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Working For Shares?
By Bruce Clement
This is something I would consider for the right project, either as a site owner or as a developer. I've worked for companies that were originally set up on that basis, so it can succeed. In writing this I'm talking software development because that's what I do, but it could apply to a lot of business ideas. For the developer
You'll never get rich selling your work for an hourly rate. Sure you can be comfortable developing software or websites for a fixed price or on an hourly rate, but no matter how well the project website does you'll only ever get that up-front payment. From a developers viewpoint if you're offered the chance to get a share of the profits from a website you have the chance to make it big. You also have the chance to make nothing at all from your work. We all know that a high percentage of business start-ups fail, and web based businesses have an even bigger failure rate than traditional businesses. I don't know the exact numbers, but let's say 1 in 20 survives to make a profit. This doesn't mean that you shouldn't go into this type of business, but it does mean that you need to do two things:
* You must believe in the business. You must feel it has a reasonable chance of success. * You negotiate a share large enough that your rewards if it succeeds in a moderate way will be large enough to cover the costs of your investments in the other 19 businesses you've invested time in that failed.
I add a third thing myself, the project has to have a unique selling proposition that would be hard for others to cheaply duplicate. For the project owner You've got an idea and you've registered a likely name. You're looking for a developer so the situation is the reverse. You'll need to offer the developer a sufficiently large share of the business to cover the prospect that they don't succeed. You'll need to sell the developers on the potential for the site. You also have the problem that if they don't do the world's best job they still own a piece of the action. That last bit is the hard bit. You aren't just hiring someone to do a specific job, you are looking to develop an on-going partnership. This means that you need to set up a framework that is not only going to be fair to both sides, but is going to keep the developer enthused about the project so they are going to make ongoing improvements to the site(s). There's a big difference between the quality of work done by someone who is going through the motions, doing just enough to satisfy the contract & someone doing their best because they still believe in the project. Have you ever seen the TV show Dragon`s Den? When they choose to invest, the investors there obviously want to do the best deal for themselves, but they are also careful to leave enough of the company to the inventors to ensure that both sides keep their enthusiasm for the project. They are also very interested in what the exit strategy is. What happens if the business is sold? What happens if either side wants to pull out of the project? For both Both the developer and the initiator need to consider these points as well. What if the website is sold? How do you decide when enough effort has gone in and it's a failed project you should both walk away from? What if one partner wants to pull out but the other wants to continue?
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Contributor's Note
This was originally a reply to a forum question and a follow-up on Acorn Domains. Bruce Clement is a keen domain name investor and commentator. You are free to copy this article under the http://creativecommons.org/licenses/by-nd/3.0/ licence as long as you publish it unchanged and link either to Bruce's blog Domaining .nz at http://domainingnz.blogspot.com/ or to his hub site at http://www.clement.co.nz/
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This intel first appeared on: http://www.acorndomains.co.uk/general-board/33319-would-you-work-st...
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Acorn Domains, UK
PLEASE VISIT THE CONTRIBUTOR'S WEBSITE
Domaining .NZ
News and comment by an active .nz investor
domainingnz.blogspot.com
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