Someone's business idea, my work, how should ownership be split?

[Jwan]

Hello all

I have a dilemma.

Someone proposed a business idea to me, it requires building an online platform, which I will be doing.

The person who proposed the idea won't be doing much (everything that he does or will do, can be done by my wife for example, or my Mum). The idea revolves around building an online platform, and I'll be doing that as the programmer (software engineer).

The idea itself was told to this person by the person's brother. So we have two brothers and me.

They want the business split 3 ways between the 3 of us.

That seems unfair to me. Am I being greedy? Or is this normal?

I'd like to hear your thoughts.

Thank you

 

[Mr D]

Yes it seems unfair.

Instead tell them to split it 2 ways and them to pay you for your work. They get to keep money for their idea, you get paid for your work up front and everyone can be happy.

 

[Jwan]

Yeah, sadly they don't have the money to hire software engineers, hence why it was proposed to me.

 

[Mr D]

Yeah, sadly they don't have the money to hire software engineers, hence why it was proposed to me.

Then perhaps more equitable 80 / 10 / 10 would suit better? Or more than 80.
The higher figure being the person doing the work for no money.

Without you they have what? Nothing?

 

[ImranR]

It sounds like you're taking most of the risk by way of time without knowing the rewards. I assume by your comments perhaps wrongly that the 2 brothers are largely playing a backseat role both now and the immediate future.

Unless it is a unique idea (and unfortunately there aren't many of them left) I'd consider dropping out until you all agree terms acceptable to you all. Otherwise, you'll forever be spiteful of the situation.

 

[billybob99]

Wasting your time.

They need to put their money where their mouth is if they think this is the next Facebook.

Otherwise jog on.

Funny how everyone that comes up with a billion dollar idea don't have a penny to spend.

 

[obscure]

So someone want one third of the business just for telling you his brothers idea?!?

Ideas are worthless. I spent over 20 years in the video game industry where this came up time after time. Someone (usually with a crayon drawing) wanting a development company to make their idea (without pay).

Even if it is a great idea it is still worth zero if it doesn't exist and isn't generating money. They need to pay you either in cash or in equity. If paying in equity then your are taking a much bigger risk than if paid up front in cash... therefore the payment should be bigger.

As Mr D said an 80 - 10 - 10 split is far closer to a fair deal but you could be generous and agree to a share earn back. If they work in the business after you have done the development work then they can earn back a % amount of shares.

Personally I think anyone as unrealistic as these idiots will be impossible to work with. You should walk away and use your time to do something you own.

 

[dotcomdude]

What are they going to do for the business once it’s up and running?

Alan Sugar has 5 million Twitter followers. He could send you more traffic than your server could cope with. If it’s him, take the deal. If it’s anyone else, ask them what they’re going to do for their stake...

 

[mattk]

Rather than a straight business split, why don't you ask for 100% of the profits up to your cost of developing the idea. Let's say it is 60 days effort at £500 per day. Therefore the first £30k of profits are paid to you to cover your initial time investment and then after that all further profits are split one third each?

That way the brothers won't feel as if you are ripping them off and you get to cover your costs. Of course, the risk is that the idea goes nowhere and you've invested a significant amount of your time for no return, but that is a risk either way.

 

[fisicx]

Yeah, sadly they don't have the money to hire software engineers, hence why it was proposed to me.

If they have no money for development they have no money for marketing. Which means no money. You will get zero.

If they believe their idea is viable they can take out a loan, get a second job, cut back on their expenditure, sell body parts and raise the capital.

 

[STDFR33]

‘Thanks for the idea, I’m going to use my skills to develop it as my own’.
They’ll soon calm down their expectations.

 

[Stas Lawicki]

Several options here.

1) As @mattk says - note your hours, agree an hourly rate and have it recharged later if and when it takes off.

2) If they are that unimportant and unnecessary, ditch them and use the idea yourself, owning 100% of the business.

3) Set out exactly what they will be doing once the thing is built. Will they be working on sales, running the business, hiring, firing, delivering any additional services or products as a result?Perhaps they are working on this at the moment and you don't have a clue what they are doing?

