What would be a fair percentage, if any?

I was developing a product with a family member (yea, I know first mistake) and its ready for production. However, said family member wants to go back to the drawing board and start from square one, which is beyond retarded. Its a viable product. They also, seem to have lost focus, time, and "drive". No paperwork was ever signed, but I don't want to screw them over, as they did input time, energy, and ideas. I will be approaching this person soon, to see where they stand, as i have already taken the step to line up a source for the parts, which I will assemble for the finished product. If they continue to beat around the bush, so to say, what option would you offer? A percentage of revenue, based on their initial input? I don't want to cause bad blood, I want to be fair, but I need to move on. Thoughts appreciated...

reply to post by pityocamptes


If you move forward, without paperwork, into production, its 50/50.

If you move forward and they dont want you to, then you either:

- buy them out, which is a negotiation for the two of you to hammer out in agreement
- move into production without their approval. But this would mean you have to screw them to protect yourself, by filing trademarks, etc
- have them sign a waiver of rights ceding all rights to you (again, screwing them over).

Simply put: you need to sit down and work this out with them.

bigfatfurrytexan
reply to post by pityocamptes

 

If you move forward, without paperwork, into production, its 50/50.

If you move forward and they dont want you to, then you either:

- buy them out, which is a negotiation for the two of you to hammer out in agreement
- move into production without their approval. But this would mean you have to screw them to protect yourself, by filing trademarks, etc
- have them sign a waiver of rights ceding all rights to you (again, screwing them over).

Simply put: you need to sit down and work this out with them.

Yea, I know. I will be doing so soon. I don't really see a 50/50 split considering that the initial idea was mine to begin with, and I approached them for technical advice. They did have some great ideas for modification and stream lining, though, which was adopted in the product.

I'd really like to know what in the hell is wrong with people today? They have no drive! I had another opportunity about a year ago, and the person I approached on that, only had to expend time, as I was funding everything, and they still screwed that up! Do people NOT want to work these days? I finally may have found a partner on a seperate venture, who has run a business, and we are lifelong friends. Seems he has his sh!t together, and a go getter drive that rivals most... thanks.

Offer a percentage of the residual profit from the product, if you have to make the full startup investment. Get it in writing.

If your partner is going to help foot the bill for startup costs, then it should be a percentage proportionate to the amount invested. Get it in writing.

If you want advice, don't ever get involved in a business partnership with a family member, particularly an in-law. It's just bad for business, because if you keep it in the family, then the whole family feels they have some right to input and compensation, inheritance, etc...

Ask yourself first, have promises been made or have obligations been assumed, either explicitly or implied? That's another problem with family. They get their feelbads hurt better, and then you're obligated to that as well.

pityocamptes
No paperwork was ever signed

There's your problem right there.

Not too late, you should both consult an attourney to draw up a contractual, binding partnership agreement.

You'll know where you stand very clearly once that process begins.

Mon1k3r
Offer a percentage of the residual profit from the product, if you have to make the full startup investment. Get it in writing.

If your partner is going to help foot the bill for startup costs, then it should be a percentage proportionate to the amount invested. Get it in writing.

If you want advice, don't ever get involved in a business partnership with a family member, particularly an in-law. It's just bad for business, because if you keep it in the family, then the whole family feels they have some right to input and compensation, inheritance, etc...

Ask yourself first, have promises been made or have obligations been assumed, either explicitly or implied? That's another problem with family. They get their feelbads hurt better, and then you're obligated to that as well.

Thanks. I like your logic. I know, first and last time I get involved with family. No promises or obligations were ever implied. I can see the butt hurt feelings coming... sucks. What, in your opinion would be a fair percentage? As of right now, I have footed most of the bill, and in fact they owe me money, which they have not paid...

Ok, had a quick discussion as they were busy. They are still interested in moving forward with the product. How do I address these issues with incurring costs for the venture. Up until now they have contributed very little and always seem to have some excuse as to why they don't have money (which they do). Thus they owe me money. Also, they seem to be risk adverse to getting the materials manufactured as our equipment is very limited, which means an outsource of cash. This is the biggest hurdle in my opinion. How would you address this? Thanks again for the info.

pityocamptes
Ok, had a quick discussion as they were busy. They are still interested in moving forward with the product. How do I address these issues with incurring costs for the venture. Up until now they have contributed very little and always seem to have some excuse as to why they don't have money (which they do). Thus they owe me money. Also, they seem to be risk adverse to getting the materials manufactured as our equipment is very limited, which means an outsource of cash. This is the biggest hurdle in my opinion. How would you address this? Thanks again for the info.

