Hypothetical Situation from a redit post btw… I want to start an IT services agency and offered my friend a subcontractor position. My friend wants a partnership or stake in the business instead, arguing that they should be rewarded for contributing to its growth. I believe person believes partnerships don't work for me. I'm unsure if I'm at fault or if my friend's logic is correct. Seeking opinions on who is being unreasonable in this hypothetical situation.
AITA for Refusing to Give My Friend a Stake in My Business despite if He Contributes as a Subbie?
[Deactivated] on 23/06/2023 - 17:41
Last edited 10/07/2023 - 20:39
Last edited 10/07/2023 - 20:39
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Yes. If I would do the work alone yes I'd get the $100 profit. If its him as trainee, then he'd take $30 leaving me with $70. And if its himself going to the client and doing the work, he'd take $50 and I'd have $50.
I don't work in IT. But surely your business has costs? Just checking how you are notified of the need for your services, on what device, where you keep it, how you charge it, how you get to the job, advertising, bank fees, accounting fees etc. These are all business expenses that the business would pay for. It doesn't seem right that jobs are 100% profit.
Do you know anyone in a similar business? Or have an accountant?
Yes sorry there is definitely costs involved. Not all 100% profit. But from whatever I get after, I'd say around 10-20% would go back to operational costs yes.
@[Deactivated]: Make it clear to your subby there are costs to running the business with associated risks. Your relationship with clients is valuable and costs time and money to maintain. The business takes 50% to ensure it's continued survivability and sustainability.
A business partner can be an asset and bring in some knowledge or experience that you don't have to the business. They can be helpful to share the admin load if you are overwhelmed but can't afford staff. You would be "doing work" as a business owner that you probably don't consider to be work. Anything business related that isn't directly helping a client, is essentially unpaid work at the moment. A business partner can help with this if you're not managing. A business is always a risk and you can reduce your exposure to risk by selling your share in a company.
If you ARE looking for a business partner - try to value the business and find a price you're both happy with. I don't work in IT so I don't know what a client base is worth. Make it clear in the contract what the expectations are. If you want an active or silent partner. If active, set out clear expectations and include the penalties in the contract if they're not met. Also things like who they can sell their share to etc. Probably get advice.
I wouldn't consider "subby who wants a bigger cut" a good business partner. If the subby brings a set of skills you don't have, you want to cash out a bit or you're overwhelmed with unpaid admin and need help, then fine. The problem is when it comes to investment, hiring staff, buying long term assests etc. these people tend to prefer the option that gets them the cash this year. Eg. the idea of paying someone 70k to answer a phone, send and chase invoices- they'd rather take the 35k home and have you answer the phone and do invoices like you've always done.
"I want a bigger cut - make me a business partner" is a pretty brain-dead statement and I'm sure there's more to it than this. But defs not the (profanity) for not immediately saying yes
This is very simplistic I know, but if you're doing this as a business, the business will clear $70. Not you. This has implications - will you take a wage from the business?
Won't be an issue if you're a sole trader, but if you're setting up a company (which btw is what you would want to consider, not a partnership or joint venture), you could come to some sort of sweat equity agreement. As someone else mentioned, you should get a proper valuation done up.
I didn't read everything you wrote 'cause it's alot however employing friends/family in your own business or going into business with them makes things just plain awkward.
Source: my husband!
I agree, at least friends come and go… family hangs around forever..
Family makes it super awks esp. when they try to get other family members to take their side & don't tell them the full story so the he said, etc just ripples through the clan. sigh
IKR! My wife has been a little sloppy with folding the laundry lately. I think I'll have to let her go.
@Scrooge McDuck: Your wife messaged me earlier & advised that her pay rates for 'laundry folding' as per your marriage contract haven't been adjusted for CPI since the Howard era so she's doing a quiet quit.
A lot is two words, just fyi
I was referring to the Indian town ;)
Did you mean to post this on reddit?
This is orangedit.
Reddit's going down like OceanGate; expect to see more posts like this.
You don't have to offer him a stake in anything, sounds like as you said you:
would have considered is if he had skills which could be true assets to the business which could be utilised
Since you're saying his role can be done by another "IT support technician" you might as well go down that root and not fracture a friendship. However judging by your description he will be jealous of your success in the future regardless.
You want different things.
You want a low risk employee.
He wants a high risk venture.The only way this would work is, if you both bear the risk evenly.
To me, what this means is, either:
1. You are 100% owner, he is a hourly employee.
2. You are both partners, however he will need to pay you approx 100k p.a. as your opportunity cost of giving up your job for the business. If he is not willing to do this, then you are the one one taking a disproportionate amount of risk for your own reward.You will find that in most companies, employees make X and store makes X+100. It is by design. The employee has no risk.
I only read the TL;DR but NTA to me, your friend didn’t have the founding idea/contribution, they would’ve taken no loss if it had failed. They did their part and got paid for that, so they’re simply a sub-contractor, like you said.
It’s the equivalence of the pizza delivery dude asking for stakes of the pizza store because he was there (and got paid by the hour) “from the beginning”
Again this is going off the TL;DR since there’re a lot of fluff in the main post.I've done it in the past, never again.
Tell him to start his own business, and you'll engage his business when you need his services - and he can engage yours when he needs your help. That way he has "his" business and his ego is hopefully satiated, and you're not in a partnership you don't want.
To answer your actual question though, no, YANTA. It's your business.
^ best solution so far 👌
Given that he said his passion is to be a pilot, I can see him putting that #1 and your business #2, leaving you to do everything as he doesn't have much to lose,
Something about friends and money.
Given that he said his passion is to be a pilot
With this attitude I doubt he will get off the ground.
