@Alberto Nikodimov Great post and discussion. Lots of specific answers provided here, but as there are so many variables and different personal situations, general concepts and standards are best. Here are a few that I like:
1) Keep it simple. For equity, profit, and cash flow splits, avoid "if this, then that" statements, tracking hours, predictions of future values, etc. A clean 50/50 or 60/40 across the board is an example that can work well for an early partnership. This also applies to delegation of responsibility. Don't criss-cross responsibilities by having both partners work in the same wheelhouse, i.e. you do some rehab, I'll do some rehab, etc. Clear simple separation of duties.
2) Learn to respectfully communicate value. Skin in the game includes sweat. Many capital partners have little idea that even a small deal can take months of full time work, without pay. You are investing quite a bit into the deal, and don't need to invest cash to "prove" it. In a 100k deal example, 10k is a meaningless gesture. It also muddies the waters of standard #1 above by making both partners involved in the same area, which can lead to conflict.
3) Offer backstops and exit plans. The capital partner, while receiving no guarantees, deserves ways out if anything goes wrong. Provide comfort to them via a lien, a sell clause, etc. so they have some hedge of protection against major loss. This is likely a huge concern for them, so address it clearly right out of the gate. Likewise, if you get caught under contract for a deal and they back out for any reason, spell out a plan.
Best of luck. Thanks again for posting. Great ideas, everyone!
