How to decide stakes in a partnership?

The best way to test a person's talent is to put them to work in the reality of your business.

If these folks are all onboard for being partners, promise to give them a cut of all deals they bring in. Structure the plan so that the contract lasts three months. Then, let them prove themselves and show (not just say) they really mean it. Make no equity promises until you can validate their claims.

What if someone balks at the offer? I'd imagine these folks will have main jobs during the testing phase. If they scoff or refuse, then you've won immediately. If they aren't willing to hustle a bit extra for a few months how in the world could they do this for many years ahead within a successful partnership?

Why three months? People can fake their behavior for quite a bit of time. At two months people can't help but being themselves. You'll get a taste for how they work, they're ability to close, and their personality. Personality is the biggest factor, as they may do a great job bringing in business, but be simply unbearable to work alongside.

A note of caution around the Head of Marketing SME: this person sounds like a problem. Are they acting immorally towards their current employer? Check, stealing business. Are they sure they can do it on their own, but for some odd reason never have? Check. Are they requesting for more stake than they deserve? Check. These alone are reasons to run. Immoral, unproven, and greedy at the start.

To me, you sound like you need to hire a commission based sales person. Give them a stake of each deal. Don't give up equity for something like this. This company is your baby and equity is a last resort.

Just like when nations form a coalition (partnership) against a common cause there’s always risk to that contributing nations blood and treasure. And lets not kid ourselves, it’s that RISK which you are refereeing to. So, that said, I would not recommend starting that partnership as a 50/50 division. Even your gut instinct in your question is saying that.

So, if not 50/50, how do you? One way is a common goal approach supported by a task-to-purpose objective base. For example, I recently consulted a small three-person partnership cell phone repair business. These young folks had no shortage of people with broken glass phones. They had the idea, they had the model, but they didn’t have the common goal. They convinced themselves that each partner had equal stake in “bringing something back to the business”, or “you need to do this, you need to do that”. That’s not strategy. What I had them do is free think and write down every task they could conceive of. Then I had them agree on their mission statement for their business. Once those where visible we simple placed each task into a prioritized list. Hence, task-to-purpose and moving towards the business objective.

The partnership was forms based on a common goal. Not a 50/50 equity split. Sure, they’re all equal partners, but they all have stake in ensuring the objectives are accomplished.

Just some thoughts from the Spartan Team.

Partnerships can be tricky. No matter how good of friends two or more partners are, we are talking about business, not personal. And sometimes making tough decisions is just business but understand that sometimes “personal” gets in the way (for good or bad). Having a very thorough contract in place is essential so there are no “guessing” or “now what” that may come up later.

Once you start running a business, you are no longer working in the business but rather working for the business if that makes sense.

This has always been one of the most contentious issues with entrepreneurs the moment they plan to join hands together. We had published "Happy Equity Index" for people going through the equity sharing conundrum. Rather than re-posting the entire content I'm dropping the URL for you to refer
http://366pi.com/one-business-with-multiple-co-founders-happy-equity-index/

Hope this could be of help to you!!! All the best.

In the eyes of the law, by the very nature of entering business with another party, you may be considered a partnership -- whether you have a written agreement or not. A partnership agreement can be solidified by an oral agreement between partners, but experts recommend putting the terms down in writing. Once you have an idea for a company, whether this means selling a product or a service, understand the consequences of opting to become a partnership. The first step you need to take in forming a business partnership is to figure out who is in the partnership. Professional firms with 50 or more partners have extremely detailed agreements spelling out rigid procedures over who gets admitted, who signs the lease, the structure of the partnership, etc. If you are teaming up with someone else to perform services for a mutual client and do not wish to make that person your formal business partner, make sure the other person signs an agreement stating clearly that they are not your partner or agent. You notify the client in writing or by e-mail that you are NOT in partnership with that person. While this exercise is not mandatory, it is extremely helpful to ensure success of a partnership. Do this by making sure a suitable Internet domain name is available for your partnership, as most businesses these days should establish a website.
You will also need to register your partnership name with a local government, for which there is usually a modest fee. And while it is not required, it is often a good idea to gain legal protection for your partnership in the form of a trademark. A business partnership does not pay taxes on income. The partnership is a pass-through entity, and the individual partners pay tax on their distributive share of partnership income passed through to them. Each year, the partnership files a return, Form 1065, to report to the IRS the income, gains, losses, deductions, and credits from the business. It also files a Schedule K-1 for each partner, allocating a share of each item of income, deductions, etc. according to the terms of the partnership agreement.
If the partnership is profitable, each partner must pay self-employment taxes on his or her net earnings. Instead, they can file a single Schedule C to report their share of business income and expenses. The most important thing to spell out in a partnership agreement is your "exit strategy" if things do not go as planned and you want to get out of the partnership.
Besides if you do have any questions give me a call: https://clarity.fm/joy-brotonath