# Who should have a bigger share?



## Joeyt (Jan 10, 2011)

Hi guys. Hope i can get some help here. My friends and I are looking to start a small business, printing tee shirts. Basically, one is an investor, and another, the designer and founder(myself). That's about it.

My friend, who is loaded, saw my designs and was impressed with it. As such, he was willing to fork out the required amount to get my first batch of tees done. As a test marker among friends.

Do understand that I, the founder and designer, will be doing almost all of the work. Designing, sourcing for suppliers, website and such. 

However, my friend is of the belief that as investor, as the one who is pumping money in, he should get most of the shares. We're talking somewhere along the line of 80-20. Personally, my thinking is that I came up with the designs, and since I'm doing most of the work, I should be credited relevantly. Here's what i would like to ask - should parity be enjoyed here, or is it natural that the investor gets most of the shares? Or should the designer get more of the shares? We're in the midst of drafting an agreement..

I kinda have a second question to ask.. But I'll just stop at here. Will really appreciate your help because I'm really new to this discipline.


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## BroJames (Jul 8, 2008)

How much is the bigger share and what is the 80-20? 

There are really no hard and fast rules. Maybe it boils down to mutual understanding or something like supply and demand. How much do you need him and how much does he need you? How much risk is he taking? How established are you as a printer? How much capital is he infusing?


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## Joeyt (Jan 10, 2011)

BroJames said:


> There are really no hard and fast rules that I know of. Maybe it boils down to mutual understanding or something like supply and demand. How much do you need him and how much does he need you? How much risk is he taking? How established are you as a printer? How much capital is he infusing?


Let's just say we are really good friends and both of us really want this to happen. I can't exactly answer your question, as to who needs who more. I need his money, without it, I can't start anything. He needs my designs because without it, he can't start anything. What I would like to know is really in the real-world (sounds weird), who gets more shares under a circumstance such as mine?


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## BroJames (Jul 8, 2008)

Then that makes it more difficult. Something like a stand off. If the who needs who more is on an almost equal balance I would say the investor has the bigger share. But then you do the design and the printing. Who does the managing and the marketing?

The person doing the managing is usually entitled to some allowance or financial incentive. Maybe even a 10-20% share of the net profit before the industrial and financial partners' get their share depending on how valuable that person is. He can also be entitled to a monthly salary plus monthly allowance. 

In a piggery farm where I used to work as farm manager and asst general manager, I get 10% of the net profit. I have no hands-on experience then. In some farms, I heard the farm manager gets 20%. In the last company I worked for, I am not even an industrial partner but assistant manager, I receive about 1.5% of the net profit before the shareholders divide the profits. Also an allowance of roughly 0.5%. I think you can try discussing the various incentives for the person managing the company, whether its you or your partner.

For your designs, maybe you can workout something like an allowance for every approved design plus additional incentives for every design that sells well like X dozens within a certain period of time. Likewise, some sort of sales-based incentives can be given to the person handling the marketing. But these should be separate of the partnership sharing.


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## Skinbus (Jul 2, 2007)

This seems like the "chicken or the egg" issue & it's really a tough call. If I were you, unless there are any other issues not stated here, I wouldn't take less than 45%. If possible, I'd also consider going elsewhere for the money. If the two of you are truly friends, a deal like this could ruin it for both of you. What's more important; the business or the friendship? Good luck either way!


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## binki (Jul 16, 2006)

If I am putting my money into it I want control. You can have all the great ideas in the world but If you don't have the loot to make it happen then you are nowhere. Now, giving up 80% equity is a little steep. I would think something like 60/40 might be more like it.


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## Joeyt (Jan 10, 2011)

binki said:


> If I am putting my money into it I want control. You can have all the great ideas in the world but If you don't have the loot to make it happen then you are nowhere. Now, giving up 80% equity is a little steep. I would think something like 60/40 might be more like it.


But am I right to say that if you have all the money in the world, but not one great sellable design, you will get nowhere multiplying that amount of money you have?

Well I guess it's all a fair exchange - each party needs the other just as much. 

Do you guys have any good reads or websites I can look into which teaches one how to go about spitting company's dividends?


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## pukingdeserthobo (Jun 3, 2008)

What exactly is each party doing. Make a list


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## Louie2010 (Feb 26, 2010)

Joeyt said:


> we are really good friends and both of us really want this to happen.


If that is true, you should be able to work out something fair to both of you.

IMO, if I were you I wouldn't want to give up a large % of my company if you are going to be doing all the work, and have all the ideas. Instead I would approach him with the idea of it being a one time investment.

All the proceeds first to your friend until he re-coops his investment. After that you split the profits from the remaining shirts 50/50, or maybe give up 60/40.

After that you might have enough money to go it alone, that really should be your goal. If you have to, maybe repeat the process where he can make another quick return on his investment in order to raise more money.

Also keep in mind that going into business long term with friends can likely ruin a friendship


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## kriscad (Dec 18, 2006)

80/20???

