First, I want to say that I live in my only little web development island here in Philly and I am so grateful to have this community to reach out to when I have questions. You all provide really sound advice, and your time spent answering my questions is always greatly appreciated.
I have been doing some consulting work for a small video production company. The owner is a serial entrepreneur and always looking for promising new business ventures.
He recently approached me about possibly partnering with him. He would provide me with a desktop and pay for all the usual costs of business, and I would serve as the web developer for the clients he sends me, working from home.
Hes very well connected and would be able to sell my services to people/businesses I do not have access to for more $$ than I ever could. I guess he would be a business manager of sorts.
What do you all think about this? What is a fair split of the profits? I was thinking 75/25. We have a lunch meeting next week. I want to prepare myself.
I think your share of 75/25 seems fair, if he is generating the business, and sending you the stuff to code.
your problem here is, if he gets you a client, and you can’t give what the customer wants. for example: a customer wants a fully operational CMS (bespoke) and selling items through Credit Cards.
What if you get a client who want a huge site but only in 5 days?
Will you guys be business partners? if so if the business makes a good profit, and the business gets sold, will you still get 25%?
these are the things you need to consider before jumping into this venture.
but talk to the guy, he seems to want you on board, he may offer better terms
I suppose it depends on how much he would be spending on you to "run the business".
The financials would have to be completely transparent so that you both know exactly how much is being spent where, etc.
Remember, he’s in it to make money (obviously). So here’s what I would do (I’m going to completely make up numbers here):
1. Figure out how much money would be brought in on an average/standard contract ($2,000)
2. Deduct cost of running the business from that ($-200; $1,800 | questions that need to be asked here are, what is considered a cost? Do I get any health benefits? Is my travel covered? Am I getting computer upgrades? Etc etc)
3. Deduct taxes (income tax, or whatever is appropriate for your region, we’ll just say 20% for the hell of it: $-360; $1,440)
Now you’re left with essentially the pure profit from the project. The cost of running it is already given back to the "Manager", so what’s left is essentially a Finder’s Fee. So you’ve got $1,440 left in profit. 25% finder’s fee kicker? $500 would probably be the minimum there, so that’s about 35%. Plus the "cost of running the business" +$200. So the total Manager takes home would be $700, or exactly 35% of the entire project.
I would definitely recommend making him propose the split, maybe he’s only expecting 10%, you never know.