotiating the whole package and are not offering share options going forward? In which case it is part of the negotiation.

She mentioned she never hit her 12 month targets on which she would receive the share options, so it seems it is them negotiating on the next contract.

 

[Newchodge]

She mentioned she never hit her 12 month targets on which she would receive the share options, so it seems it is them negotiating on the next contract.

sorry, didn't see the bit about missing the 12 month target

 

[AlanJ1]

In relation to the questions asked, I would sit down, show them what you have spent and negotiate with them. They haven't taken anything away as you only had targets for 1 year in place, by not hitting these you never met the contractual requirements to get the shares.

 

[Stacey Jones]

sorry, didn't see the bit about missing the 12 month target

I hit my targets... they are reengaging as they have a different company set up which apparently means they don't have the shares to give away now

 

[AlanJ1]

I hit my targets... they are reengaging as they have a different company set up which apparently means they don't have the shares to give away now

It seemed from your writing the targets weren't hit.
Have you got it in writing the target and on achieving this you will receive the shares?

 

[Stacey Jones]

Apologies it

It seemed from your writing the targets weren't hit.
Have you got it in writing the target and on achieving this you will receive the shares?

Apologies it wasn't meant to come across that way. I had a comfort letterproviding me shares on exit if they sold the company. Legally the comfort letter doesn't really give much of a leg to stand on. They have no plans to sell the company so say that it isn't really relevant now anyway.

 

[AlanJ1]

Apologies it


Apologies it wasn't meant to come across that way. I had a comfort letter which providing me shares on exit if they sold the company. Legally the comfort letter doesn't really give much of a leg to stand on. They have no plans to sell the company so say that it isn't really relevant now anyway.

I would suggest you take a long hard look at the company you are working for and if they are someone you can trust going forward to work for/with.
If you do want to stick them out, then you simply have to negotiate everything with them, prove what you are worth and what they would lose if you left. What you think you deserve can be totally different to what they want to give up.

 

[Stacey Jones]

Thanks for responses, it's difficult when you enjoy what you do, work hard and thennot valued, but like you say they will only be prepared to give up a certain amount.

 

[Newchodge]

They have already reneged on a contract - get out

 

[netdesignr]

As @Newchodge suggested, to get out seems the more tangible way. A good friend of mine was in a very similar situation and lost a few years before taking that decision. Of course, it's easy to judge from the outside but sometimes it's better to understand when to stop and start fresh.

 

[MBE2017]

Your other option is to negotiate a true contract, I doubt they would want to lose yourself after increasing their sales so well. I would push to become the sole UK distributor, where you buy at wholesale and you retain all of the UK profits, look for a minimum 3-5 year commitment.

Make sure you get a lawyer to make the agreement, normally the manufacturer would want agreed annual sales figures to keep the agreement in place, then market it through your own uk distributor website.

All real value in sales comes from owning the end client.

 

[billmccallum1957]

"we had an informal but written agreement in place" Did this include a share option or just an exit on sale?

If it was just an exit on sale issue, then they have not breached any agreement.

Time to move on.

 

[Newchodge]

I don't understand the concept of an informal written agreement. If it is agreed, it is probably contractual. If it's not a contract, why is it in writing?