Tell me how much Cash he is putting up. That is what is important to know=-


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## gotshirtz001 (Sep 23, 2008)

I would approach it one of two ways: a simple loan or a partnership

A simple loan is easy... it has amounts, time frames and returns. (Example: Joe Bob loans Billy Ray $2500 with a promise to repay $3500 in 90 days. Profit: $1000)

The investor simply needs to decide if the terms and return are acceptable... whether your net profit from sales is $500 or $5000, the investor return does not change.... and they cannot gripe if you make a fortune off their money.

A partnership is a little trickier and this will be where you guys see how strong the friendship is... This is where you each get to puff out your chest and see who can toot their own horn louder in regards to their own self importance to the project. Usually a partnership such as this does not have guaranteed returns but rather the investor figures he/she can get a bigger return over time as the project grows. Another sticking point might be how to break the investor relationship if this this goes huge and you have enough money to go at it alone... Nothing like trying to have a "Thanks but I got it from here" talk once it gets successful. Could end up as a lawsuit if terms are not crystal clear.

At this point, you have ideas with no product and a dream of attracting a finicky public. Finding someone to give you unsecured money with the hope that you can do what you say you can do will be tough at this point (read all postings regarding failed clothing lines)... this means you probably need him more than he needs you.

I agree that you should not take less than 40% of the profits but I would encourage you to lean towards the structure of a simple loan... or not at all.

It may be a better deal to try and form a partnership with a printer rather than a friend.

Cost of initial run ... $2000
Profit made after retail sales ... $2500
Ruining a friendship over a few hundred dollars ... Priceless


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## leadergrafx (Sep 29, 2008)

Most States have laws against investors taking advantage of people needing venture capital. Usury Laws vary from State to State. check that out. A $5,000 investment is absolutely nothing in comparison to the kind of money you could potentially make. Your investor doesn't sound like he is real involved in investing, IMO, or he/she would not be requesting that kind of a %. If the company made a million, he would get 800,000 and you get enough to survive and run a business on. Stockholders don't get controlling interest of a company. Sounds like they want CONTROL. Not sugarcoating anything, and I know you are anxious, but try to do it yourself, build a loyal base, develop a demand for your designs and then the investors will be coming out of the woodwork, Good Luck in your venture.


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## binki (Jul 16, 2006)

You have to negotiate, that is for sure. But the guy with the money can invest it anywhere. 

Look at it this way. If you go under you still have your great ideas but his scratch is gone but you can find your next investor.

Why wouldn't you accept 40% equity? How long would it take you to earn that amount without the startup cash?

It is not uncommon to give up equity when someone is investing in your idea.


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## SnapGraphics (Dec 21, 2010)

Obviously there are many options but honestly 50 - 50. I have a buddy that owns a clothing line and he has to many partners. Every time there is someone introduced to the group and they can bring a new aspect to the business they add a Partner. I clearly don't recommend this. If you can't do the business without his cash then you owe him 50 - 50. Otherwise borrow the money from him and pay him some interest on the cash.


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## johnatwar (Aug 9, 2010)

pay him his money back and use you're own money, you can use your profits to get yourself off the ground.


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## BroJames (Jul 8, 2008)

Personally I think the 80-20 split is too stiff considering your contributions to the company as you stated. But as I posted earlier, 20% is what some farm managers with farm management skills gets. On top of farm management, I source for the feeds, do the feed formulation myself, market the hogs or look for buyers, took on limited role as veterinarian or techncian, etc. We can equate the farm management skills with your designs. Still, I think you should try negotiate for some incentives off your designs because of the creativity involved. Or maybe negotiate for at least 30% share. Try convincing your partner that 20% is OK if it does not involve designing or whatever you think it is that separates your talents from other fields.

But again, as I mentioned, it depends really on who needs who more. How impressed is he with your designs? How much is he infusing? How much do you need the funding? If he is infusing at least $15,000 or enough to buy a 8/4 rotary press, a 3-5000w MH exposure unit, a conveyor dryer with at least 100shirts per hour capacity, and other equipment for a full setup, plus enough operating expenses for 6 months, then 20-25% would be acceptable.

Also read the agreement carefully. Is there a provision where you'll be tied with the partnership for a X among of years? Or a clause where you cannot do screen printing for X number of years after leaving the partnership? If there are some such or similar restrictions, I would not accept anything less than 40%.

Also note when and how he will infuse the capital. Let it be put in black and white that it will be in non-financed cash because any loan must be paid up first before you can split the profits. Likewise try to insert provisions that will void your agreement if the funds are not infused at the agreed time.

Now, a little off-topic, there is one thing I would like to add and some people may have heard of it more than enough, look at the line table printing system and the DIY equipment you can do to get you started. I am not really expecting majority of printers used to the rotary or carousel press to give it a try. And for those who do, they would have to make a number of adjustments in their printing style. But it's your ticket to go it all alone for a 100% share. I can only assure you that the system works and is suitable for commercial operations. 

If you are really worth the 20% or more share then profits would roll in. If by that time you still yearn for a rotary press, as Johnatwar posted, *"you can use your profits to get yourself ..."* whatever it is you want.


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## Joeyt (Jan 10, 2011)

Here's what the both of us will be tasked to do if this business should ever take off. Do understand that my friend, the investor, has no prior knowledge or business ideas to talk about. As for myself, I am well-versed in marketing our design, trademarking it, business protocols (e.g. How to safe keep your .psd files and send .jpeg files instead, for a lack of a better example). Since i am the one who came up with the initial design and name of the company, I have a very clear and distinct idea of its concept and how I should market it. 

