My partner and I have been discussing the contributions each of us make and whether we should be rewarded differently. I run the business side; my partner is the art director. My role generates more wealth for the company; I also work longer hours. Our solution is for me to be reimbursed for the vacation time I don't take. We also agreed that I will get 9% more ownership of the company, which would raise my stake to 60%. Is this fair?
Betty L. Brennan, Taylor Studios
The short answer: If both parties believe an arrangement is fair, then it is, says William Allen, a professor of business law at New York University. But if one party thinks she's got the short end of a stick, she may use that stick to smash the relationship. Business partnerships require a "reservoir of trust and good feeling," says Allen, and -- like marriages -- only work when founded on respect and the willingness to compromise. You should both be open to rethinking roles and recalibrating compensation if things change.
Sometimes what changes is your assessment of a partner's value. In 2001, Andy Morris launched an eponymous public-relations firm in Manhattan, giving long-time colleague Judith King a 20% stake to run the business side. King worked just one day a week, Morris as many as six. It soon became clear that the ownership split wasn't fair -- to King. "I brought in a heck of a lot of business," she says. Morris agreed, crediting his "brilliant strategist" of a partner for helping the company grow 400% in two years. So in 2002, King was made a 50% owner, even though she still only shows up a couple of days a week. "It's not a matter of the hours we put in," Morris says. "It's the results we produce."
My company roasts coffee for grocery stores and espresso shops and has sales of nearly $1 million. But suddenly, I can't get another account. I haven't lost any clients, but I'm losing pace with my business plan.
Brenda Moore, Perk & Brew
Ann Arbor, Mich.
If you can't keep pace, then maybe your business plan should slow down. Business plans don't descend from the mountain writ on stone tablets. They're meant to be fine-tuned -- as often as every quarter -- to reflect changes on the ground. Growth strategy no longer working for you? Get a new growth strategy.
John Wallace's plan stopped working for him in 2001. Wallace, CEO of Now Software in Albany, Ohio, was counting on new products to grow his contact-management software firm. Then that whole dot-com unpleasantness happened and revenue fell 40% in six months. So Wallace -- with a consultant's help -- back-burnered the new stuff and focused instead on two core offerings. "It ultimately made us stronger," he says. Now executives treat the plan as a work in progress, giving it a thorough once-over every quarter and reviewing some parts weekly.
One caveat: Make sure it's your plan that's out of step and not you. "If you've modeled your world correctly but you're not hitting milestones, you need to address execution problems or correct assumptions, not just rewrite your plan," says Mahau Ma, of Trinity Ventures, an early stage venture capital firm in Palo Alto, Calif. Remember: There are attainable goals and unattainable goals, and it's possible to fall short of either.
After a rough couple of years, we're close to getting back on our feet. But we need a small amount of capital to push us the last little bit. We've already tapped a long-term credit line with our bank, and I don't want to exchange equity for cash. Should we play the cash-flow game and try to wing it, or is there something I'm not thinking of?
Michael Oh, Tech Superpowers Inc.
Yes, being aggressive on accounts payable gives you more time, and we all know what time is, right? But bear in mind that some vendors are way more equal than others. "It all depends on who is in power in the relationship," says Karl Borden, a University of Nebraska at Kearny professor who has founded eight companies. Wondering who has the power in your relationship with IBM? Well, it isn't you -- so back off. On the other hand, Borden asks, "who cares about the guy you buy paper clips from?" Or you could tinker with your payroll schedule. Paying once a month might not endear you to employees, but these days most folks have accepted that pain is something to be spread around.
You can, of course, charge it on your credit card. But with interest rates as high as 20-25%, if you're not really almost back on your feet you could end up on your keister. And in a pinch, there's always your family and friends. Money can't buy you love, but sometimes it works the other way around.
Looking For Answers?
Stumped by a thorny business problem? Let Inc. help. Send your questions to AskInc@inc.com. We'll consult with experienced entrepreneurs and savvy advisers, folks who've been where you are and figured out what works and what doesn't. If you don't like what we have to say -- well, you can tell us that, too.