One might argue that you getting a third for building a platform is unfair and that once its built, then what? Without knowing what the two brothers are going to be doing, how can you or anybody else know what share is fair? Life isn't 'fair'. Sometimes you're up, sometimes you're left behind - that's business. Look at the hundreds of posts on here every day about partners, work loads of some vs others, share deals etc etc. You'll never please everyone.

They might be posting on here asking 'our partner built a simple programme that got us started but the programme was replaced after 6months, has done nothing since and three years later still wants his 33%. How can we get rid of him?'.

Take a punt. If it's the real deal, do it yourself, otherwise figure out what else needs doing other than just the programme before you move either way. Ask for too much, they may find 10k to pay a third party and you've missed out.

Is this an ambiguous and non-committal enough way of saying only you can make the decision having worked out what is required to make this idea a business?!

 

[Jwan]

Thanks all.

@Stas Lawicki option 2 doesn't seem fair to me. It was their idea.

I forgot to mention, one of them is married to my sister.

You've all provided good insight. Thank you for all your responses

 

[Stas Lawicki]

I forgot to mention, one of them is married to my sister.

Yikes!! Ok, for the sake of peace and harmony you might be making the right decision not to opt for 2!

As others will concur - what ever you decide, get in straight legally and in a contract. Nobody wants to see another thread on a family business down the pan because nothing was agreed or written down formally... least of all you!

Good luck.

 

[fisicx]

I forgot to mention, one of them is married to my sister.

Run Away!

Seriously - don't go anywhere near this one. It will all end in tears, it always does.

 

[gpietersz]

I see ideas for software all the time. My main line of work is writing software to implement someone's idea, or modifying and maintaining such software. Every prospective customer tells me what idea(s) they have

I also do some work advising people on whether their ideas are feasible and how to go about developing it.

Ideas that are worth much in themselves are rare. The ones that are worth implementing are worth it because the person who have come up with the idea knows the market they are selling to, or has an existing business that would be improved by the idea or has resources to market it, or has the skills to run the platform, or whatever.

Set out exactly what they will be doing once the thing is built. Will they be working on sales, running the business, hiring, firing, delivering any additional services or products as a result?Perhaps they are working on this at the moment and you don't have a clue what they are doing?

If they are not making a large contribution to sales or running it or whatever then its never going to succeed anyway.

If they are, then your one third share might be fair, not because of the value of the idea, but because of the value of their contributions. SO they sit back while you write the software, but then you sit back while they run the business.

 

[fisicx]

If they are, then your one third share might be fair, not because of the value of the idea, but because of the value of their contributions. SO they sit back while you write the software, but then you sit back while they run the business.

Except in this case there won't be a business. They have no money which means that can't afford to market or support this new platform.

 

[Mr D]

Except in this case there won't be a business. They have no money which means that can't afford to market or support this new platform.

True.
If they cannot afford to have their idea produced then no way be able to pay considerably higher cost of marketing it.

 

[Chawton]

Run Away!

Seriously - don't go anywhere near this one. It will all end in tears, it always does.

This.

Stas Lawicki made some good suggestions, and provided a bit of useful balance too, but once the family link was disclosed everything screams: politely decline.

Alternatively go no further unless and until a comprehensive partnership agreement (or equivalent) is hammered out with a professional with all parties bearing an equal share of the cost for the same.

 

[gpietersz]

Except in this case there won't be a business. They have no money which means that can't afford to market or support this new platform

Probably, unless they already have a related business and can cross sell, or they are salespeople who can do the selling themselves, or they are going to do deliver the product, or they do not have money for both development and marketing so are looking to get development done for a stake or similar.

 

[Jwan]

@gpietersz Sadly, they're none of those things.

 

[fisicx]

Which means you politely decline and breath a sigh of relief.

 

[gpietersz]

Sadly, they're none of those things.

In that case the odds are that the idea will not work anyway.

I have seen this again and again and now, unless the client understands the business they are getting into I will turn down the work because I feel like a cheat if I am working on something I think its doomed to failure.

