An Entrepreneur's Dilemma (Please help me)

[HaydenNoble]

Hello everyone,
This is my first post and I have a major problem that has been on my mind as of late. (In fact this is why I decided to sign up) Recently I started up a small online company and I decided that I should hire a few of my friends to program some features that I would need. However, the dilemma that I am having is in how I should treat them.

For one thing, I am deciding on whether to pay them or not if they want to become "partners" in this business. But I have already sacrificed so much time and invested a lot of capital that to let them have equal amount of ownership over the business makes me uneasy, especially if I have to pay them.

Am I just a cheap stingy guy for feeling this way? What do you think I should do? How would you distribute ownership and what kind of deals do you think I should make?

*Note: My friends and I are only 20/21 so we've never actually had the "real deal", but I was fortunate enough to have an amazing amount of capital due to some other works I've done.

If you took the time to read this, thank you so much.

[StephenG]

Hayden, I don't think your problem is that hard to solve. Everything has a value. Your company has a value and the work they are doing has a value. Just determine what thevalue of their work is in relation to the value of your company. I paid programmers a fortune and basicaly would have been just as well off to have flushed the money down the toilet. You have t be assertive about what you want and what you are willing to pay, negotiate a fair deal for both of you and then go from there. Steve

[guidemesingapore]

What kind of business are you in? Are the programs your friends are developing worth giving them a lifetime stake in your company? Thats how you should approach it. I personally would be very uncomfortable giving away part ownership unless there is a VC involved.

[HaydenNoble]

Hello and thanks for replying.

@StephenG
Were those programmers your own friends from high school? If they were your "friends" could you really build up a business "with them" and not give them ownership over part of the company?

@guidemesingapore
I am a starting-up a particular website that I have spent a year structuring. Actually they have not begun to program anything yet. I only gave them an offer if they wanted an "internship" (really just something to do) over the summer. Venture capital? There is no venture capitalist involved. My starting capital is only what I invested myself.

[doolally]

If you see a value to the business from them, offer a small percentage - they can be used to grow the business. However, taking this approach, they have to be aware that there is a commitment from them to the company. Is this what they want?

If they are just friends helping out that don't want a long term interest in the business, pay them a little to appease them. Friends can often be persuaded to wait until the business is doing well before getting their money or if they are really good, close friends - get them to do it for free with the offer of a night out on you at the end of it or similar.

[SethKravitz]

For one thing, I am deciding on whether to pay them or not if they want to become "partners" in this business. But I have already sacrificed so much time and invested a lot of capital that to let them have equal amount of ownership over the business makes me uneasy, especially if I have to pay them.

I would always lean the side of not giving equity. Bringing in new partners should be considered a last resort. You don't want anymore hands in the cookie jar than absolutely necessary. Also, at the end of the day do you really need to hire your friends to do coding work when there are so many good contractors out there available through sites like oDesk.com.

I feel like you may be making two critical mistakes at once. 1. I never work with friends or family since there are so many things you ark risking in that scenario and 2. I only bring in an equity partner when it makes absolute perfect sense.

[srem]

Providing equity isn't always a last resort. It really depends on the goals of your business. Remember that when you provide equity in your business, they are going to benefit when you benefit and vice versa. It is in their best interest to see the business prosper. If you pay someone flat out that is fine in a lot of cases but no matter what they will get paid the same. Not that I am against silent investors but finding investors that know something about your business and giving them equity can actually benefit you. Even though there are more hands in the cookie jar, there is simply just more cookies. They want you to succeed so they can too. If your partner can't see that then you better just pay them a flat rate. If they understand business and have a proven track record it can really be a beneficial and rewarding decision to provide equity to the right partner.

[Advertising Swami]

Most experienced entrepreneurs would not give equity unless they had no other option.

Read Felix Dennis's book "How To Get Rich"

He's a bit of a dick, but he got very rich by firing employees who demanded
equity and always trying to maintain as much ownership and control as possible,
even when it meant taking loans at unfavorable interest rates.

[vince]

I would offer another benefit to the friends either then equity.Depending on how enormous the task is for them id say drinks every weekend would be a better form of remuneration.

[chanson]

If you believe in the idea and you have the capital to compensate them for their work go ahead and do so and retain your equity. If it is going to work as planned then it should be more valuable int he long run. IF you are going to divy up the equity be sure to retain a majority, and dont undervalue your own efforts both past and future.

[www.olytec.cn]

I think you have to think over your business again. because It is not just yourself, but also involve your company value.
Eric Lee
Sales Manager

MSNlytec.cn at hotmail.com
Email: sales at olytec.cn
Olytec Co., Ltd.
Address:27K, Di Jing Feng Building N0.1 Shenhui rd, shenzhen, China. Zip 518000
We focus on laser safety glasses, Ipl safety glasses, laser diode mudles, optics. since the year 2002

[jrod31]

if you are the head person of the idea, you want to take control of your decisions. you need to what value do they bring to your business. one thing that i have learn with having friends as your business partner is..... are they going to work as hard as you ar willing to? are they business minded... you could work out a deal wuth them where u dont give them no percent of yiur business... also....keep in mind business is business.... dont make the mistake of letting your friendship feelings get in between...

[Anderson23]

I would not give them equity in the company. When you partner with someone it can cause problems more than help. For instance, you may not agree on the operation of the company and it could cause your relationship to deteriorate. Also, owning 100% you make the decisions and you are in control. They may or may not have the same vision, goals, etc. as you do.

[secret]

Hi Hayden...great that you have idea to start your business...we would be happy to help you on your problem..

I'd be very happy to help you.

[majo]

value your self first , treat your friends as you would treat me...business is business man!