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How to structure a new partner within an existing business?

We have a great product line in our industry. We've become a market leader in our geographic area (we are a service business). Recently, we were presented with the opportunity of bringing on a partner who offers a "compatible" service to ours, thus extending our existing product line. Basically this product compliments ours, it would be an easy sell.

The synergy seems to make sense. What this person has in terms of knowledge and skill we could sell. They could service it, we could all make money. However, I'm curious to see what thoughts are on how to split up the pie.

They are currently working as an employee for a company within "that" industry. (The one we would be adding to our service line). They bring a wealth of knowledge to the table in terms of the nuts and bolts of how to get this new division of ours off the ground and quick. They have ample contacts with that industry, people love this person. (There is no employment contract).

We have the contacts, the marketing umph, the brand name recognition, and the existing customer base in place. The phone already rings, selling would be a cinch.

So, if we were to start a new division, how would you want to break it up? 50/50, 66/33, 75/25. How do you value selling power vs servicing power?

We have the market, they have the knowledge and ability to service. Both of us want to grow.

Thoughts and insight are very much appreciated!

2 Responses

  • Aug 10, 2010

    President

    20% of profits for new employee coming on to start division, with opportunity to earn an additional 10-20% based on profit/return milestones. This assumes you're putting up the cash to bring them on with a salary comparable to current.

    You're taking most of the risk by branching into a new market and leveraging existing client relationships. If everything goes well the new partner gets 30-40% of profits on top of their salary, and if it underperforms you still get to earn a decent return while they get their salary managing the division with strong incentives to perform further.

  • Aug 31, 2010

    President, Art Director, Receptionist, Administrat

    When I was looking for a partner in my business, I, as you are now, looked for THE inside person who would fit the profile.
    In my case it did not work because I failed to see that if that person was great at his tasks and beyond, he was not my clone in business - Your clone, a person who thinks and acts like you and has the same long term goals and same philosophy of business is whom you need.
    When I failed at my partnership, although the partner seemed to have all the pre requisite, I called a professor of business in a university to get his advise. He was the one to have recognized the "missing clone" error. I thought you ought to know.
    In terms of breaking up the profits, start low(at an acceptable%) and build up, that always works
    Good luck.
    Dominique Dekindt

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