 

[Panoramix IP]

Whatever you decide, and as @Stas Lawicki says, make sure that there is a written agreement in place that deals with IP ownership. The basic position in UK law is that the person who creates IP, i.e., code or images used on the platform, owns it. That would change if you were a director of a limited company in which case the IP would be owned by the company. My advice if you go ahead with this is do it through a limited company and put a shareholders agreement in place so you have a mechanism to deal with splitting the company should it all go wrong.

 

[MBE2017]

Watch the Social Network for a guide.

 

[Porky]

Hello all

I have a dilemma.

Someone proposed a business idea to me, it requires building an online platform, which I will be doing.

The person who proposed the idea won't be doing much (everything that he does or will do, can be done by my wife for example, or my Mum). The idea revolves around building an online platform, and I'll be doing that as the programmer (software engineer).

The idea itself was told to this person by the person's brother. So we have two brothers and me.

They want the business split 3 ways between the 3 of us.

That seems unfair to me. Am I being greedy? Or is this normal?

I'd like to hear your thoughts.

Thank you

“A good idea is nothing without execution”

Met loads of people in my time with good ideas but won’t commit to seeing them through or want someone else to do the donkey work and ride off your coat tails.

Frankly I think anything you give them will be more than they deserve. If you are feeling charitable 10% split between them whichever way they want would be more than generous

Unless they can demonstrate what each would be doing, capital they will invest, work to get business in, they offer little value. And don’t forget if the business did take off, you would likely need cash further down the line and you might need to sell shares then hence further dilution of your position.

Good luck

 

[thqybdbzle]

Have you really checked it is viable, loads of people think their idea is new when there are 100 versions they are not aware of.

If it is, you are trying to figure out the best way to win, that might mean you do it, hire them or if they bring something beyond the idea to the table they own part of your business.

Great ideas are everywhere, great execution is a tad more important

 

[MOIC]

Whichever way the business is split (if agreed) within a limited company, you should be paid for your development costs at your current rates.

If they don't have the funds, then walk away.

Alternatively, get them to raise the funds, with them being responsible for the debt.

You retain ownership of the IP.

Have you discussed the situation with your sister, if so what has she advised?

Generally, working with family will create problems, whether in 2 years or 20. When that happens all siblings are affected. You don't want to be responsible for that. That would be my main issue.

 

[gpietersz]

That would change if you were a director of a limited company in which case the IP would be owned by the company.

Automatically? I thought it depended on whether the director was an employee etc.

In practice, in most businesses like this:

1. The code is a small part of the value of the business. User base, content, databases, relationships etc. are more valuable.
2. The code is built for a particular business it is only useful for someone in exactly the same line of business who is not committed to a different solution. Most code written for a specific business is very useful to that business but of no interest to anyone else - you could put it in a public code repository and no one will download it (except maybe a competitor who wants to get insights into your business processes - they will not use the code though).

 

[Ian fraser]

Hello all

I have a dilemma.

Someone proposed a business idea to me, it requires building an online platform, which I will be doing.

The person who proposed the idea won't be doing much (everything that he does or will do, can be done by my wife for example, or my Mum). The idea revolves around building an online platform, and I'll be doing that as the programmer (software engineer).

The idea itself was told to this person by the person's brother. So we have two brothers and me.

They want the business split 3 ways between the 3 of us.

That seems unfair to me. Am I being greedy? Or is this normal?

I'd like to hear your thoughts.

Thank you

What's greedy about wanting paid for your time and expertise?

Some Options :-
1. Take the idea for yourself, do the work yourself and retain any money made yourself.
2. Same as 1. but if you've got a moral conscience pay 1 or other or both of the brothers as you see fit something from your profits over and above the costs which would include whatever you decided to pay yourself for the development effort.
3. Agree whatever you feel is fair with them if your not prepared to go 1 or 2. If you can't agree something you don't do it, simple, let them go find someone else and keep your fingers crossed it's not another Facebook!

