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      09-14-2019, 06:30 PM   #1
Our03z4
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What would YOU do? Business Question

4 years ago my wife acquired a client list that compliments her other company. The seller was a family member who collapsed the company through many poor mistakes. Shame too because it was to quite a nice size. No broker would touch it due to poor book keeping and contracts that were pre-paid.

The PO wanted $50k but we agreed to a continuous 25% of net net if PO worked for us on the online marketing for said 25%. This is something he was VERY good at. He also was going to work for us as an employee on the production side making $20 per hour not including the 25%. We also honored all of the pre paid agreements for the first year. Had an almost 100% renewal year upon year since.

Everything worked well at first, but then he started to take random bouts of time off, including spur of the moment, well knowing this screws schedules up. Always talks about doing the marketing but has yet to give us anything to use to date. He had no contact with us for the past 3 weeks, leaving us to handle everything, then tonight asks for the monthly 25%. She is very hesitant to pay it since he hasn't done anything. Our dilemma though is he did acquire most of the clients from his previous company.

We are on the fence about shutting down the company after this years contracts are complete, just isn't where it should be. Profit is 26% compared to 53% of our other company, about 20+% of accounts are consistently past due. Yes, yes, I know, don't do business with family...also don't have a contract. Also found out he has many court proceedings against him now due to business loans not being paid back. Not connected to us luckily.

So the question is:
Pay him for the rest of the year, take the high road? Shut down next year due to low margins and head aches? Say screw you and not pay?

Thanks for any advice!
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      09-14-2019, 09:03 PM   #2
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You already mentioned it, but yeah, doing business with family of even close friends...
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      09-14-2019, 09:18 PM   #3
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how does this family member defend explain the uptick in time off ?
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      09-14-2019, 09:37 PM   #4
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You don't have a contract. That means you are in the grey area.

Do what feels right in the long term. Pray about it. Ask people in your trusted circle.
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      09-15-2019, 02:12 AM   #5
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Time to Consult with my favorite people… Lawyers
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      09-15-2019, 07:10 AM   #6
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Pay a portion to the family member only if your wife decides to keep it going and the family member signs a contract that outlines expectations and terms going forward. They don't deserve it for what they did but this is an opportunity to get it documented and make the most of the situation going forward if it make sense. If she decides to shut it down, then no point in paying him for past lack of performance unless doing so for family harmony, which is a family decision, not a business decision.
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      09-15-2019, 08:04 AM   #7
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Quote:
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Originally Posted by RickFLM4 View Post
Pay a portion to the family member only if your wife decides to keep it going and the family member signs a contract that outlines expectations and terms going forward. They don't deserve it for what they did but this is an opportunity to get it documented and make the most of the situation going forward if it make sense. If she decides to shut it down, then no point in paying him for past lack of performance unless doing so for family harmony, which is a family decision, not a business decision.
Bring the latter to the former as a baseline strategy and follow the mouthpiece's strategy for the business with the caveat that you're fully transparent with your family member because a few dollars isn't worth causing or exacerbating family discord.

Good luck!
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      09-15-2019, 05:05 PM   #8
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Thank you all for the replies. Talked with him today and it was very productive. He just doesn't have the desire to stay in the line of work, too burnt out from the past business and wants to move on to a new career in something more enjoyable. Going to pay him out the rest of the year, then starting next year merge with our other business. This will reduce our costs due to having them separate and he agreed not to receive further payments. Went surprisingly well and he feels relieved along with us. Thanks again!
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      09-15-2019, 05:46 PM   #9
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Sounds like it worked out for all.
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      09-16-2019, 01:17 PM   #10
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Quote:
Originally Posted by Our03z4 View Post
Thank you all for the replies. Talked with him today and it was very productive. He just doesn't have the desire to stay in the line of work, too burnt out from the past business and wants to move on to a new career in something more enjoyable. Going to pay him out the rest of the year, then starting next year merge with our other business. This will reduce our costs due to having them separate and he agreed not to receive further payments. Went surprisingly well and he feels relieved along with us. Thanks again!
I was going to suggest just buying him out, and make sure you have it all in writing and nicely part ways and make sure you put a clause in the agreement that he can not compete directly or indirectly with your business since he may have acquired knowhow and other information from your business, and also put in the agreement under no condition can he reach out to any clients for a period of 2 to 5 yrs. Since you did say he got most of his clients from a previous company you do not want him doing the same without serious legal issues coming down on him. The fact you are paying him out allows you to make that a binding deal since he getting money not to do anything in the agreement.

Last edited by Maestro; 09-16-2019 at 03:50 PM..
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      09-16-2019, 01:44 PM   #11
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Lightbulb

As a entrepreneur myself and having been involved with multiple businesses including Partnerships, and from reading your OP:

Sounds as if the guy is himself burnt out, non interested or simply tired. Sine it is family, no need to cause tension so to speak or be rash. Simply offer him something 'respectable' and point out the fact that he himself is M.I.A. And that you're ready to move in a new direction your own way but want to be amicable and respectful about it.
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      09-21-2019, 11:30 AM   #12
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That's the reason I don't do business with family members I prefer to apply to professionals. When I started my own business I found Jafton custom software company to help me with my web development and design. They provide a high-level development services for companies ranging from startups to large corporations.

Last edited by heatwave; 09-27-2019 at 10:04 AM..
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      09-21-2019, 11:41 AM   #13
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You are a better man than I. If he failed to show or call for three weeks, I would have formally fired him and defaulted on the agreement. Any bad feelings would have been on his side if you felt that you did everything you were obligated to do.
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