As you now know.. family doesnt make the best partnership. This will sound awful.. but necessary. Draw up a contract NOW.. no moving forward until the parameters, division, and responsibilities are written out and agreed to.

How do I know? My dad and uncle didnt speak for 20 years.. then my dad died... due to going in together concerning a medical device and patent. No contracts of course.. Uncle thought of the "thing" and dad expounded on it, financially backed it, and paid for the trials. Guess who won the fight : NEITHER... Its still not in production although my uncle holds the patent but cant use it...due to contractual issues to dads estate. The last time I spoke to my uncle about this was at Xmas a few yrs ago. He wanted to know what was up, when it would progress, etc. I said Hell if I know.. let me go dig dad up and you can ask him yourself.. or did you not read your contract, have an atty, already know how much you have to reimburse his estate... and youre just being a dick to me cause youre mad at my dead dad?
Family can suck... bad. Get a contract and get it QUICKLY.

Advantage

pityocamptes
Ok, had a quick discussion as they were busy. They are still interested in moving forward with the product. How do I address these issues with incurring costs for the venture. Up until now they have contributed very little and always seem to have some excuse as to why they don't have money (which they do). Thus they owe me money. Also, they seem to be risk adverse to getting the materials manufactured as our equipment is very limited, which means an outsource of cash. This is the biggest hurdle in my opinion. How would you address this? Thanks again for the info.

As you now know.. family doesnt make the best partnership.

This will sound awful.. but necessary. Draw up a contract NOW.. no moving forward until the parameters, division, and responsibilities are written out and agreed to.

How do I know? My dad and uncle didnt speak for 20 years.. then my dad died... due to going in together concerning a medical device and patent. No contracts of course.. Uncle thought of the "thing" and dad expounded on it, financially backed it, and paid for the trials. Guess who won the fight : NEITHER... Its still not in production although my uncle holds the patent but cant use it...due to contractual issues to dads estate.

The last time I spoke to my uncle about this was at Xmas a few yrs ago. He wanted to know what was up, when it would progress, etc. I said Hell if I know.. let me go dig dad up and you can ask him yourself.. or did you not read your contract, have an atty, already know how much you have to reimburse his estate... and youre just being a dick to me cause youre mad at my dead dad?
Family can suck... bad. Get a contract and get it QUICKLY.

Very good! Thank you. I will apply this before any more progress is being done. On a side note, and worse case scenario, what happens if the other party does not want to do a contract of responsibility, funds, etc. but continues to string along the implementation of the device, while saying they are still interested? Where would that leave me? Just throwing out a worse case scenario...

pityocamptes

Advantage

pityocamptes
Ok, had a quick discussion as they were busy. They are still interested in moving forward with the product. How do I address these issues with incurring costs for the venture. Up until now they have contributed very little and always seem to have some excuse as to why they don't have money (which they do). Thus they owe me money. Also, they seem to be risk adverse to getting the materials manufactured as our equipment is very limited, which means an outsource of cash. This is the biggest hurdle in my opinion. How would you address this? Thanks again for the info.

As you now know.. family doesnt make the best partnership.

This will sound awful.. but necessary. Draw up a contract NOW.. no moving forward until the parameters, division, and responsibilities are written out and agreed to.

How do I know? My dad and uncle didnt speak for 20 years.. then my dad died... due to going in together concerning a medical device and patent. No contracts of course.. Uncle thought of the "thing" and dad expounded on it, financially backed it, and paid for the trials. Guess who won the fight : NEITHER... Its still not in production although my uncle holds the patent but cant use it...due to contractual issues to dads estate.

The last time I spoke to my uncle about this was at Xmas a few yrs ago. He wanted to know what was up, when it would progress, etc. I said Hell if I know.. let me go dig dad up and you can ask him yourself.. or did you not read your contract, have an atty, already know how much you have to reimburse his estate... and youre just being a dick to me cause youre mad at my dead dad?
Family can suck... bad. Get a contract and get it QUICKLY.

Very good! Thank you. I will apply this before any more progress is being done. On a side note, and worse case scenario, what happens if the other party does not want to do a contract of responsibility, funds, etc. but continues to string along the implementation of the device, while saying they are still interested? Where would that leave me? Just throwing out a worse case scenario...

IMO...Then you patent it first before they can.. and cut YOU out. When you make money on it, throw them an appropriate ( and fair) one time cut according to their initial work and investment.

