Questions

What questions should I ask before agreeing to be a partner in an e-commerce retail business?

I'd contribute sweat equity with $0 salary and 50% or more of profits. I was recently approached by a person who owns a retail e-commerce business to be a partner. He's already been having success selling his goods on eBay for a few years, and at one point he even had a retail showroom but moved to a smaller office due to rent increases. Currently, he wants to transition completely to selling his goods through a proprietary online store, which isn't set up yet. He has plans for how the website/online store will look and even has a developer lined up. I met this person while pitching my digital marketing services as an outside consultant, and I left with an offer for partnership: $0 salary and 50% or more of profits (he was throwing out numbers to gauge general interest). I'd be responsible for setting up the online store, moving the inventory to the online store, marketing it, and ultimately selling it. He would cover any and all costs associated with sales and marketing. I'm no stranger to making business arrangements via my consulting business, but I've never even considered such a partnership before. I'm currently unhappy with my work situation and theoretically, I'm excited about this new opportunity. I'm passionate about the product, and I'm definitely motivated by the hustle. Of course, I wouldn't enter into the agreement without some assurance of its potential for growth. What questions would you ask before making a decision?

3answers

Something you need to take into consideration (and most people forget) is to understand if the CEO is looking into the right numbers.

That's how investors also vet entrepreneurs. Are they looking to achieve the right goals?

For example, a successful e-commerce site always look to get as close as possible to 50% when it comes to the revenue that comes from returning customers.

Another big problem is the conversion funnel within the store. Is it good enough? Are they paying attention to it? Can they fix it if one of the steps is not working? (meaning: do they have the technical capability of make constant changes to the site?)

I wish you the best of luck!


Answered 3 years ago

I've guided many people through partnership issues.

You're essentially talking about buying half of this business in exchange for your labour.

Here's what you need to do.
1. Put a value on the business
2. Put a value on your time
3. Make a share purchase agreement with the partner.. I get 50% of this business in exchange for XX number of hours of my services.

Otherwise you're looking at a time black hole with no limits. As well, you want to be sure you become an owner so that if things don't work out, you still get a seat at the table in deciding what happens next.

Check out this video, it talks about some of the issues you're facing: https://youtu.be/UNZavOxgg74

If you need help sorting out the mechanics of setting this up, arrange a call with me.

David Barnett


Answered 3 years ago

There is an alarm bell ringing in my head, when I read your post.
First question: why is he willing to give up 50% of his profit?
He might have a very good reason, but you need to know what that reason is.
His answer might be: "I want to lie all day long on the beach drinking Pina Coladas, 40% is fine thank you very much"

That is OK, as long as you are comfortable with it.

PS: I sold 66% of my company, clearly stating to my associates what my expectations were and asking them for theirs. This is working out pretty well.


Answered 3 years ago

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