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I'm looking to start a website to supplement my day gig. I have the ideas, funds, and skills to do pretty much everything by myself, except for the front-end design. I plan to own the site under my Sole Proprietorship LLC, and will be responsible for startup and ongoing costs and maintenance. This will be the first time I've done something on the side with intentions of generating revenue.

I currently plan to just pay the designer a fee for his time (he will bill me based on the time it will require for his part). He would likely not have any additional work once it becomes stable, unless we wanted to tweak things later.

However, there are a few things I'm considering, and would like some peer feedback:

1) I'm wondering if I should somehow yield some profit share for the designer, to help him feel more vested in the site. If so, how do I determine what is fair for both parties? How should I protect myself?

2) I would love to have some extra help with developing to get the project up quicker and help drum up more ideas (and to help keep me motivated), but again, I'm not sure how to determine what would be fair for both parties.

3) Ultimately, if I decide to get others to help, how can I minimize the risk of tainting our relationships due to greed, jealousy, etc (on mine or their parts)?

I feel entitled to a large majority of the revenue, since I am the one doing the up-front investing and have come up with pretty much all of the ideas for the site (to this point), which is why I'm struggling with the concept of sharing the profit vs. just paying any help flat rates for their time. I also feel that keeping it simple would avoid a lot of legal headache that might come with trying to share this, plus I could jeopardize the relationships I have with these prospects (most of the ones I'm considering I consider good friends).

At the same time, I would love to share this experience with others, and feel that the site would benefit from having more than just myself contributing ideas into it.

So that's my dilemma. What are your suggestions?

Thank you for your time.

(BTW, I created this account to protect my identity, but will definitely accept the answer I feel is best, and upvote any that help my decision.)

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4 Answers

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You get 100% of equity to start with. Do NOT give it away. You can't get more.

Use money to pay people for work, not equity. (there are exceptions, but that is the rule)

I suggest you check out 99designs for front end design work. If you're set on the guy you want to use, agree on a price and amount of work and sign a contract.

You sound like you have a good plan and are only missing this one piece. There is no rule that says that anyone who does work for a company should own a piece of the equity or profits.

Even if the work is ongoing, I would recommend paying him a set amount. Employees are critical to business. If you give profit sharing or equity to everyone who works for you, you'll be a minority owner before you know it.

I'm no psychologist, but to me it sounds like you're looking for a partner. I can understand. I've been lucky enough to have my brother as my partner for both online businesses I've sold. It is a great thing, but not something you should actively seek.

Work with a variety of people for a long time. Eventually you will discover someone who compliments your talent set. Until then, pay for help with cash and keep 100% of your equity.

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I'm pretty set on my design guy, but thanks for the suggestion on 99designs, I'll keep that in mind. You may say I'm looking for a partner, but mainly because I feel it would bring in twice (or more) the perspective of going alone. I'm just not sure it'll be worth it in the long run. My main problem is that anybody I trust to help me would only be interested if they had a stake -- they're too busy to do it just for a flat rate. I could always make an offer they can't refuse without offering equity -- but I'm not guaranteed that I can make up for it. Thanks for your post. – user8810 Mar 22 '11 at 3:01
I completely understand and again, realize how lucky I am to have my brother. Here's my advice: Make entrepreneurial friends. Become comfortable with them and give each other free advice. Wanting another perspective is smart, as long as you can filter the extra noise. Sometimes the singular focus of one person can be better than two. – Landon Swan Mar 22 '11 at 4:10
BTW I'm happy to help if you have specific questions or want an opinion of strategyA vs strategyB. I enjoy this sort of thing. – Landon Swan Mar 22 '11 at 4:19
Thanks, I appreciate the offer. If there's a way I could contact you, I may have other related questions without cluttering this post w/ off-topic discussion, if you're willing (if not, I understand, just ignore). Thanks again for your time, it's been valuable. – user8810 Mar 22 '11 at 5:49
Sure, I'm glad to help and like I said, this kind of thing interests me. Email me. Landon at Landon Swan dot com. – Landon Swan Mar 22 '11 at 22:08
up vote 1 down vote

The quick answer is unless there's an ongoing need for further design, branding, or marketing that he would contribute to I'd suggest it is far cleaner to simply pay a fair rate for the job.