I want a stake in the business as well for reading the wall of text.
He says he won't work unless it's a partnership arrangement
Red flag. Tell him to say the same to his current employer. He is just preying on your friendship.
Why doesn't defer 100% of his pay and swap for equity in the business
I am trying to get a start up going and I am busting my rear end getting everyone on board. Some people are just free riding for now but this guy is on another level.
Your friend has unrealistic work expectations. Is he a partner at the current retail job? If not why hasn't he demanded it?
This sounds very specific to be a hypothetical. Eitherway its your business you do what you want.
Exactly. There are hypotheticals to the power of three in the OP. The business hasn't even launched!
So many unknowns that there is No (profanity) at the moment.
Your friend sounds like not a great friend to me… Saying this:
"even though it pays less and requires more effort. I shouldn't be helping contribute to the growth of your business where you're making more money than me"
What the hell? He'd rather work harder for less pay, purely to not help you, even though you'd be paying him well.
I shouldn't be helping contribute to the growth of your business
He can say that at his next job interview.
This is a pretty open shut case of - your friend is dreaming. All the best in your business and please stick to hiring professionals instead!
Tldr?
I wouldn’t worry about this until you start your business and you’re actually successful enough that you do need staff. Being a sole trader is easy but managing staff is the tough part. I’d never hire a friend if it was me. Especially a friend making demands on an unproven business idea. If he doesn’t want want to work on your terms, find someone else. Good luck.
Do not hire him.
Do not give him any part of your business.Its nothing to do with him.
and the BS of involving friends and family in a business has started already
<note: it can work well, but that is very rare>Your friend said he doesn't want to be your employee or subcontractor, unless he is a partner in the business. He made it clear his preference is to stay in his current employment.
You said you don't want a partner in the business.
The solution is that you don't hire your friend as an employee/subcontractor.
In my opinion your friend sounds greedy and selfish. He might even be a narcissist. Google narcissistic traits and see if any sound like your friend. I definitely wouldn't even hire him, let alone give him a stake in my business!
Hey OP. I this is something I happen to know quite a lot about having been in a very similar situation (in more ways than one), so I'll try to help. A lot of people have made good points here but it might be a bit hard to navigate opinion vs experience so I'll summarise some of the most relevant points and add a few below. You're young and I assume you've not run a business before?
running a business is hard. It can start off simpler when it's just you but then as the business grows there is a lot to do and deal with that you may not have prepared for or anticipated initially
business is risk. Who will take on that risk? You need to manage cash flow, hr, admin, navigate tax, financial, insurance, legal, sales, marketing, admin, etc, etc. Who will do that?
business has expenses, who will cover those?
how will decisions be made? Who is in charge? (being a shareholder or part owner does not automatically mean they get to be part of the decision making)
how will work (and clients) be divided/assigned? Will it be fair and equitable?
when invariably conflict and disagreement arises how will you resolve them?
will your friend give the business his whole commitment and give up his dream of being a pilot? If yes, what happens if he later changes his mind? If. No, what happens when later he wants to go and pursue that?
what is your exit plan going to be? For the business, you, and him both in case of foreseen or unforeseen circumstances (life is messy)
are you both prepared to compromise to keep the friendship over the business or will it ruin one or both if one of you at any stage one of a hundred things causes conflict
There is just way too much to cover here. But here is the tldr:
The biggest red flag is that your friend is already concerned about the very hypothetical question of you getting more benefit than him. This is a bad place to start from. I understand that this is your side of the story, but taking it on face value I would not start a business with him (or engage/employ him) based on this. Is your friendship already beyond saving if you don't involve him now? I hope so.
My number one suggestion is to speak to lots of people who know business, get a mentor (not a coach) , and learn as much from other people's mistakes as you can. I can recommend a very good community for you, but I don't know if it's against the rules to mention it here so DM me if you would like to have the details.
Good luck with this.
He wants to part own a business that doesn’t currently stand to benefit off anything with that influx of cash (which you don’t need) or knowledge (which it sounds like, in this field, he currently has none).
He therefore has nothing to offer as a part owner and you never offered it to him, and I think your offer of employment was generous and logical. You're definitely NTA.
If you go into business with him you'll either have an unhappy employee or a difficult partner.
Let us know if he qualifies as a pilot as I won't be flying with any airline that employs him.
You’re complicating the issue.
You’ve offered your mate a role.
He has declined your offer and made a counter offer.
You don’t want to accept that.
Drop the matter with him completely and find another potential contractor.
Easy asHaving been an independant in the IT field, you don't need anyone as an employee unless your going retail. You just need to work longer hours on your own & then contract out after you have 'defined' contracted clients in place. You've basically jumped the gun a bit/got things backwards.
Is he going to be a codefendant in some unfortunate and unforseen court case down the line?
Most people want the positives and not the negatives of owning a business.
And most businesses need one single clear owner.
Don't employ friends.
Don't get into business ventures with friends.You'll ruin the friendship.
Do we get advisory shares for answering?….
Just start business alone, and find the occasional casual to help out. Establish your business first, don't include friends at this stage.
Remember that any casual can still call you from jobs and ask you for advice! Most jobs won't really need an expert in any case, just some experience and common sense.
have a stake in it, not higher than you but a fair amount
He thinks he should get 50% of your business!
Theres a reason they say never work with friends or family.
You've already started to ruin your friendship with him and your business doesn't even exist yet.
Start the business slowly on your own. Stop talking to him completely about the business. Do not use him, let him follow his own dreams and maybe become a pilot. ((Then ask for a 50% share of his airplane! Joking))
Do you get paid in your current setup?