Business Partner wants to be bought out

by dskip. Posted on Sep 10, 2020    12    31


I started a company with my friends and we are in the business of selling table top card games. We haven’t sold any games yet due to an inability to pay for inventory. Therefore, we were going to raise money via a Kickstarter. The amount of money overall wasn’t a significant sum it was just something we were/are lacking at the time. So basically we prepare for a Kickstarter. We start doing everything for the business to raise awareness and build community. We get a business credit card and start contributing fixed amounts each month. The credit card was probably only attainable because of the large number of assets this partner has in stocks. Shortly after all this happens and we start to get real quotes to produce our game I suggest that it’s inexpensive enough for us to split the cost. He says no to this proposition. I then say what if I cover the cost and get some more equity for doing so. He says no to this proposition as well. I don’t have a lot of money but I would have found it because I believe in the project. So then my parents offer to give us a zero cost loan but I had to disclose to them my friends substantial wealth. He sites that he has some debt and that’s why he doesn’t want to contribute any more money. So I suggest for him to sell some of his equity to cover his share of money if he doesn’t want to put up his own money. He says no buy me out. What am I looking at here?

Update: Here is my website to show you what we’ve managed to do CapitalPunishmentGame.com


Comments

Zazenp

You can buy him for his portion of the profits ($0) plus whatever capital he has contributed (you haven’t specified how much that was).

GamerInChaos

Bad news: You are going to need a lawyer. Depending on how much effort you’ve put in it might be easier/cheaper to start over.

Short answer:

  1. Your friend doesn’t have substantial wealth and that is going to be bad.
  2. Ask how much he wants for his half and decide whether you think it’s worth it or negotiate until you do.
  3. Make sure you get a legal document that you now own all the IP and assets and that he has not created any other liabilities.

    Long answer:
    If you cannot agree on a price that you are both ok with then it’s going to be hard to resolve. It sounds like he is a financial disaster so that might be the case.

    One option, which requires a legal doc to really works Agree to this solution and then do it:
    You put a price you are willing to pay to buy him out in a sealed envelope.
    He does the same.

    You open them with a lawyer the person who offered the most signs the doc buying them at the lesser price. (Or the higher price, but the lesser price forces both people to make credible offers and keeps it more fair IMO.)

    Curious to hear what happens... and also to learn more about the game.
Samson1978

Yea man go spend thousands on a lawyer with your zero revenue business that you are trying to get off the ground.
Kidding, don’t.

GamerInChaos 1

Yeah hence why I said it might be easier and cheaper to start over, but be a snide unhelpful jerk if that makes you feel better.

Sadly given what he said about the situation and this partner’s previous reactions if he wants to resolve the situation he will have to pay for a lawyer. Just depends on how valuable he thinks the IP is. Impossible to judge from what he said.

7six78 1

At this point I'm not sure which is worth less, the business or the friendship. Reminder kiddos: Don't start businesses with friends.

People do this because they don't have the money or the guts to go it alone. That's a sign.

ThinkAuric24 1

Quick comment. Viewed your website looks a little like cards against humanity with the black box and cards. Also the website laid out similar. You might want to see if this is infringement to there trade marks before anything. The partner stuff sucks and he is probably wanting a return of money spent. If you do not have that to give him then you are stuck at the moment.

Do you have a contract in place with them or is it basically all been by word of mouth or is it a legal document. If it is a legal document go through the bi-laws and if he is not following any of them he is breach of contract which means contract is null and void. You could kick him out with out paying anything but you would need a third party present to document this so there is no legal recourse.

chabonki 2

He violated rule #1 in entrepreneurship.
Dont try to start a business if you're broke.

Atm there's nothing to buy out. The business hasn't generate profit so it's worthless.

I dont know how much he contribute, but if he wants out; u dont have to give him anything.

Samson1978 1

How is that #1 rule? That’s ridiculous

  dskip 1

He has money it’s just money he doesn’t want to touch which is completely different in my opinion.

ks9836 2

Everyone should have an operating agreement that covers this scenario in place before investing any capital into a business.

  dskip 1

We have one

ks9836 2

Does it cover this situation? There should be a transfers amendment.

calemedia 2

Yep no revenue and no inventory means it’s worthless tell him to kick rocks

  dskip 2

Just tell him he can walk away and leave his stake if he wants to

calemedia 2

Yep, if you don’t want to help you don’t get to be part of the business unless the rare case of a silent partner but they get to be silent because they sponsor everything

ScrumptousLoL 5

A business that loses money is not worth anything. There is an argument to be made that the ip is worth something, but if it's not proven then that's a weak argument.

You might be in too deep. Offer him a very small amount, a few hundred just to leave and that if he doesn't then you will vote to dissolve the company.

bojangleschikin 22

It’s not clear what your friend has contributed yet other than applying for a credit card. The way I read it is your not out anything yet either. I would consider this fortuitous and you might be able to save your friendship.

I skimmed your prior posts and comments.

1) you don’t need a business credit card. Credit at this point is reflective of your inability to save for what you want/desire. If you need a loan for 15-20k to make this float and have equity issues- it’s already taking the wrong path.
1a) if your insistent on a loan- drop the business stuff- you don’t have a business if you have no sales- you have an idea and that is best funded by a personal unsecured line of credit on your own good name.
2) get off the crypto boards and read up on accounting and marketing.
3) learn to save $$ and bootstrap it yourself. You will be more likely to ask for prepay discounts and 60 day terms when it’s your money.
4) consider that your friends easy access to cash may limit their ability to be interested when say your business is “only” looking at a $1,000 gain this month when to you this will be a crowning moment in your business growth.

