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Startup/formation quandry

Discussion in 'General Business Forum' started by muppetdave, May 6, 2009.

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  1. muppetdave

    muppetdave UKBF Contributor Free Member

    89 22
    I have a particular idea that I really need to get in to action. It's relatively straightforward in terms of the idea itself, it's more the design/website side of things that I really need to get in to order.

    Time-wise to learn all of the design aspects required, it's an absolute no-no, someone one day will hit the market with this service and I'll lose out.

    With limited personal funding to pay for the services required, I had in mind approaching a friend of mine who runs a good design agency, with whom I have worked for a number of years, and I am comfortable in how they operate and who they are. My initial plan was to talk about procuring their services for a smaller percentage of the business.

    However yesterday, knowing that I flounder sometimes and need a bit of a kick up the arse to get things moving, I decided to speak to my designer about the project to gauge some initial interest. He's very interested and made comment that we'd need to go in equally.

    Now I'm not trying to be stupidly greedy, and I'd rather have 50% of something than the 100% of nothing if I don't move things forward. Certainly initially, there would be more onus on him/his company doing the work to get a lot of the ball rolling. He also made comment that obviously it's my baby. When we start having more formal discussions, should I be looking to up my 50%? I think I know the answer, but wanted to get some feel from people who've probably been through this before.

    Also, some general comments/thoughts on the provision of his design services would be appreciated. In my mind, I would like his company to provide those services as a supplier (albeit discounted/with good terms I would hope), rather than be an in-house function in order to make the business a better standalone company. Any thoughts on that front?
    Posted: May 6, 2009 By: muppetdave Member since: Oct 28, 2008
  2. MyAccountantOnline

    MyAccountantOnline UKBF Legend Full Member

    13,147 2,461
    If you have doubts now that a joint venture/partnership wont work it probably wont.

    Could you not approach a bank for funding and then use your friends services as an independent supplier?
    Posted: May 6, 2009 By: MyAccountantOnline Member since: Sep 24, 2008
  3. muppetdave

    muppetdave UKBF Contributor Free Member

    89 22

    I'm not particularly having doubts. In fact I'm probably more for going down this avenue than against, working on the basis of sharing the workload etc. I was more trying to gauge whether or not I'm being too grabby, and picking up any pros/cons I'd not considered along the way.
    Posted: May 6, 2009 By: muppetdave Member since: Oct 28, 2008

    JADEMEDIA UKBF Newcomer Free Member

    127 22
    Hi Dave.
    Before anyone can answer the question as to what may be a reasonable equity share you will need to supply more information because all you seem to have now is some vague idea of 'sharing the workload'. That rarely happens in business partnerships because they are complicated by nature simply because each role is different. After this web site is designed for example the designer may feel that he has done his job leaving you to manage the business on your own.

    So OK. You come back and say that you expected him to spend a great deal of time on SEO but why should he. He has a web site design business to look after. All of which leads to resentment at first and then a complete breakdown in the relationship.

    Unless there is a specific reason to take on a partner who will contribute to the running of the business on a everyday basis - and equally important that role is clearly defined it is best to avoid partners - and never, never give up control by giving away 50% of the company. That all to often means gridlock.

    That is not to say you couldn't do a deal by offering the guy a stake in the business as a non voting shareholder. Nicola's suggestion that you try other avenues before considering a partner is by far the best and I would this to it.

    If you can't find the money for a web site from your own resources the chances are the business will fail very quickly because the biggest handicap facing every new business - and even the big established ones these days is cash-flow. Jade
    Posted: May 6, 2009 By: JADEMEDIA Member since: Jan 1, 2009
  5. muppetdave

    muppetdave UKBF Contributor Free Member

    89 22
    Thanks for the comments Jade, some very interesting points which clarify a bit more the cons to looking at a full partnership approach.
    Posted: May 6, 2009 By: muppetdave Member since: Oct 28, 2008
  6. dsigner

    dsigner UKBF Newcomer Free Member

    375 55
    If you want to go ahead fine. Insufficient data to comment. But if you propose a partnership then you need to understand how decisions are to be made 50/50 raely works. 51/49 is OK unless you intend to sell shares to raise cash. Then think that 5% is enough to have decision making power if the principals disagree. Control matters far more than most people realise at your stage.
    Posted: May 6, 2009 By: dsigner Member since: Jun 6, 2008
  7. KateCB

    KateCB UKBF Ace Free Member

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    The thing I wonder is that as you have already spokent to this designer about the idea, how likely are they/is he to run with the idea if you can't agree on the %split - did you ask him to sign a confidentiality agreement before your told him about the idea?

    Lots of things to consider - who will do what, when for how long - how can each persons value be measured? - 50/50 is never good, its stalemate......
    Posted: May 6, 2009 By: KateCB Member since: May 11, 2006
  8. muppetdave

    muppetdave UKBF Contributor Free Member

    89 22
    We've had a very initial conversation, conceptual rather than high levels of detail. No NDA/Confidentiality as yet, but was going to go down that route when we sit down to talk through it fully (although I know you'll all jump in with sirens blaring that I've missed the boat on that!). I know it doesn't technically count for much, but the reason I was going to speak to this chap, is that there is a level of trust in place.

    Some interesting comments being raised now though, thanks people, it is helping to polarize my thoughts. And although it may be the tougher route initially, perhaps I am just better off to buy-in their services (or as I mentioned offer a smaller share of the business in return for a set level of service provision, which was my original consideration).

    Whilst we're on the subject, would anyone have a basic NDA that could be utilised/plagirised?
    Posted: May 6, 2009 By: muppetdave Member since: Oct 28, 2008
  9. KateCB

    KateCB UKBF Ace Free Member

    2,258 534
    Posted: May 6, 2009 By: KateCB Member since: May 11, 2006
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