Wednesday, September 29, 2010

Business Partnership and Money.

Here is a suggestion for those of you looking to get into business. Have at least one partner who is an accountant. Give him a small, fixed income, with some incentives if you do well at sales. Most importantly, when that partner provides you with advice, take it.

Those of you who follow this blog on a regular basis are aware of the various quasi-legal entrepreneurial ventures I'm involved with. This particular one is legit, legal, and done jointly with two other guys. One of whom is in charge of acquiring the legal (I feel that this can't be emphasized enough, it's such a pleasant change) proprietary ingredients, the other in charge of selling and packaging, while I run accounting, manufacturing and overall business goals. The guy who is selling, styles himself a marketing genius. Unfortunately, he isn't, and lacks all business sense. Scenes between us are like something out of the movie Blow.

Here is how I planned the night to go: L arrives with blend takes his cut and leaves, I manufacture and take my cut and leave, then N packages and sells at a price based on excel tables I've drawn up for him. Easy? Simple? I thought so.

However, here is how N planned the night, and how it went. L and I arrive, make a few dozen units. Then invite over a guy who he had presold several hundred dollars worth of units to. Units sold at a steep discount, at a price N pulled out of thin air, without consulting me. Following the kids arrival we'd hang out, talk and chat for two hours, then finish the kids preorder. Boot him out and then split the money from the sale on a percentage base between us.

Thing was, as I would have been able to tell him if he had asked, the discount he offered was so steep - that if we used N's percentage idea, it didn't leave enough to go around and cover L's costs (he had invested the most). The Flat rate I had worked out guaranteed L his investment back, and mine, but didn't leave N much at all (since his discount didn't let him profit after our cut). This led to long, drawn out, civil but heated debate about how the money was to be split.

I fail to see what is so complicated about making sure you sell your product at a price that clears your costs. The buyer would have been willing to lay down an extra 20% (the non-retard-discount price), which would have been the difference between N being happy, and him being pissed. Ultimately, since he hadn't actually invested anything except time, L and I convinced him to go with my flat rate, and hopefully he learned a valuable lesson about selling at prices you simply made up. Dumbass.

Don't ever accept a percentage on sale if you aren't the one selling, you might end up with this guy.


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