Not trying to be a dick. It sounds like you have a fun idea and believing in yourself is 90% of it- run with it yourself and if you fail (no sales) consider it a learning lesson that you can apply on your next venture.

  dskip

I’ve had a failed venture before and I made every mistake that you could make and I paid for it. I’m talking about 6k that we need for inventory to actually start making money. He refuses to put up his share of 2k. How can anyone work with that?

Additionally our profit margins are very favorable

bojangleschikin

How much $$ is he in for. Not for gas and shit.
How much $$ are you in for.

If your in for money. And hypothetically asked me for money- I would be much more interested knowing that your flat broke and put $500 in rather than 2k in your bank and 15k in loans. So if you only need 6k to get product on a shelf. You need to find friends/family and offer them your time- landscape, mow lawns, shovel snow and let them know that every penny goes toward this.

I would again recommend a personal line of credit. They give that shit out at higher interest but you can payoff and restructure later. Also- the amount not used you won’t pay on- much better than a loan with the balance sitting in checking. And every dollar you make goes back to paying the line off and when you need more money you can draw again. Loans are better for things like machines. Last piece of advice on this- get approved for as much as possible. If you need 6k- apply for 25k. It’s hard to ask for more when you need it and your maxed out on the current one.

Regarding your friend- 2k can’t be holding this up. Something else is. Did he loose interest? Negative feedback from his family? If you want him to stay in the gig- get to the bottom of it before you proceed further. Give him a chance to exit otherwise be clear that it’s time to double down on your efforts and you need him there 100% committed. This isnt your side project (it’s your future) and he can’t treat it like one either. If he thinks that his few thousand $$ (in loans?) is so special that he can be the boss- drop it in his lap and let it fizzle while you save up. Once it hasn’t gone anywhere. Buy him out for 10 cents on the dollar- that how business works.

I also want to take a shot at your mentors. Him (and family wealth), booth guy, and advertising guy. He not being helpful and the family may or may not be behind you, booth guy knows how to tow the line in a classroom but that shit is free online- sit down and watch the free Harvard shit online if you want to know his special sauce, and advertising guy- he’s the fucking worst- ad folks only know how to spend other people’s money.

Lastly- you have not made clear your roll vs his but at this stage- your about to be the salesman. They are the most important guy in the room and make sure the product sells/ships/and gets paid for. If that’s about to be you- buck up and carry the big stick. If not and your in the office/operations- then he does hold all the cards.

I want you to sign up for a NPR podcast. How I built this. The one I really like is about bobs red mill. I actually can’t believe it’s free and take lots of useful thing away from it. Another is about a children’s toy company- Andy something I think.

  dskip

So here’s the thing. This game, this business were my idea. It was something I brought to them because they were my friends. I do most of the work. I have ADHD so when I lean into something it becomes obsessive. We are only into the business 1k a piece no nonsense and we’ve managed to do a lot. My issue is the same how can we ask for money if we can technically get the money. We’d only need 6k to get 1k units of our game. At this stage he handles the emails but I handle all the operations. I set the plan research the plan then execute the plan. We would not be here without me obsessing over every detail

bojangleschikin 1

Then I think you have your answer. You have the idea and the interest. They are along for the ride and now the rubber is meeting the road and they might not want to part with more of their cash for your idea. You clearly believe in yourself and that’s what it takes.

Not clear how many people total are invested for 1k each but for for only a few grand- get your line of credit and get them off the ownership.

Wells Fargo will write you a line in 30 min. GET WAY MORE THEN YOU NEED TODAY. THINK OF WHERE THE BUSINESS WILL BE IN 2 YEARS. Get it lined up and then make your move. It’s like $100 a year for a line to be open. Everybody should have one- I keep a 60k line just in case of the unexpected things in life like the need to post bail!, flee the country, Or a killer below market deal at auction/craigslist.

nimble_fox 2

If he hasn't put up the agreed capital then he is in breach of the agreement, what does your initial contract say? Does he forfeit his shares?

Santier 17

> We haven’t sold any games yet

You have to have profit to have profit margins.

  dskip

Need inventory to do that too!

wamih 7

I may come off harsh or like an ass but I deal with a lot of small businesses.... If this is something you believe in, I am kind of sad to not see a bit on inventive entrepreneurial critical thinking.

PRE-SELL UNITS! You don't actually need a product to sell it, you do need to meet delivery dates if you promise them.

Can you get less units at a higher price?
Do you have a partnership agreement?

Have you contacted multiple manufacturers?

Can you bootstrap and DIY the early sets?

Currently it sounds like you don't have a product at this point, or even a company to be bought out of. You guys have a concept that hasn't been tested.

  dskip 1

I want to pre-sell units the reason I need the money is so I can pre-order the boxes or put the 50% down in order to have them manufactured and guaranteed stateside BEFORE Christmas. I don’t want to miss out on that. We have a concept we have boxes that are being play tested and it’s showing us results.

z64dan 1

I think at this point pre-Christmas is unrealistic. I don't manufacture things but I've kickstarted enough boardgames to know "delivered by Christmas" means "delivered by March"... There will be random issues during production / communication issues with your manufacturer that will delay, delay, delay. But, you know, maybe you'll get lucky.

  dskip 1

Is it really that bad in your experience!

wamih 1

You can take payment for pre-sale units and use that to fund initial manufacturing plus some inventory...?

a_computer_adrift 54

No revenue, no value. He gets nada.

FreeGFabs 11

Yes, he can have his half of zero. Or his half of the debt which ever is greater.

It’s the classic “pre-revenue” business valuation.