Dividing the Pie ????
Chris Schultz
Writing a book called Analog ?? about my pursuit of a life of agency, meaning, and joy.
Ever found yourself thinking… ??
There are many reasons to contemplate a partnership when starting a company.?
After a year of working on my first company, BachelorBlowOut, my partner and best friend arrived at the ‘getting real’ moment where we needed to make an ‘in or out’ commitment. I was all in. He was taking a job as a lawyer. We rationalized that he could make a salary and help fund BachelorBlowOut while I worked on it full-time with no pay.?
We started at a 50%-50% ownership division. We agreed he would invest $1000/month for a year and keep his ownership; if he didn’t put the funds in, his ownership would be reduced accordingly, ultimately down to zero if he didn’t put anything in.
This agreement was handwritten on a piece of paper.?
After a year, he hadn’t put any money in. I sold the company two years later for $60,000. I was also offered a $60,000/year salary. Combined, this helped me pay off the $120,000 in credit card debt I acquired building the business.?
After the sale, he felt screwed. I felt I’d dedicated three years to the company we founded and walked away with nothing. We went without speaking for more than two years. It sucked to struggle to build our company and lose a friend. The handwritten contract did little to assuage hurt feelings on both sides.?
What would I have done in hindsight? Maybe nothing more than trying to paper the contract more formally. With experience, I’ve learned that partnerships are challenging, and crystal clarity on agreements upfront goes a long way to avoid someone feeling screwed later. This becomes especially important when things go really well or really poorly.
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How to divide the pie in a new company is one of the most frequent questions I get.?
I’ve done it every which way over my career and 40+ businesses. There is no foolproof way and I rarely give the “you should do this” kind of advice, but I like to provide guidelines that help a founder to think it through.?
Here are some ideas for consideration:
Here are frameworks that can help you decide on the right structure for your situation:
To my friends who are dividing the pie right now, I hope this provokes some helpful thinking. There is no correct answer, it ain't easy. Do your best and keep on rolling.
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- Chris
PS: Want to dive deeper? I recommend this book: Slicing Pie Handbook
Chris, thanks for sharing!