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Free registration at the forum removes this block.He invented the product but with company funds, tools, machines and employees. We have been friedns for 10 years and partners for 10 with no agreement in place....so NO there is no Shot Gun agreement in place.
the product should cost 5-7 dollars to make and we plan on retailing for $24.95 so I do think there is room for the company to be profitable with a $1 royalty bonus.
that makes no sense from your earlier description - i thought his desired terms were like this. you sell the product for $25, say you make 50 per cent profit from the retail sale, leaves you $12.50, he gets the first $1 meaning $11.50 is split 60/40 between you. In your new example, the maths does not add up, you sell 100k, you take 100k from the 60/40 split, that leaves zero, where does the other 30k materialize from???He is creative but not really a inventor by trade with more inventions in the pipeline. I am confused though about the 60% of the $1. The way he thinks it would work is ... say the company makes 100K in year 1 and sells 30K units . He would take 60K and I would take 40K. in addition he would have the company cut an additional check for 30K to his name. This example isnt really the best as we wouldn't really draw so much money on only 100k profits but just for example.
From what OP said, I'm sure it's just money, I don't think he would agree on 40% if all execution would be up to him as well. Money doesn't buy equity, it's just sponsorship. We're not in 40's.
5 minutes on the phone with this inventor about how easy it is to find money nowadays without selling 40% of company, and OP wouldn't get even 10%.
Whoa, why do you think I dont deserve 40% ? He created the invention on company time, company funds, and used company equipment employees to help. The invention is related to the industry we are in. I have been a partner in the company for 10 years.Who is inventor?
If you think that you can just throw money on table and you automatically deserve equity - you're mistaken.
It's unfair that you have 40% in the first place.
In which case, the 1$ per product sold effectively shifts 2% ownership from OP to his partner (62% vs 38%)If your company makes $20 a unit and sells 30,000 units ($600k) then he gets $30,000 for his royalty. You company then makes $570,000 which you split 60/40.
You make $228k.
He makes $342k + $30k = $372k
From what OP said, I'm sure it's just money, I don't think he would agree on 40% if all execution would be up to him as well. Money doesn't buy equity, it's just sponsorship. We're not in 40's.Execution is key here, so great that he invented the product, but if you're building the business that sells it, I don't think he deserves even more money than the 20% more hes getting.
Who is inventor?
If you think that you can just throw money on table and you automatically deserve equity - you're mistaken.
It's unfair that you have 40% in the first place.
Also to add we have been business partners for 10 years already and we simply used the current business money and time to pay for the patent and develop the prototype. We did not yet incorporate the new company or might not completely as its a product invention in our current industry
Yes I didMy opinion: In that case the extra $1 isn't fair. If he used your business's time and money, then a fair split would be 50/50. If you're fine with 60/40, then great. But if you're not find with 60/40 + $1 royalty, then the other partner should scale back to 60/40.
Have you told him you don't think the $1 is fair?
Thanks I agree , execution is key here and we are both building the company together but still I feel a $1 request is high.Execution is key here, so great that he invented the product, but if you're building the business that sells it, I don't think he deserves even more money than the 20% more hes getting.
Simple: How does the company have access to the invention if it is his? Is there a licensing agreement in place?
More important: Can you be profitable with the $1? Can the company make a lot of money and lead to future opportunities? Do you lose that opportunity unless the $1 is paid?
If he personally licenses the product to the company with a $1 per unit sold royalty, you are only paying $0.40 as the company is paying 100%.
If he wants 60%, then $1 royalty from your 40%, ask him how that lines up with 60/40 and what agreement is in place between him and the company.
Hold this in case needed.......if he invented it while part of and being paid by the company to do so, in most cases the company owns the invention.
Is there a shotgun clause in your shareholder agreement?
An earlier contributor noted that in effect the extra $1 profit per unit is only obtaining 40c additional because under your agreed 60/40 split he would get 60c of that $1 anyway. If I was you, and the business partner is a good inventor with other projects in the pipeline, I would not fight him on this 40c. I would seek however for him to confirm that this is final re negotiation of your terms - you will give him $1 profit on the provision he does not ask for additional financial remuneration in relation to this product or any new products. I really don't think this is a point worth fighting over.
Do you own 95% of company? If no - it's a weak argument.Whoa, why do you think I dont deserve 40% ? He created the invention on company time, company funds, and used company equipment employees to help. The invention is related to the industry we are in. I have been a partner in the company for 10 years.
that makes no sense from your earlier description - i thought his desired terms were like this. you sell the product for $25, say you make 50 per cent profit from the retail sale, leaves you $12.50, he gets the first $1 meaning $11.50 is split 60/40 between you. In your new example, the maths does not add up, you sell 100k, you take 100k from the 60/40 split, that leaves zero, where does the other 30k materialize from???
This guy seems like he is constantly trying to get more out of you.My partner actually wants 1.50 Per Unit sold.
In addition I requested a commission for me if I bring in new business. He proposed .25 a uint
Smart.If the profit is below $5 the royalty is eliminated.
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