A structure for my team

Wf

I have some questions about contracts relating to a team organisation method I am considering:



The structure I'm considering:

I’m looking for team members to help grow my business. I want to base payment to team members on profits/growth of my business.

I’m considering organising things so that a person would join the team on a contract of, say, 12 months; would work on the project, and would receive a share of profits over that 12 month period. After 12 months, there would be renegotiation, with no obligation on either side (or there could be some obligations that might make sense in the context).

I am of course familiar with the idea of giving a percentage of a business away in return for investment and/or labour/marketing input. This isn’t that, though. I want to set a contract term, and I want to pay team members based on profits for that term. And I’m looking for team members with expertise. I’m not looking for money investment.

I believe this can work out a good deal for team members. With the potential of my business, I believe this deal will attract some good candidates for team membership.



My questions:

Are there precedents for this type of arrangement? If so, are there any particular items that might usually be included in the contract? Or any other things that I might need to bear in mind?

Obviously there needs to be transparency on revenue/profits, and the finer details need working out.



Some background (to save reading time, you might not need to read the following in order to answer the questions above):

I’m looking to expand my team to help grow my business, Wordfruit.

Wordfruit is a job board for top copywriters and hirers of top copywriters.

You can see it here: http://Wordfruit.com

The business is still at a fairly early stage. I believe the project has excellent potential for growth. Reinforcing that belief, I have a huge amount of feedback from people I’ve never met who are all basically saying “Great idea. The market needs this.”

I have a good number of top copywriters on board. Once I’ve built my database of writers some more, I’ll promote the site more extensively. With the right people on board, I believe it will be possible to grow the business quite quickly.

I am looking into the idea of payment to some people on a per-sale basis / affiliate marketing. But for this core team, I believe things can be done better if instead I offer a percentage of the profits of the business over a set term. I believe this will lead to a better, broader-growth approach, will be more healthy for the business, and ultimately better for the people I recruit into this team. I can of course use affiliate marketing also. One member of the team could manage the affiliate program.

It will be a small team, with openness and accountability between all team members.


I haven’t previously run a business based on this type of agreement between team members. So I’m looking for advice on how contracts might be best structured, and any other things I might need to consider.



Thanks for reading this, and thanks in advance for any thoughts.


Richard Clunan
http://Wordfruit.com

antoinolachtnai

What you are talking about is a sort of profit-share in a professional services firm, common in law firms and so on. For sure, you can structure something like that, but it needs a lot of detailed thinking (for example, is it a rolling 12 month period, or a fixed 12 month period - if fixed, what period do you use; what about people who do more work than others, what about people who introduce more work; how do you pay people a stipend in advance of financial accounts being prepared, what about profits which are reinvested in the business.)

However it will be harder to make this work in a non-hours-based business like yours, where the different roles of the different employees aren't easily comparable. Realistically, it will take a number of years before there is much in the way of profit which is available to actually share (you will end up reinvesting the bulk of the profit). But you can do it to some degree, and it's a good idea.

Wf

Thanks antoinolachtnai,

Most of those points I have an idea of how I'd organise, though some I might also be open to negotiation on, with prospective team members.

The profit-share arrangements in professional services firms that you mention: is this sometimes done without salary, and without ongoing shareholding: healthy share of profits only, and for a set term only.


Thanks