 

[ExoPaul]

If it were my brother-in-law I would offer to do it (family loyalty) but make it clear that it will be done in your spare time when you are wanting to spend time on it.
And that they both contribute to 66% of all the operating costs (hosting, domain name, etc) up front.
And get a contract drawn up for the 3-way split and them paying their share of operating costs.
And also in that contract (because you put in all the hard work to begin with) that should the business fail to make a profit after 12 months, then the entire platform reverts back to you.

The reason, aside from the harmony for your family, is that if YOU believe it may potential in the right hands, and you develop it in spare "hobby" time rather than paid work time, and they are paying up their share of basic costs (not your development time), then when it is built then you can hand it over to them to operate it with you then sitting back and having a nice 33% income while they worry about marketing it and so on.
It then becomes a revenue stream, an investment that only cost you spare time and a third of the operating costs involved. If it is successful and for example, it turns over £10M a year, you are sitting pretty on £3M a year having done all the hard work early on.
If it completely flops however, or they cannot afford the costs of hosting it or whatever, and it generates nothing after 1 year, then by contract law you get it back and you can either rebrand it as your own project and try to grow it for 100% of the profits. Or you can sell the platform to anyone that wants to buy it which hopefully will recoup some of the costs and your time involved in it.

Which ever happens, you have to believe in the product enough to see value in it even if it does not take off, in that you can sell it, or modify it to a business that you can use the platform for. That way you are not going to lose out too much financially (which you definitely shouldn't risk) and yet giving your Brother-in-law and his brother a chance.

But I also would say, whatever the business is, that it is not too unreasonable in my eyes if you build it and they take 2 thirds of the profit IF they are going to take over the operating of it. Mark Zuckerberg might have built Facebook, but it takes an army of people to operate the entire operation and make it lots of money so he doesn't have to. And that is the mentality you would need. That your job is to build it, not to then run it afterwards.

If these brothers expect you to not only build it AND run it once it is launched, and they just want to take a huge slice of the profits for the idea, then they are having a laugh and taking you for a mug.

So to summarise, build it in spare time, Only pay third of operating costs, get a contract before building it, once it is built let them do the running of it so you are sitting back and getting your third as an (time) investor, and if it flops, reclaim the platform you built and sell/repurpose it for yourself.

 

[Ray272]

I'm the ideas man on my team and thankfully I have a guy who can make it happen and he has done just that three times in the last decade based on my ideas. I can do other stuff too but if these brothers are dead weight just take it forward on your own and if something comes out of it give them a drink. Like a swift half and get back to work.

 

[Alison Moore]

We used to get it all the time, being software developers. People genuinely think that their 'idea' is worth millions and you just tap a few keys to make some production ready code. Big fat No to this, especially with the family connection.

 

[gpietersz]

We used to get it all the time, being software developers. People genuinely think that their 'idea' is worth millions and you just tap a few keys to make some production ready code.

My favourite is "I have a design, so all you need to do is write the backend".

 

[mattk]

My favourite is "I have a design, so all you need to do is write the backend".

My favourite is "I've got a unique idea no one else has thought of".

2 minutes on Google and there's half a dozen companies offering the same thing.

 

[Mr D]

My favourite is "I've got a unique idea no one else has thought of".

2 minutes on Google and there's half a dozen companies offering the same thing.

Amuses me on The Apprentice where someone claims to have a unique product and in seconds can track down competitors with exact same product.

However sometimes a product is worth producing even if it already exists. If can come up with a new spin on it.
Look at Dyson. Look at the car manufacturers. Look at mobile phone companies.

 

[gpietersz]

However sometimes a product is worth producing even if it already exists. If can come up with a new spin on it.

A good spin on an existing idea can be very good (for one thing you know the market exists), but even they are rare. There are not a lot of Dysons out there.

 

[alan1302]

Amuses me on The Apprentice where someone claims to have a unique product and in seconds can track down competitors with exact same product.

However sometimes a product is worth producing even if it already exists. If can come up with a new spin on it.
Look at Dyson. Look at the car manufacturers. Look at mobile phone companies.

Probably 99% of all companies produce something others produce.