But, on the other hand you go on to say you'd like to share the experience with others and would benefit from having other contributions to it. Are you looking for a reason to involve someone further here ?

Perhaps you're better off having a more involved conversation with the friend(s) you have in mind for the design to see if there's other skills they could usefully bring in, and figure out what's a fair split of hours, involvement and equity.

For myself I am 100x more productive with someone to be accountable to and crucially to bounce ideas and tech issues off. Even though I've got a pretty wide skill set, there's areas I'm better bringing in others.

Would you be able to handle the marketing, support and further development on your own? What about the increasing isolation as things get busy?

I know I've mostly asked questions, but better figure these out sooner than later.

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I wouldn't say I'm looking for a reason to involve someone else, but I definitely see the benefits: accountability, less time (usually), more engaging, better product (usually). But I'm not sure they outweigh the tradeoffs: less profit/equity, legal drama. If this takes off, I will consider dropping my day dig and potentially employing others, but I can cross that bridge if it happens. Thanks for your response. – user8810 Mar 22 '11 at 2:55
@user8810 Get the wrong person and sure, there's the risk of fallouts/legal drama etc. Overall I think the benefits of at least one other founder outweigh the risks (personal opinion), as you can trade ideas, and the result should easily outdo that possible by one trying to do it all. If it does bring those benefits to you, 50% of it is more than 100% of solo. I guess it then boils down to intangibles like shared vision, goals and the like. It will also strain your friendship at times. Good luck. – Matt Mar 22 '11 at 14:58
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I see no reason or need for you to share any type of ongoing revenue with the designer of a website. There are a cornucopia of qualified great designers that work work on a contract. Pay for what you want. Pay a full price. And shake hands. If you feel the need to incentive performance, provide a kicker upon completion by a specific target date.

(I have questions about what you mean by designer. See below)

Getting Others Involved There are lot of people who would be eager to help you develop your project. Many I am sure would help you get the project completed quicker. Many might even help keep you motivated. You will need to pay them. Either in currency or equity. (Or other items you might have of value -- like say a Chicken)

If you go the Equity route than you are accepting the person as your partner. They are now a co-owner in your business. And you need to take into consideration all of the ramifications there off.

Another option is to give them Options. A legal agreement that they can buy shares att some future point. This usually only works if they are an employee. It is a way to provide extra motivation by vesting them in the upside performance.

In Summary All relationships run the risk of being tainted by greed and jealously. Choose wisely, and play fair. That is all any of us can do.

What do you mean by Designer? If by designer you actually mean designer/programing/ongoing webmaster -- that is a different story. The design of the site is a small portion of the actually programming. And the design and programming is actually a fairly small percentage of what is required to keep a functioning eCommerce site going. The most significant ongoing cost of an eCommerce site is the ongoing hosting, support, and development of the sales platform. Websites are never a "build-it-and-you-are-done" proposition.

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By designer, I mean he would do the graphics and CSS, and that's pretty much it (maybe some HTML). I would still do client scripting, most HTML, and of course the bankend scripting, database, server maintenance, etc. If I do give equity, it would likely be a small percentage, 10% or less. Thanks for your post. – user8810 Mar 22 '11 at 3:07
up vote 0 down vote

I don't recommend getting anyone onboard your business if you are already comfortable handling it yourself. Giving people equity in your business is a headache unless that person is REALLY valuable. I'm talking about the kind of person who loves and believes in your idea, and is willing to quit his/her daytime job for it. Think about how much energy you put into it; that other person has to bring in the same amount effort, if not more.

The designer should be paid as a contractor AND forced to sign a copyright transfer/waiver agreement.

This agreement is a simple 1-2 paragraph document that says the designer is transfering the copyright of all intellectual property, assets, designs, concepts, etc. to you. If you don't do this, your designer, by law, owns the copyright to all the designs he/she gives you.

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The people I know might be willing to quit their job for this, but only after it pans out and they are making enough money to afford it. They definitely wouldn't do it up front -- they're not willing to take that risk (and not likely to believe enough in this to take the risk). Thanks for the tip on the designer contract. – user8810 Mar 22 '11 at 3:04

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