My friend will manage all of the accounts and book keeping. That's about it.

Whereas for myself, I am going to be the designer, brains of the marketing department, controller of the contents of our online store and website, sourcing of suppliers for printing and packaging, and anything else that is not mentioned, I am about the one who needs to take the lead and start the ball rolling. 

I am really stressed about the situation. My investor is claiming that since he is putting in all of the money(the figure we are talking about is SGD5000), he should at least be getting back a considerable amount. We have calculated that if we manage to completely sell our first batch of tee shirts, we will have a take-back sum of SGD6000. If you take 80% x 6000, you're looking at 4800. That's if it's a share of 80-20. I don't think I'm too much for that idea of earning so little. 

From what I see, I am not just a designer who provides the design. Consider the amount of effort and workload i have to commit (as mentioned above). My friends are telling me that the investor is earning more than what he ought to. 

Someone please guide this confused boy who feels he has been treated unfairly!


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## wmckillop (Dec 1, 2009)

so after he puts up X amount of dollars what is he bringing to the business? are you doing all the design and printing forever where he is kicking in X and getting paid for life? 

All great advice in this post, error on the side of caution when dealing with money.

My advice if he is not a working partner - if you have designs that will sell contract the printing to a current printer and sell the shirts the printer prints. Then use the profit to invest in production equipment, website, and etc. This will keep your investment low and also prove your great designs sell to customers. 

A year or so down the road if he is not working on this business i am guessing you will not want to give up the bulk of the profits.


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## TshirtGuru (Jul 9, 2008)

I suggest not partnering with your friend as an investor. You guys already can't agree on the terms and you haven't even started yet! When things don't go right, I can see the situation getting worse. It happens all the time with friends and family.

But in your case, id say 50/50 seems fair.


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## Joeyt (Jan 10, 2011)

wmckillop said:


> so after he puts up X amount of dollars what is he bringing to the business? are you doing all the design and printing forever where he is kicking in X and getting paid for life?
> 
> All great advice in this post, error on the side of caution when dealing with money.
> 
> ...


I don't think you'll be wrong to say my friend will not be bringing anything serious and critical to this business. Except for his opinions by mouth and accounts book keeping, which for a matter of fact, is something that I'm capable of handing. He will be handed this job only because that is about the only thing he is capable of doing.


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## Joeyt (Jan 10, 2011)

TshirtGuru said:


> I suggest not partnering with your friend as an investor. You guys already can't agree on the terms and you haven't even started yet! When things don't go right, I can see the situation getting worse. It happens all the time with friends and family.
> 
> But in your case, id say 50/50 seems fair.


I guess what you say makes sense. But I don't want to throw this friendship away just like that. The investor is someone who doesn't have had any form of art-related studies or experiences. I think that is the most probable reason why he thinks that going into a business, an investor should rightfully be earning most of it. I have explained and told him that it is different for designers, inventors and such. Imagine i invented this new product with a highly marketable concept and function. An investor pops by and sees this as a money making scheme. He's gna have to pay me a high amount so that I sell him the rights to distribute it. 

I guess it's the same concept here in my circumstance. And on top of that, I am still tasked to do a whole ****load of work. 

As much as i feel that i have been treated unfairly, I don't want this golden opportunity to start this business to slip away just like that. 

The setting was a simple Chinese coffeeshop. We just had our supper and was puffing on a few cigarettes. He picked up my phone and saw my wallpaper(my designs). He asked what it was. I explained. Explain that it's been 3 years but it won't reach the next step because of the lack of funds.mAnd almost instantaneously, he looked me in the eye and said something like, 'I'll give you $5000, are you capable of doing 
it?'. I said yes and agreed almost immediately.

It was almost like a fairytale!! Until this....


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## Louie2010 (Feb 26, 2010)

Instead of giving up anything near 80% (or even 50% for that matter) of my business for only $5000.00, I would try and work my rear off to come up with the money. Try and get a second job for six months or so doing anything, even if it is just delivering pizzas in the evenings. Have a yard sale and sell anything you don't need.

Sit down and write out a goal to come up with the $5000 by the end of the year, and do it yourself. That will save yourself a lot of problems in the long run, and probably save your friendship as well.


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## jiarby (Feb 8, 2007)

80/20 is not a business deal.... it is a job. He is just hiring you to work for him at 20%. 

Incorporate your business WITHOUT HIM... then create 10,000 shares of stock. You keep 5500 of them. Offer him some shares, maybe 20%. Get some OTHER investors too. 

With the share system you can simply buy them back from him if you need to.... and you can declare bankruptcy and wipe out his investment if it goes bad. 

If you give up majority control then all you have dome is buy a job.. not start a business.


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## FreightGuyNTX (Jan 16, 2011)

It sounds like you need to do this by yourself if 
you're serious about it. To gamble with someone
else's money is something that shouldn't be done lightly,
or direspectfully. 
If this person is someone you truly consider a friend then
it may be a better idea in the long term to value that friendship
higher than the 5,000.00 you're speaking of. 
You've already been working on getting this business started,
so you shouldn't be too far away from having the start up cash together
to do it on your own right?


