How much of my company should I be giving up? This is the biggest decision of my life. Please help!

I've built and sold two businesses for £1M+ each. In both cases I took on outside investors.

Some things to think about:

Do you need an investor? What would you actually do with the money he’s investing? You mention an office and adding video production, but are those things you really need to have / do? What is really constraining your growth right now? Would having an office and more money actually generate more sales? You mention that you already have two commission-only salespeople, so they only cost you money if they bring in sales, so you wouldn’t need more money to get sales through that route.

If you proposed partner is into flower wholesale and distribution, they may not really be able to add that much useful expertise to your social media marketing agency.

I’d look at it this way: what’s the worst thing that would happen if you did or did not take up this offer? If you did take it up, worst case is that you lose your business and can’t do anything about it (things don’t go well, partner stops funding, business goes bust); if you turn it down, you are at least still in control of your own destiny.

I think you nailed it with the 1% vs. 100% comment.

It really depends on what you want to do and where you want you business to end up.

It sounds like you would like to grow the business and have additional capital to do so. Just because he offered 60/40 with him in charge does not mean that is what it has to be. I would see how negotiable he is on that point and what his concerns are with you being in control.

I suspect that it has to do with how his dollars will be spent, which is understandable.

Just spit-balling here but maybe you could counter with something along these lines. Make a 51/49 split with you in control, but setup a "release schedule" in which he would have to approve specific investments before he gives you the cash.

There are a variety of other things you could do, this is just one idea. This way he had more control over what happens to the money and is not just giving you a "blank check", but you maintain control over the company.

This scenario requires you to establish a good financial reporting and forecasting process/system. But this is something you absolutely must do no matter how you proceed.

I hope you have not yet made your decision yet, however, I believe partnering up with this individual in 60/40 split will be a mistake. Here are my reason why:

1) This business is yours. You started it and you have grown it to what it is. He is an outside investor, who, not only wants to change the vision of the company, but he also wants controlling interest. The likely outcome is that you two will butt heads on decisions and directions of the company, but you will be powerless because he owns the majority share. He can also have you removed.

2) Being a first time entrepreneur can be tough. Ofter you're doing things you have no idea will work, and its easy to feel like you could be making the next huge mistake that will destroy your business. My guess is that you feel this person can help remove that uncertainty because he is experienced and has connections. However, the odds are that he also does not know what he is doing when it comes to the specifics of your business. He is just going to come in with preconceived notions based on his past experiences and successes. Odds are he can be just as wrong as you can be. You have to trust your gut. Only you know what is best for your business.

3) If you give up the majority of your company in the very first funding round you put yourself at risk of not being able to raise additional capital in the future. If you do raise capital later, you will have to give up even more of your minority share. Venture Deals by Brad Feld and Jason Mendelson is a great book to learn about raising any kind of venture capital and the typical pitfalls.

I can list a few other reasons why this is a bad idea, and I'm happy to jump on a call with you ,should you want to discuss this further.

My advice is you should continue to build your business (slow and steady) until you are in a much better position to raise capital on your own terms and giving up only minority share in the company. One way to start this process is to start charging more money to your clients. I've tried this many times, and it can be made to work. Let profits drive your growth. Raise money when you least need it.

If you must partner with this individual, then I would say a 70 / 30 split in your favor or better. Or an even smaller share and give him the role of an advisor. Just don't lose majority control. this is your business. He should be working for the business, not YOU working for HIM. If you want to work for someone, then then there are less riskier options than starting your own business.

Hope this helps.