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  • How do I exit this partnership gracefully?

    updated 2 weeks, 3 days ago 0 Member · 1 Post
  • Charles

    Member
    October 30, 2019 at 6:17 pm

    Three years ago a friend of mine, whom I consider a savvy businessman and a solid marketer, brought an idea for a niche B2B service to me. The idea isn’t original, with a small number of similar services on the market and doesn’t hold any patentable concepts. The implementation is highly technical, requiring knowledge in the areas of data science, machine learning and systems architecture, which I am an expert in. He pitched this as “if you build it, I will sell it” and we discussed at length that for the service to be successful, it would need thousands of users, to which he said should be no issue at all since it’s a very easy service to pitch. We created an LLC in which we are equal partners. I had the prototype built in a month and within 3 months we had a solid feature-rich website ready so sign up customers. Alas, 3 years, 1500+ hours and a sizable hosting bill, we have ~100 customers, half of which were signed up by me by either a word of mouth or a web chat. Not to discredit my partner, he did try marketing the product and even worked on a few large deals, but none of them materialized. I feel like in the early stages he tried hard, but all of his efforts were fruitless, which is particularly surprising since he already operates in our niche and has oodles of connections. He simply failed to get to the decision marker, every time. As time went on, his efforts started to resemble sporadic moves rather than calculated decisions. To put the above into monetary value, my T&M cost is roughly $150K while the business produced by my partner is barely $5K. After running some reports, I reached out via email to a few stagnant leads in our system and managed to convert them into customers. We’re talking about maybe an hour’s of work here. After some soul searching, I realized that I can double down and start marketing this myself, which will require further investment of my time and possibly money into the business. I have the luxury of time and resources, wheres my partner is too busy running his other business. We had a conversation about this today and I brought up the fact that he hasn’t held up his end of the deal and we need to part ways. Since his sweat equity is barely quantifiable and his monetary investment is limited to a few trips to trade shows, there’s very little he has a claim to. He was furious, insisting that he owns 50% and that’s what it is. I tried reasoning that at this point any further investment into the business from my end isn’t justified and I need to cut my losses. I am also willing to take over the business, set him up as an affiliate and reassign all the business brought by him to his account and pay him commission. He can continue signing up new business as well. Somehow, that got him even angrier, as he “would not be kicked out from a business he created.” I also offered him to acquire my investment of the business, but he has neither the funds not the understanding of the technology to do this. I believe that I can grow this business to what it should have become by now. I am not willing to hand over the software I developed to a guy who doesn’t know what’s under the hood and it’s difficult for me abandon the result of 3 years of work. How do I structure this exit? – by hq overview ub3rn3d1n3ss – –

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