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## Biglefty25 (Oct 21, 2010)

I would Simply ask your friend to loan you the money with guaranteed pay back and have him collect 40 percent of the profits until you have payed him or her back the full amount! Start this adventure by yourself, and in the end you will still have your friend!


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## BroJames (Jul 8, 2008)

jiarby said:


> 80/20 is not a business deal.... it is a job. He is just hiring you to work for him at 20%.
> 
> Incorporate your business WITHOUT HIM... then create 10,000 shares of stock. You keep 5500 of them. Offer him some shares, maybe 20%. Get some OTHER investors too.
> 
> ...



80/20 does not make one an employee. But as I mentioned above, I think that 80/20 is too stiff because of the "designing/creativity" involved on top of the management/marketing. Maybe not really too stiff but inappropriate. From the viewpoint of an investor, the differences between an employee and a partner is often blurred - both are expected to give their best. 

Aiming for a 50/50 as others suggested is to my mind unrealistic. It is better to just decline the offer politely. 

For SGD5,000 (US$3,900 or Php174,000), I'd turn the deal down. That won't be enough to buy a decent brand new 8/8 press (with shipping and duties). 

Since the Philippines and Singapore are geographically close I presume shipping cost is almost the same if not higher. I am guessing that taxes are higher in Singapore. 

Last year, a potential partner and I did some estimates for a "modern" setup. For an 8/8 manual rotary press, flash cure, metal halide exposure, conveyor dryer, and other stuff mostly from Asia, plus some operating capital including rental deposits, computers, printer, we'd need about P1million pesos(SGD29,000 or US$22,600). Do note that all equipment, although well made and of good quality, are from the Asian region. For a US press, exposure unit, dryer, etc, We estimated the total exceeding Php1.5million (SGD43,200 or US$33,700). 

The minimum for a 6/6 rotary, UV exposure unit, and others (all form Asia) is Php600,000 (US$12,500 or SGD17,300). I'll accept 30% but can leave anytime after 1 year or maybe 2.


Starting the business alone seems like a good idea. It does not really have to be a corporation although incorporation helps. Does Singapore have a strong protection for partnerships? 

At its simplest form, you can just say you have set up this company and am looking for investors. That the company is divided into 10 or 100 shares .



Biglefty25 said:


> I would Simply ask your friend to loan you the money with guaranteed pay back and have him collect 40 percent of the profits until you have payed him or her back the full amount! Start this adventure by yourself, and in the end you will still have your friend!



As a business, I would ask for a collateral. Without collateral, the interest would be higher.


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## ai file (Sep 9, 2006)

I have to say this - definitely do this ALONE. Take out a bank loan, get it from your parents, relatives, pool the money, partner with other designers, printers, venture capiltalists, etc. 

Whatever it is, you know what they say about rooming with your best friend.


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## harleyrider11 (Jan 16, 2007)

IMO a loan from your investor/friend makes the best deal for you and him. Get the 5000 as a loan offer him 15 % return on his money within X amount of time and then as an extra offer an add in % after all your expenses for a X amount of time after you have paid off his loan with interest. 
Keep your investors out of the day to day business. All they need to know what and when they will getting for the investment.

Get your business up and going making money and should you come up with a new design or product you could consider another loan with same arranges as not to use your profits to kick off a new ideal. Keep him as an investor with return on his money and you will always have his friendship.

Should the business take off and be worth $$$$$, you could offer the total business for big $$$$$$$$, deposit it and possibly manage it after he buys your business and pay you 20% as the pig farm did Brojames. Just my thought.


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## red514 (Jul 21, 2009)

i agree with what most are saying here, the 80/20 deal is a bad move... really bad.

5000$ really isn't much, if that's all you need, get a loan, get credit cards...
there's a reason for the saying 'don't mix business and friendship', it often doesn't work out.


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## Dermy (Jan 25, 2011)

DONT GIVE THIS MAN 80%.
Don't give him any %.

Ok here is what you do...

You and your friends are the key players and this other guy hes just the financer. Other than his money he is of no value to you and considering his 80% share he is demanding he isn't a very good friend.

You should take his money and pay him interest after you sell YOUR t-shirts.
Like say he gives you $200 after you sell your product and make a profit give him 250$ back(max)

Kepp borrowing money from him until evetually you have enough income to cut him out.


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## Joeyt (Jan 10, 2011)

You guys... Are... Simply... Excellent!!! 

At the start, I was just dying, raring to jump into the business. Although at the start, I felt treated unfairly, I was no doubt with the mentality of, "let's just do it. I want this and i want this bad. I can't be bothered of its profits. I need my clothing label to be up this very moment! I want it to start alr!". I was willing to do it, although always hesitating. I told myself that if I learn to remind myself of the time I have wasted sitting on this project, I will be able to handle the job with head held high. 

But I felt something holding me back. And I thank God someone led me into this forum. Somehow or another, I am here. You guys broke every little details of the agreement down, provided a fine explanation of each decision, and on top of all, you guys indirectly protected me - you guys taught me how to protect my designs and my shares!

You guys are just awesome!

