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I built $2m in revenue for a business I don't own. What's the best way to split the profit?

a year ago
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When it comes to splitting profits for a business you don't own but have contributed significantly to, there are several factors to consider. Here is a detailed approach to help you navigate the process: 1. Determine the agreed-upon terms: The first step is to establish whether there was a prior agreement or understanding regarding profit-sharing. If there was, review the terms and conditions outlined in any contracts, agreements, or discussions you had with the business owner. This would be the starting point for determining the split. 2. Assess your contribution: Evaluate the nature and extent of your contribution to the business's revenue growth. Consider factors such as the time, effort, skills, and resources you invested, as well as the impact of your actions on the revenue generation. This assessment will help determine the proportionate share of the profits to which you may be entitled. 3. Understand the business's financials: Gain a comprehensive understanding of the business's financial situation, including its expenses, investments, and liabilities. This knowledge will assist in determining a fair and sustainable profit-sharing arrangement. Review financial statements, tax returns, and any other relevant documents to get a clear picture of the business's financial health. 4. Analyze industry standards and benchmarks: Research industry standards and benchmarks to establish a baseline for profit-sharing. This can help ensure that the proposed split aligns with common practices and is fair to both parties involved. Look for data on profit-sharing arrangements in similar businesses or industries to guide your decision-making process. 5. Consider risk and opportunity costs: Take into account the risks you assumed and the opportunity costs associated with your contribution. If you took on significant financial or reputational risks, or if your involvement prevented you from pursuing other lucrative opportunities, these factors should be considered when determining your share of the profit. 6. Negotiate a fair split: Once you have gathered all the necessary information, initiate a discussion with the business owner to negotiate a fair profit-sharing arrangement. Present your case by highlighting your contribution and the value you brought to the business. Use your assessment of industry standards, financials, and risks to support your proposal. Be open to compromise and consider the owner's perspective as well. 7. Seek legal advice if necessary: If the profit-sharing arrangement involves substantial amounts of money or if there are complex legal considerations, it may be wise to consult with a lawyer who specializes in business contracts or partnerships. They can provide guidance and ensure that the agreement is legally sound and protects your interests. Remember, the best approach to profit-sharing is one that is fair, transparent, and mutually beneficial. Open communication, a clear understanding of each party's contributions, and a willingness to negotiate will help in reaching a satisfactory agreement. Note: It is important to consult with professionals such as lawyers or accountants who can provide personalized advice based on your specific situation and local laws.

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