Advantage

pityocamptes

Advantage

pityocamptes
Ok, had a quick discussion as they were busy. They are still interested in moving forward with the product. How do I address these issues with incurring costs for the venture. Up until now they have contributed very little and always seem to have some excuse as to why they don't have money (which they do). Thus they owe me money. Also, they seem to be risk adverse to getting the materials manufactured as our equipment is very limited, which means an outsource of cash. This is the biggest hurdle in my opinion. How would you address this? Thanks again for the info.

As you now know.. family doesnt make the best partnership.

This will sound awful.. but necessary. Draw up a contract NOW.. no moving forward until the parameters, division, and responsibilities are written out and agreed to.

How do I know? My dad and uncle didnt speak for 20 years.. then my dad died... due to going in together concerning a medical device and patent. No contracts of course.. Uncle thought of the "thing" and dad expounded on it, financially backed it, and paid for the trials. Guess who won the fight : NEITHER... Its still not in production although my uncle holds the patent but cant use it...due to contractual issues to dads estate.

The last time I spoke to my uncle about this was at Xmas a few yrs ago. He wanted to know what was up, when it would progress, etc. I said Hell if I know.. let me go dig dad up and you can ask him yourself.. or did you not read your contract, have an atty, already know how much you have to reimburse his estate... and youre just being a dick to me cause youre mad at my dead dad?
Family can suck... bad. Get a contract and get it QUICKLY.

Very good! Thank you. I will apply this before any more progress is being done. On a side note, and worse case scenario, what happens if the other party does not want to do a contract of responsibility, funds, etc. but continues to string along the implementation of the device, while saying they are still interested? Where would that leave me? Just throwing out a worse case scenario...

IMO...Then you patent it first before they can.. and cut YOU out. When you make money on it, throw them an appropriate ( and fair) one time cut according to their initial work and investment.

Sound advice. Along with consulting an attorney.

If this is something that could potentially mean a lot of money over time, I would protect it with a contract. I hope you have receipts for all the money you've invested, where, when, on what, because that is what needs to be on paper before any contract is signed.

If someone wants equal partnership, they should share the costs of startup equally, unless another fair arrangement is made. If they owe you money at this point, and it sounds like you could be just months away from launch, I would question them hard about their dedication to the project.

Ask yourself if this is really someone that you want to continue to run a business with or someone you want to represent your hard work, when it seems they've contributed little more than ideas.

Don't get me wrong, ideas have value, but patents and copyrights have infinitely more, from a business point of view.

I have recently had one family friendship and the project crashed over similar issues. Things where working fine on the ideas, but when it comes to the business, work and money issues things have not been working as well. I do recommend trying to find a common position on how to take the business. If the other person has no real experience in business then it will be tough trying to work with them here.

As for putting a value on ideas it is hard. One common business saying is that it takes 1% inspiration, 99% perspiration. When looking at the facebook legal battles over the ideas, a similar valuation was also made with about 0.5% to 1% of the current business valuation awarded to settle the issue. If your business partner is anything like mine they will become quite offended with such an offer. If you do want to keep the peace with the family then it sounds like you will have to pay a premium for it.

When trying to define any profit sharing arrangements, make sure any investments and work efforts are first compensated.

reply to post by pityocamptes


really difficult issue, if you should go ahead and use any of what input they had contributed and become successful, you may be sued.

You might want to have a look at Royalties... the % given to musicians' and the only reason I offer that as any advice is due to the fact that music/songs are usually collaboratively written and the royalties/ % is legally fixed.

good luck.

Spoke to them again a little over the phone last night. When I brought up the idea of a contract, they kind of regressed and indicated that they "would not feel comfortable signing a contract". I explained it would be for mutual interest, and we ended the conversation by saying we will sit down and discuss it in person. Now I'm wondering WHY they would not feel "comfortable"? That makes no sense to me...

pityocamptes
Spoke to them again a little over the phone last night. When I brought up the idea of a contract, they kind of regressed and indicated that they "would not feel comfortable signing a contract". I explained it would be for mutual interest, and we ended the conversation by saying we will sit down and discuss it in person. Now I'm wondering WHY they would not feel "comfortable"? That makes no sense to me...

Because now they think that you are trying to screw them, and that you have lost trust in them. Part of it is "the free ride will be over" as far as the monetary investment goes. The other part is, "I may not negotiate for the value that I believe my position in this relationship has".

Just be fair with them. And be smart: create opportunities for you to "give in" on ground you don't really care to lose, so the perception they will take away is, "I won some ground". It helps with ego control and whatnot.