I am glad to say that after all of these, I managed to pluck out enough courage to consult my dad about my project. He agreed almost immediately, and said that it was about time I start getting my own fair share of good and bad experiences from a business. 

And then i thought about how i could still keep my friend in the picture, yet still having most of the control. Now, we are looking at 3000 from me, 2000 from him, and a share of 70-30 respectively! I'm not sure what you guys think about that.. Please bear in mind that I will still be handling the majority of the job. I wna hear what you guys think! Please!

Serious, sincere, earnest, big, "Thank you!!!" for all the help guys. If not, i would have been still living under the shell. Big cheers to t-shirt forums and its founder!


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## DivineBling (Sep 14, 2010)

With you putting in more than half and doing way more than half of the work, I would say that 70% is more than generous on your part. I really hope your friend holds up his end of the deal with the bookkeeping. 

Congratulations on everything you've accomplished so far! The planning stages take so much time! I'm anxious to see your designs!!!


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## BroJames (Jul 8, 2008)

harleyrider11 said:


> ...
> 
> Should the business take off and be worth $$$$$, you could offer the total business for big $$$$$$$$, deposit it and possibly manage it after he buys your business and pay you 20% as the pig farm did Brojames. Just my thought.


I got only 10% because I lacked the hands on experience at that time. It was really OK for me as I planned to stay for only a few years and gain the experience I want.

But one thing I would like to share as this happened to me and should be something to think about. After a while, the majority shareholder decided that the company should make a loan instead of infusing more funds as the hogs are growing. In a hog farm, about 80% of the cost is in the feeds. At that time, there was a financial crisis here and loan rates of 40-50% were quite common. So after the loan, I got almost nothing as interest payments comes first before any incentive is paid. 





red514 said:


> i agree with what most are saying here, the 80/20 deal is a bad move... really bad.
> 
> 5000$ really isn't much, if that's all you need, get a loan, get credit cards...
> there's a reason for the saying 'don't mix business and friendship', it often doesn't work out.


I think that's SGD5000 or *US$3900*



Joeyt said:


> ...I managed to pluck out enough courage to consult my dad about my project. He ...Now, we are looking at 3000 from me, 2000 from him, and a share of 70-30 respectively! ...


you seem to be worst off than earlier.

You now have 60% capital outlay so you will be getting only 10% as management/incentive fee instead of 20% earlier? Shouldn't you be getting 80% at least or do you have a management fee or incentive? If you are having second thoughts on 20% earlier, shouldn't you be getting at least 90% now(60% share + 30% incentive)? If your father readily agreed to SGD3,000 couldn't he help you raise SGD2,000 more?

Would you like to share with us on what you plan to purchase with SGD$5000 and how much each cost?


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## VinylHanger (Jul 16, 2010)

I've read through this post and it looks like towards the end you have moved toward a better position. 80-20 was making you an employee. You at 70-30 is much better, however, this still leaves you doing the work and him reaping profits forever with little work. You need to look into the future. 

Say you work your butt off for 2 years and find some great local retailers for your line and you are making 100,000 dollars a year. He is now getting 30,000 dollars a year on an initial investment of 2,000 dollars with little sweat on his part. Great for him, but you have now given him a large chunk of cash that might allow you to grow bigger, but he has no incentive to invest anymore. You will always have that monkey on your back. The numbers may end up being smaller, but the financial drag will be the same. Is it 70-30 net or gross?

If you really need the money from him, maybe offer him a double his money and he is out incentive. Give him his percentage until he has been paid double, then see if he is willing to invest again. If not, go your separate ways with both of you feeling good about it.

Also, he may not be feeling the same about not having anything to contribute. This may need to be hashed out so you both know what to expect. If he does the books, he needs to get paid for that. If he brings in customers, he needs to get paid for that. Money has a funny way of getting in between the best of intentions.

You also need to lay out how he will be paid as far as his share goes. Do you get paid as in a paycheck, before you pay out his share to him? Do you both take the profits and split them relative to your shares before you buy new equipment, print new designs, etc, and then each of you decides what to do with their share. 

You may end up putting all your profits into the business while he gets to reap the rewards of what is now your investments. These are now growing the business and he is just getting more money relative to his share size. If he puts his share into the business, how does that effect his investment into the business as to share size.

Lots to think about. Doesn't really seem worth it for a few thousand dollars. It might take you longer to do it on your own, but in the end you will have full control. Taking a well spelled out loan, would be better than a partnership, if think you will make it. If not, don't take his money. Just because you are broke and he is flush, doesn't mean he won't be expecting to be repaid, whether you succeed or not, and whether you are friends or not.

With all that said. Welcome to self-employment. Rewarding and scary all at the same time. Starting up is the fun part, just remember it is about the long haul in the end.


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## tattoodad (Jan 25, 2011)

i went into business with my buddy. I needed another 7 grand so we went in 50/50. 7 from me and 7 from him. biggest mistake i ever made... NEVER EVER GO INTO BUSINESS WITH ANYONE EXCEPT YOURSELF. it seems cool at first havin someone to split the costs and etc.... but when you start makin money and you have to split it someone who's not puttin in the same level of work as you. The resentments build real quick.... take my advice on this one... trust me.
good luck.


