How business partnerships can work for soloists

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Can business partnerships help you grow your business without getting paid? Possibly. One way is to help a client build a business by putting the value of your expertise on the line.

Recently a long-term client of mine returned from America with a new business idea he was starting up. We met to discuss the writing of all his marketing collateral and I left the initial meeting feeling pretty excited about the business concept. This is when thoughts of possible business partnerships first came up.

After putting together a list of requirements – website, corporate profile, emails, sales letters, press releases and so on – I soon realised it would be a fairly involved project from a copywriting perspective.

Obviously a challenge in setting up any new business is forking out cash early on before there is any revenue coming in. That was when I considered an alternative that I thought may work for both of us.

I asked my client what he thought about sharing a percentage of the company (equity) in return for an agreed amount of copywriting services.

For me it provided a way to get involved in growing a new business without risking any capital. For the business owner it means they can get all the services they need without having to outlay a whole lot of cash upfront.

It also means that I am 100% motivated to get things right, because the only way I see a return on my investment in time is if the business becomes a long-term success.

Given the right trusted client relationship and business idea, this sort of arrangement is something that could work for designers, writers, business consultants, coaches, accountants, web developers and many more. In fact anyone with skills that complement those of someone starting a business.

Your accountants and/or lawyers would need to sort out the details based on your specific circumstances to make sure it’s all above board, but here’s how it worked for us in principle.

1. Agree on a theoretical value of the business.

This is difficult for a non-existent business, but we looked at things like set-up costs and the value of the idea to establish a figure. Let’s say just as an example that you agree to a current value of $50,000.

2. Agree on an equity percentage that is available.

This needs to be a figure that the owner is happy to part with, but that is high enough to make it worth your while. Let’s say that figure is 10%, which amounts to $5,000.

3. Complete services for equity.

Rather than send an invoice for cash, simply quote and work as usual, but you ‘earn’ equity for services rather than money.

When the growth of your own business growth is limited by the hours in the day, this equity approach can offer an alternative means to grow a side business while still using your core skills.

What’s that you say? You want to know what this revolutionary new business idea was? Well that’s not really the point, but I suppose if you must know…

[Shameless plug alert!]

It’s a zero-hassle way to sell on eBay called www.GoingGone.com.au. It’s essentially a service that sells goods for individuals, businesses and charities on eBay for a percentage of the sale price. They do all the work for you – take photos, write professional ads, answer customer questions, collect payment and ship the product – you just pocket the profits.

It’s too early to say whether the arrangement has worked for us. But so far so good.

Peter Crocker is a director of Flying Solo responsible for the areas of marketing and advertising. He is a business copywriter specialising in websites, videos and marketing communications.

4 comments | Add your own

If YOU are suggesting the arrangement - that's one thing, but if the client is suggesting you work for share of the profits, be super careful..
I am a web programmer. In my particular experience I wasted 6 months of my life working on a project that looked like it had the potential to make heaps of money. It went pear-shaped when the client wanted changes - and lots of them. He kept changing things because he couldn't make up his mind, and because it didn't cost any money to change his mind. (of course, it was stupid of me let him do it, but you live and learn.)
Other clients were put on the back burner while I tried to get rid of the ever evolving project that started having no obvious completion in site. (oh let's just add one more thing!)
If you are going to do work for profit sharing, agree on a set amount of work for a set share of profits. Treat it like you are still being paid. "I'll do x work for y share of profits" Also, if you aren't the marketer, make sure there is an obvious marketing plan in place. If the project isn't marketed properly it makes no money, and you've wasted your time.
Finally make sure the way the business will be making money is sound and fair for all. (My client had some pretty unfair terms and conditions for customers to agree to)
The customer offering a share of the profits is looking for reduced or no upfront payment - most likely because they aren't sure they are going to make their money back, so they are trying to reduce startup costs as much as possible.
Michael Phipps from Brisbane, Queensland Australia
Hi Michael. That’s good advice and I absolutely agree with these points. To avoid the never-ending project problem, we agreed to a set amount of hours for an agreed percentage of equity, and then treated this dollar figure with the same level of scrutiny you would treat a cash investment. Any new business is risky, so it is crucial that your partner has as much or more to lose than you do. The most important (and hardest) part can be finding a highly trustworthy business partner with a shared vision for project, usually someone you’ve worked with for a long time. This sort of mutual relationship seems to be something that can just happen naturally, rather than a commercial opportunity to actively seek - sounds a bit like a marriage:) Peter Crocker from Sydney | Read my articles
I have a software business in which I've offered a business coach, a graphic/web designer and a software engineer a share of profits rather than equiity. Complicating the ownership structure by offering equity isn't always a good idea, and can put potential investors off. It relies more heavily, perhaps, on the trust bond between the individuals. I paid my software engineer some cash early on when I was able to, before we put the profit share agreement in place. I think that signalled my commitment and trust has grown as time goes on. Although they're living in different places, each knows who the other is, and how to contact each other if I ever did anything untoward. I thought that was important to underscore my methods and ethics. The software engineer has since taken a fulltime job, and is not available anywhere near as much. We're discussing a revised formula for him accordingly. And clearly the flexibility of a profit share agreement was an advantage with this sort of eventuality. Andrew Simms from Sydney, Australia
The article is beaut. We all work in all strange ways and solutions come in all manner of unusual places. Legal, financial, PR and marketing, product development and research. Each area is suitable to this synergistic relationship.
I have done this type of product development through my legal firm for clients with great success. I think that this type of joint venture is extremely useful. Make sure that you have the proper documents in place. More importantly, make sure that you can trust your partner. Everyone is prepared to promise the world when starting up. When success comes and there is a time for the joint venturer to be paid, then sometimes the appreciation for the help and support evaporates.
Bob Gillroy, GWM Lawyers, from Port Macquarie

4 comments | Add your own

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