need some business advice

[starsky]

i hope some people can offer advise on this scenario.

2 people, john and bob, buy a retail business and put in equal amount of money 5k each.

john works 26 days out of the month and bob works only 4 because he has another job as well. how should they split their monthly profit? any ideas?

[sauce]

does Bob make as much money for the business in 4 days as John does in 26?

[RG]

i hope some people can offer advise on this scenario.

2 people, john and bob, buy a retail business and put in equal amount of money 5k each.

john works 26 days out of the month and bob works only 4 because he has another job as well. how should they split their monthly profit? any ideas?

well if I figured right 86% should go to John and 14% to bob ... if both have the same cash invested ... then the pay out should be based on days worked.

[BlackKnight]

Sounds like Bob Should atleast Get His Cash Back,.. & then after that,.. if he continues to do so,.. He should only get 5 percent of the profits,.. or be Fired.

[Mikey]

John should buy Bob out considering he's running the whole shabang single handed ...

A partnership like this is only going to last so long anyway.

[starsky]

does Bob make as much money for the business in 4 days as John does in 26?

no he doesnt.

[bobws]

What was the understanding when the business was started? was Bob supposed to arrange for more time for the business? what is on paper? was the business possible without his investment? was it even though bob didn't have time for it but put up 50% he was told would get 50% of profits? these need to be addressed.

[sauce]

If the business is new, then I can see Bob skating on 4 days of work for a while.
But after the rubber hits the road, Bob needs to be paid according to his hours worked and income he brings in to the business. His startup money was just that....startup money. The business has started up and now has to function and make profit. Simple like that. Of course, they are probably friends, so it will now get difficult, and then Bob and John will learn that two friends going into business can be as horrible as two family members doing it.

[UnderdogDJLSW]

Well, as was said earlier, what was the agreed upon scenario after start-up. If it was let's get this going and see how it goes, then you are at a blank slate and can work things out. If bob was told it was OK to keep the other job and we do this together, then you may have some negotiating problems. If the 4 day a week partner is needed for influx money to keep the business afloat, then that can be considered just as important as working more days.

[MIB41]

If you needed his money just to start the business and only shared the dream without getting into how the profits would be split, then I think I would consider buying out his stake in the company, unless you truly feel like you need him. Without knowing specifics, I can't think of alot of scenarios where only four hours work translates into a meaningful contribution... UNLESS he's doing something that is incredibly vital to the business that takes less time but is still incredibly valid (like producing your printed goods, etc.). I think I would ask myself that question first. Then I would ask myself if eliminating his position would increase costs for what you'll need to do in his absence. When it comes to business, it's all about the dollar, so that's how I would measure it.

[Hulk]

They should consider paying themselves an hourly wage, with the remaining profits being put back into the business. They should also come up with some way to measure the increased value they profits add to the business, and a distribution percentage based on hours worked or some other proportion, such as 80/20.

If this scenario is followed, and they sell the business down the road for 110K, then John gets 80K and Bob gets 30K (initial investment and percentage of increased value of 100K), plus they have whatever money they have drawn in wages. If either one wanted to buy the other out, they'd know how much to pay. Fair and reasonable I think.

[Zemo]

What was the understanding when the business was started? was Bob supposed to arrange for more time for the business? what is on paper? was the business possible without his investment? was it even though bob didn't have time for it but put up 50% he was told would get 50% of profits? these need to be addressed.

Yes, this would have to known to give a solution.

[megoapesnut]

My thoughts are similar to Hulk. You should come up with a decent hourly wage and pay each based on that. Then the PROFIT at the end of the year, or quarterly, or however you want to do it, should be paid 50/50.

[toys2cool]

it depends if they agreed on something before, because I doubt he would've invested his $5k knowing he would only get back a small percent