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6 Comments

How the profit should be distributed?

Hello folks...

I built a Shopify app with 2 of my friends.
The idea was mine. 90% of the work was done by me. All the hard tech problems were also solved by me, as they didn't know much about the mern stack.

But profit is shared in 40%, 40%, 20% basis.(I take 40%). I feel like I could have built everything myself easily. They don't know about marketing it too.

I feel bad that they are getting 60% without contributing anything. And I am getting so little.

What should I do?

Btw MRR is more rhan 1500USD.

on August 15, 2020
  1. 3

    Exactly, the deal is the deal. If the deal gets you 40% of existing work flow and income share as the result of that work. Then, according to the deal, the rest of the work - 60% of work supposed to be done by your co-founders. They are the ones who are not keeping up with the deal, not you. They have broken the deal by not taking ownership of their workload share (60%). The deal is not only about the outcome share. Sharing the income is the consequence of the work to be done, the share of involvement. The share of work you agreed was not done by your co-founders according to the deal. Therefore, the deal on income share has to be re-negotiated on the face value of work that has been done by team members.

    About friendship: the situation does not qualify as friendship when "the friends" take the majority of your income away while putting the 90% of workload on you. I call it exploitation.

  2. 3

    Firstly, congratulations on getting to $1500 MRR for your app.

    I've been in a situation like this, where I took on 90% of the work and risk for 50% equity. It wasn't much fun.

    If your co-founders are genuine friends (who value your friendship more than the money), I expect that you can have a conversation with them about it. If they are aware of how much you have done and how little they've done, they may even feel guilty about it.

    I suggest that you explain to them how you feel, also making clear to them that you value them as friends and don't want to resent them for the equity split.

    It's also worth explaining to them that you have very little incentive to keep going, that you'd be better off killing this project and starting another without them.

    One possibility, then, might be to give them a choice, that you either:

    1. keep the current equity split but you stop working on the app (meaning they'll get 40% / 20% of the profit from a 1500 MRR which is likely to shrink over time), or
    2. change the equity split so that you keep working on it (either completely solo or with them at their low level of input) so that you'll keep growing the business and their share of profits will increase over time (so that their 15%, say, of the much larger business, is worth much more than their 40% of the current business).

    If you do this, I suggest you offer them more than you think is fair for the sake of the friendship - something like 70/15/15, 75/12.5/12.5 or 80/10/10 rather than 90/5/5 (which they are likely to find offensive). And you can consider the lost equity a learning experience (in terms of working out the equity split for future projects) and the cost of maintaining a friendship.

    Whatever you do, work out how much you value your friendships versus the equity / money and act accordingly. Money is useful, but it doesn't keep you company.

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      I believe this is best advice out of all here.

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      This comment was deleted 6 years ago

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    This comment was deleted 4 years ago

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      I believe the deal would hold only if the other friends did their part in contributing. The deal wasn't to take that much without giving anything I guess?

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    This comment was deleted 5 years ago

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      Even the customer support is also handled by me.😅