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## Joeyt (Jan 10, 2011)

tattoodad said:


> i went into business with my buddy. I needed another 7 grand so we went in 50/50. 7 from me and 7 from him. biggest mistake i ever made... NEVER EVER GO INTO BUSINESS WITH ANYONE EXCEPT YOURSELF. it seems cool at first havin someone to split the costs and etc.... but when you start makin money and you have to split it someone who's not puttin in the same level of work as you. The resentments build real quick.... take my advice on this one... trust me.
> good luck.


Hey, tell me more. I'm eager to know.


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## Joeyt (Jan 10, 2011)

Guys, I can't really put how I feel in words. I might have made it sound bad when i said my friend is gna just about do book keeping and accounting stuffs. His job also includes... What should I call him? An administrative officer for a lack of a better of words. He's most probably gna be the one helping me with email replies, general enquiries of our customers, and ultimately, he's gna re look at my designs and give me some pointers. Oh yes, and he has a really wide connection. That was one of the things that he felt he could offer. You know.. These, unspeakable stuffs that he can offer to the company. Nothing really concrete in the sense like book keeping and accounting where it's black and white and anyone can see if he's done it or not. So, what does all these things fall under? Public relations? I don't know.


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## DivineBling (Sep 14, 2010)

I think you should split everything 50/50. You can't do it without him and he can't do it without you so you are mutually dependent on each other. If he is getting more profit than you are, you will feel resentful the minute you feel like you're doing more work than he is. Although he may not intend to act as your boss, if he is controlling even 1% more of the shares than you, it will put him in a higher position than you. If working with your friend is something you truly want to do, you need to sit down and have an open conversation about all of this because if anything is bothering you in the slightest bit now, it will turn into a huge thing later when it may be too late to do anything about it.

I wouldn't settle for anything less than 50/50. 

When I read your second post about having talked to your dad and friend, I thought you were saying that you would have 70% and your friend would have 30% because you were now fronting more than half of the money.


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## sweetts (Apr 4, 2010)

Why not take a loan from the friend and pay him back with interest? Or go get a bank loan and leave the friend out of it. He's only giving you money lots of people you don't know will do that


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## BroJames (Jul 8, 2008)

Joeyt said:


> Guys, I can't really put how I feel in words. I might have made it sound bad when i said my friend is gna just about do book keeping and accounting stuffs. His job also includes... What should I call him? An administrative officer for a lack of a better of words. He's most probably gna be the one helping me with email replies, general enquiries of our customers, and ultimately, he's gna re look at my designs and give me some pointers. Oh yes, and he has a really wide connection. That was one of the things that he felt he could offer. You know.. These, unspeakable stuffs that he can offer to the company. Nothing really concrete in the sense like book keeping and accounting where it's black and white and anyone can see if he's done it or not. So, what does all these things fall under? Public relations? I don't know.


So he's an active partner. That could be good but that could also spell more trouble. Be sure you discuss the details so you don't put your friendship at risk. From a financial perspective, The original 80/20 seems to be about fair but the 70/30 with you as majority owner sucks.

But let's forget everything everyone has posted and go back to the original deal of 80/20 with your friend infusing 5000SGD. *Gross Profit less Expenses = Net Profit of which you get 20% *right?. 

Now that you or your father are infusing 60% of the capital, shouldn't the new deal be *Gross Profit less Expenses = Net Profit of which you should still get 20%* for your efforts, whatever your scope of responsibility is, under the 80/20 deal which your friend sees as fair, *PLUS another 60%* based on your capital contribution?.*That makes it 80% for you* and 20% for your friend and that should be fair based on his 80/20 proposal. Anything less than 80% seems to be making you, forgive me for the language, a sucker.

Try explaining that to your friend and I think he should understand.


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## red514 (Jul 21, 2009)

well said BroJames, i completely agree with that!


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## Joeyt (Jan 10, 2011)

I have explained that to him. I started the conversation asking him if the scenario is now 60% on his as investor, and 40% on me as designer and the one who's doing most of the work. I asked if he'll agreed to that. As expected, he immediately said no, without any considerable hesitation. Then I proposed my 3k, and said that using his logic that he has clearly exemplified in the past discussions, I should get a majority of the shares 80-20. He considered, shook his head, and told me honestly that if he is getting 20%, he isn't gna do it. Yes, he agreed that it is like tasting his own medicine now, but he just won't settle for 20%. I asked for a reason, and he couldn't give me one. Since i really felt that I needed him in this business (somewhere along the line of having a friend as a business partner will mean some great bouts of fun and joy), I relented and proposed a 70-30, in which he felt he could accept. And then i settled down, and thought about 70% for myself. I gave myself a night to think about it, and find myself truly able to accept the situation fully. 

I gave him a call and told him that I'll be fine with 70-30. That's about the story..

I want to consult you guys on a matter. My brother told me about how a company should be self sustaining. I don't think I fully understand this concept and how it should be done. What I am thinking right now is that if we are going to send for prints out first batch of order (say I'm using 2k of my 5k capital), and manage a return of 6k in total (profit plus capital), how much of this should be put back into company funds, and how much should it be split rightfully as profit for each party.. Or should the right way be all the revenue should be kept as company's funds until a certain date where we feel the company has stabilized before cashing out a portion of our profits?

