profit sharing? how to?
- Started
- Last post
- 10 Responses
- rps
hello,
i just got the second request in a couple months to do a "startup" company-type project. really small startup, in fact - both cases are individuals. given todays economy, i would imagine this will pop up again. however, at my age and experience, i find it impossible to do "freebie" work for a for-profit company, even if they have zero cash to start with. and, i think in the case of a potentially profitable-in-the-future idea, it doesn't seem a necessary path to take, anyway.
so... "profit sharing" seems to be the term that fits the situation quite nicely. however... how is this done?? the term already seems to be biz lingo which is applied to small/medium businesses as a scheme to motivate employees, blah blah. but, i obviously am not an employee, nor do i want to be. perhaps what i am really talking about is becoming a minor-stake partner, with no decision making power for the company (other then graphic/ux/etc consulting i am "hired" to do, as normal), and taking a cut of future profits, perhaps only for a specified time?
is there something like this already established for our field of graphic design? if not, anyone doing this? what are your terms like? was it hard to implement/met with some resistance? or, well received?
sorry if this topic was discussed, i just woke up, have been working long hours for very cut rate (though top quality, of course), and am quite tired, and coffee is doing nothing for me right now. though, this is just another reason why a "profit sharing" scheme has positive potential to me... as designers, we know the value good ui/visual/graphic design has - i feel like i devalue it every time i have to cut my rates to get a job (plus, it is really de-motivating on a certain level, no matter how interesting the project). perhaps this is a viable alternative?? i mean, especially to a startup, nothing can give them an edge like a quality identity design. what do you think?
.p
- ********0
maybe helpful
http://www.qbn.com/topics/581301…
- rps0
thanks for that link! didnt find it during my search. it seems very similar, however, it seemed kinda unresolved - i came away from the thread with the feeling that, no, there isn't any kind of established way to work for these startup companies... i saw a couple "i tried it, and it didn't work" - but, there was no explanation of why, or how if "this" was different it could work. hmm...
- mikotondria30
Sounds like you're asking for ways to win a crapshoot, which is what these things are. Like you I've been in this position before - mostly at the start of my career when I was honestly a little flattered that I was in the picture, having a chance to hone my skills and get the exposure with the promise of money in the future which I became less and less certain of with each job that happened and with each 'client' that came and went.
If people have got a damn-sure-fire-best-internet-pro... in the world, but they come to you with their hand held out asking for a freebie then experience tells me that you're probably the hundredth in a long line of people they've asked for help with for their brilliant idea, and the fact that they don't have enough money to pay you properly means that every one of those other people has said no, and that you should too.
However, I like a punt now and then, and I'll do some spec work on what I think are long odds - clients that are those sort of people that movies are made about, who walk the streets persistently going against the odds, never taking no for an answer and who succeed on their 100th idea when most people would have stopped after 20. It's difficult to spot those people, if it wasn't then they'd all get snapped up and become successful before they got to you - but it *is very rare* that doing some startup a freebee site or project will get you any returns, so couch whatever profit-sharing, bonuses, stock or whatever you feel is worth your 'time' if it does come off, but realise that it's like playing a slot machine - you're better off playing 15 lines at 1c a line most of the night, but unless you hit Max-Bet and throw down $5 a spin now and again, you're not gonna get any major returns. Just think of it as gambling money and enjoy it.
Honestly I don't think thats' what you asked, but someone might find it useful. Sorry to jack your thread :(
- kgvs720
Ask these one of these two. I'm sure they have some great tips.
