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Ask HN: Starting company w/ non dev. How to divide profit/revenue/shares?

2 points by rfnslyr ↗ HN
Hey guys. I met a guy that wants to start a company. His idea is to go 50/50 on the company. He promises to bring in clients and work. He seems like he knows what he is talking about. We vibe together well.

We're meeting for a longer talk today. The problem is I don't want to give him 50% of profits from our early freelance projects just because he found the clients. I want to split the company 50/50 and profits on projects 75/25 (in the beginning while im the only developer).

How would you go about this HN?

11 comments

[ 10.4 ms ] story [ 101 ms ] thread
dylandrop
Could you expand on the idea of the company?

If it's just a freelance web dev company there's no reason he should be getting 50% of the profit. There's no way he's spending as much time as you searching for clients as you would be building the site. You could easy replace him with PeoplePerHour.

rfnslyr
Right now we're going to launch a creative agency. Anything from web apps, web design, mobile web apps, iOS apps, Android apps, I'm able to do all this. I really don't think he should be getting 50% of profits either, ridiculous.

He has marketing and business/sales experience.

What would you make the "finders fee"? I was thinking 80/20.

dylandrop
Yeah, that sounds about reasonable. I mean, think of it this way -- as a freelancer, you'd spend about 20% of your time finding clients, sitting with them, getting coffee, landing some of them. By the time you know it, you've used up ~8 hours of your ~40 hour work week. So he's doing 8 of the 40 hours of work, so 20%. Sounds reasonable to me.

This is all just an estimate by the way. Mileage may vary.

rfnslyr
I just talked to him and he will not do that. So I said "I'll do the work, it will be copyrighted under MY name, if shit hits the fan I take my work with me. All profits we make will be under the company name and all money will only go directly back into the company. We manage the money 50/50. Down the line once you get good and decent with code and you are able to help me out, then we can do 50/50 split of profits since we'll both be equal in workload."

I think that is more than fair.

rdouble
Well, signing the clients is actually the most important part.
rfnslyr
Really? Because I'm kind of building the entire product. He can't code at all. I need to determine a fair signing bonus.
hmmmOk
Wow, I wish all you smart people could teach the rest of us how to run a successful business. I mean, heck, all it takes to be a good business person is 20% of a coder's times? If that is all it takes, not sure why you are partnering up with someone who isn't a developer.
rfnslyr
I'm not sure how to interpret your comment. Kindly explain?
Anonymous238
He just misinterpreted the previous comments. When developers were saying 20% of their time goes to managing clients and 80% to coding, he thought they were implying stirring up business is easy compared to coding. However, they were simply saying 1 hour of searching for clients generated them about 4 hours of work. This means to have a balanced team, they'd need 4 developers for every 1 person on sales, otherwise, working equal hours, the sales person would be bringing in more work then the group can handle.
vonseel
I would think that someone out getting clients 100% of the time would soon bring in too much work for a single developer. That is the point at which you become an agency, and can afford to hire a team.

I would also be reluctant to give an equal share before that happens. Later on in the game, when you have a handful of developers under you, that's a different story.

Anonymous238
Agreed. How involved is he going to be outside of finding clients? Who's going to be the one going to meetings, drafting up invoices, working the phones, and constantly relaying updates? If he's just going to appear once a month to drop a project on your desk, of if he's going to scrap garbage clients off elance while dumping them on you and expecting half the profits, I'd be running.