This is worrying me right now, not too much of the 70-30 split since i really find myself accepting and feeling happy about the situation. Can someone explain how a company should handle profits and company capital correctly in the long run?


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## BroJames (Jul 8, 2008)

I really wouldn't push through with the deal because aside for the reasons stated above, I wouldn't leave an impression or precedent that I will accept an unfavorable deal. Remember, he is the one who proposed the 80/20 share earlier. I would not push a friend to accept a raw deal like that.

It is possible that he does not want a 20% share because it is too small and not because of the ratio. If this is so, why not propose that he infuse 2900SGD and a 61/39 share. 20% as your incentive in accordance with his original proposal and 51% of the remaining 80% as your share. Tell him that you are willing to round off the share to 60/40 instead of 61/39 just to push through with the "partnership.

Remember this. What you agree to right now, an unfair share on your part, will last the lifetime of your partnership. It is not just the unfair sharing but also the knowledge that he could have one over you. Your position from a sharing that you think is low to a much worst situation says a lot about you and the stuff you're made of. I wouldn't bring that into a partnership. I just won't be comfortable with that and how he may perceive you in the future. It is your decision though but my advice on this 70/30 is a *very very big NO*.

And don't be happy with your current 70/30 situation or at least show the opposite. You really should express dissatisfaction or some displeasure with the worst deal you are ending up with. If you show satisfaction, I can almost guarantee that your friend will look down on you in the future as someone that can be taken advantage of. Maybe not now and maybe that is not his intention but there is a good chance that the thought will creep in. What sort of future does a partnership, where a party moves down from a position of uncertainty (your earlier 20%) to a position of accepting a raw deal, leads to? 

Have another serious talk with your dad about raising funds from relatives and friends. Now that you have a 3000SGD capitalisation, potential partners should be looking at you in a more favorable light.

But again, the final decision is yours.


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## Joeyt (Jan 10, 2011)

Thank you BroJames for your consistent help and attention in this matter. Really appreciate it. But i guess I'm sticking to the 70-30 for now.. 

Any tips on how should my company be self-sustaining? (refer to previous post for question)


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## BroJames (Jul 8, 2008)

In your case, self sustaining simply means that your income should be enough to sustain your operation so there is no need to infuse new capital. You have not yet replied to my question on how you plan to spend your 5000SGD capitalization.

Let's say your monthly expenses is 1000SGD including rental, electric and water bills, allowances if you two have any, etc. you can only spend 4000SGD on equipment and initial expenses and must come up with a net profit of 1000SGD before the end of next month.

Putting it another way,m if you spend 4000SGD on equipment and initial expenses, you are left with 1000SGD as operating expenses and better come up with enough net profit before the 1000SGD is used up.

By how you describe your partner, and his share of the job, I think he knows all these and you should sit with him to discuss how you will be spending your financial assets and set a realistic projected sales. If your projected sales and its net income can pay for your expenses, and if you can make them come true or exceed set goals, the you're OK.

BTW, will you be selling printed shirts or selling your printing service?


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## DivineBling (Sep 14, 2010)

@BroJames You give amazing advice that will help anyone in any kind of business. I'm finding myself wanting to follow your threads just to get business advice! Thank you for your time and effort on this thread!


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## blankCLOTHING (Feb 20, 2008)

What's so important about your friends money? You said you already have $3000, why not just use that?? Honestly it makes no sense to me. Just use what you have now and make it stretch, you won't have any people telling you what to do or how to run your buisness. 100% > 70%


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## BroJames (Jul 8, 2008)

I agree with that and my posts reflects that sentiment. 

However, there are also people who do better with partnerships. My brother in law is a very good example. He run their own business into the ground. But most of his business in partnership are successful. He is currently a little down due to a bad major investment. A bad fall from putting most of his eggs in that basket. Actually a double whammy. A major investment did not do well and the company made a business deal with a very prominent person who turns out to be a major crook who wanted to literally steal their business right under their nose. Literally storm their building and replace all the guards. But this has nothing to do with the partnership or the partners. And he could have made it alone with his connections especially when he was "up".

After all my posts, joeyt still decided on a partnership with his friend. I think he is comfortable with his friend and what his friend can also bring into the business. I respect that and wish them luck.


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## gotshirtz001 (Sep 23, 2008)

blankCLOTHING said:


> What's so important about your friends money? You said you already have $3000, why not just use that?? Honestly it makes no sense to me. Just use what you have now and make it stretch, you won't have any people telling you what to do or how to run your buisness. 100% > 70%



That was my thought too... you can do a lot with $3k.


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## BroJames (Jul 8, 2008)

Its not really $3,000 but 3000 Singaporean dollar or about US$2300. If buying equipment from the US, cost of equipment and is likely to cost 2-3 folds so the US$2300 in Singapore (or that's about it in neighboring Philippines) is only about US800-1200 in the US. But I'd say closer to US$800-1,000.


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## Joeyt (Jan 10, 2011)

BroJames said:


> In your case, self sustaining simply means that your income should be enough to sustain your operation so there is no need to infuse new capital. You have not yet replied to my question on how you plan to spend your 5000SGD capitalization.
> 
> Let's say your monthly expenses is 1000SGD including rental, electric and water bills, allowances if you two have any, etc. you can only spend 4000SGD on equipment and initial expenses and must come up with a net profit of 1000SGD before the end of next month.
> 
> ...