- rps0
maybe i didnt make my point clear with all my writing. i am not talking about doing spec work with the hope that some paid work will come later. in fact, that almost never pans out, and is obviously not a smart thing to do. though, anxious designer types do it all the time, it seems, and sadly i think that degrades the value of what we do as an industry (and, why so many "clients" think they can get away with asking for free work) . though, i do understand the need to build up a portfolio when you don't have one. anyway...
also, to be more specific about my immediate case, one is a website with some profit enablers in place (that can be clearly tracked), and another is for some apps for everyone's favorite touch screen phone (again, clearly a case where sales are counted). and, in both cases, i am the first person asked. and, they are a company of 1 (well, one of them does have a full time employee). this is not some "seen on tv" type product idea, nor is it the "next big thing" - they are just good ideas that have potential to work, and obviously i am willing to share the risk by inputing my time and effort (and, leverage to get less resistance to my aesthetic quirks :-) - but, if i am willing to share risk by giving my time, i should certainly be able to share the profit when it comes.
i know it is rare to get a monetary return on a freebie project - otherwise, they wouldn't be free. what i want to know is how to setup terms to avoid the status of "free" work. i figured in this economy and age, people still need stuff done, and quality design is more important as people are spending less. now perhaps it makes sense to establish some real means to make this type of work viable. i am hoping someone is already on the path to finding a way and can share some points, or even contract advice.
and, to be clear, the pic references really have nothing to do with this. my potential clients are not scheisters. i was burned once, and i aim not to have that happen again. but, visual input is certainly welcome!
- cuke4260
think of your business as a separate entity.
say your business makes 200k a year.
in order for that business to run, it needs to have a business guy @ $60k, and a designer at $60k.
it also needs $30k in rent, laptops, etc.
your business grossed 200k minus 150k, that's 50k in profit.
if you're an owner, say you have 10% ownership, you get 5k. that's on TOP of your 60k salary.
you're talking about working for free, i think you're implying that you're not getting a salary; again, that business won't work without a designer at 60k, so you working for free is like you investing 60k into the company.
if you both are starting from scratch, i.e. neither getting a salary, both doing 50% of the work, then in theory you should both get 50% ownership. if you're both doing 50% of the work but guy C is investing 60k, then you all split it 33%(but you two split Guy C's investment)
- rps0
wow, thanks for that input... that gives me a perspective i wasn't considering - and, also makes for a nice way to explain to a potential client the value of the work in a proper context they can understand. yeah... i just re-read this, and it really helps. you have experience in this scenario before? or just sharp at business? thanks!
- rps0
maybe i am "thinking out loud" - but, i wonder if anyone out there has tried to work out also just a flat percentage of revenue, rather then profits? as, profit is certainly something that a far away company can whittle down in a spreadsheet to much less then what there actually is... anyway... much to consider here, before i say "yes." (again...).
- shockalot0
First off, I would say don't cut rates or barter for something you don't believe has potential. That is just a waste of time. I'm not sure why you are so set on "profit sharing". Without knowing the type of business it's hard to say but my experience in the internet game that there is no profit to be shared. Your best off taking the value of your "full rate" in shares, but again, only if you believe this can be a successful venture. Consider also who you are working with. Do these people have the expertise, experience, skill sets and most importantly the network to make it work? After all that considered if you still want to be a part of the project, barter for shares at your full rate and get it in the form of a legal contract. You will have a higher return on a venture that gets bought or funded than you will ever have on profit sharing. Either way, like mikotondra3 said...it's a crapshoot so knowledge is king.
- rps0
sorry for the late reply..
good points shockalot... i think i mentioned the business is developing some kind of an iphone app/internet web interface application. so, that has a direct product value that is trackable (1 downloadable app for $5, or something - though, the world of iphone apps is changing fast already, that is another topic). so, it is not part of the last "internet profit making idea" generation. i think any of us can smell through that. given that, i would be working as said before with a company of an individual, basically. so, shares, etc are out of the question at this stage.
oh, and another case was of course a website design... but, likely i will now just get paid for my time, which is easy and fine. but, also, has potential application for this concept.
also, i think now, it should apply more to "revenue sharing" rather then profit sharing - as profits come after expenses, and as a "partner" of sorts, both the startup and the designer have their own share of expenses that obviously dont need to be cross-calculated.
i totally think the way to go is with some kind of contractified scheme - the trick is coming up with some kind of formula that works for both parties. and, the "dream" is that this formula would become a graphic design industry standard with a lawyer or two behind it, with multiple tested partnership cases that are hopefully working out fine.
hmmm...