I may not have myself clear in my previous posts. I'm looking to start a clothing label, one where I look for suppliers and get my shirts printed with them. I'm still in its early stages of sourcing for one. I just want to get all the necessities done up and settled as soon as possible.

BroJames, you have been extremely helpful and you render me speechless. It's amazing how willing you are to provide assistance to people you don't even know and haven't met!

Regarding the notion of self-sustaining.. Do you mean that if i have a remaining capital of SGD1000 after sending my first batch of tee shirts for print, i should be able to profit at least SGD1000 from those tee shirts? Do you have an explanation in a more layman's term for the newbie me?


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## Joeyt (Jan 10, 2011)

At $3000 and 70% of shares, i have ensured total control of the company on my part. I have made it clear that I want to be able to have the final say in all matters. And I'm glad to say that i have been granted that.

So I guess i can take it as someone who will be there to help me out, yet share the burden of the total capital needed. What do you guys think? Oh and rest assured, my friend and I go a long way and have a good relationship.


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## BroJames (Jul 8, 2008)

So you trade or sacrifice 10%(70-30 instead of 80-20) to get support for your decision making and still keeping the friendship. That's also a good calculated move.

As to self sustaining. In layman's term-the company better make enough money so none of you need to shell out more money.


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## Joeyt (Jan 10, 2011)

Yup BroJames. That was what I figured. More on the friendship part, I guess. 

If let's say my company needs $2000 for every batches of production. Today, I go ahead and spend $2000 on my first batch, take back a total return of $6000 (which means I profit $4000). Then the second batch comes along and I'll need another $2000, which, judging from the above, shouldn't be a problem. What I would like to ask is when then does the company divides its respective profit to each party (in which this case will mean a share of 70-30)? 

Take that $4000 profit and split it likewise, while still retaining my capital? What if I feel that in future, I need more than $2000 for each production (company gets bigger and decides to do batches in larger quantity)? Where then, shall I get the difference from?

Please help. I am in my final stages of completing discussions with my partner, and honestly, I can't wait to get started!


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## BroJames (Jul 8, 2008)

It depends on how much of the profit you wish to infuse back into the company and also after allocating funds for regular operating expenses as well as for contingencies or projected expenses like taxes, payables, etc. If you have any expansion plans, it is also better to allocate small portions of the profit for that. Any excess or idle funds can be divided. Really makes no sense letting money sit in the bank with minimal interest unless you want to impress the bank.

For example, in the piggery I mentioned, the profits are kept in time deposits until year end. Dividend is annual. In the last company I worked for and where I still own a small share, when excess profits reaches about $NN,NNN we split. It used to be every 30-45 days. The economy has not been as good so it became 45-60 days. Our latest dividend was after 4 months because the majority shareholders wanted to split a larger amount for a change. 

Do you have printing equipment or do you outsource?

Congrats on your first project. It would be nice to frame the first shirt you printed alongside the first dollar you make.


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## Joeyt (Jan 10, 2011)

BroJames said:


> It depends on how much of the profit you wish to infuse back into the company and also after allocating funds for regular operating expenses as well as for contingencies or projected expenses like taxes, payables, etc. If you have any expansion plans, it is also better to allocate small portions of the profit for that. Any excess or idle funds can be divided. Really makes no sense letting money sit in the bank with minimal interest unless you want to impress the bank.
> 
> For example, in the piggery I mentioned, the profits are kept in time deposits until year end. Dividend is annual. In the last company I worked for and where I still own a small share, when excess profits reaches about $NN,NNN we split. It used to be every 30-45 days. The economy has not been as good so it became 45-60 days. Our latest dividend was after 4 months because the majority shareholders wanted to split a larger amount for a change.
> 
> ...


Nice idea! I'm gna do that! 10 years down the road, I'm gna look at my framed tee shirt and remember you BroJames! You have been of great help!

I'm planning to send my tee shirts to a printing service and supplier. That's for a start.. Do you do tee shirt printing? Do you think i can consult you on certain matters via private messaging?


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## BroJames (Jul 8, 2008)

You can PM me anytime.


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## Joeyt (Jan 10, 2011)

BroJames said:


> You can PM me anytime.


You've got PM, BroJames. I love you, as with everyone else.


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## Dermy (Jan 25, 2011)

Been offline a few days.

What was the end result here?


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## BroJames (Jul 8, 2008)

Just scroll up


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## leadergrafx (Sep 29, 2008)

$5,000 won't even pay your overhead for a month if you are running a real business, let alone get you into a location if you don't have one already, which it doesn't sound like. It may sound like a lot of money to you now, but some people get that much back just for income tax returns. IMO HE should be thrilled to receive the 20% for a one time small investment with the potential you could have if things go right. It sounds like the $5,000 has the potential of doing serious damage to your friendship. Get some of your designs in some stores, sub out the work and invest the profits.


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## BroJames (Jul 8, 2008)

The OP has already made a decision and they a;ready have their first job about a month or so ago. They sub out the printing job.


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