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Changes after the business is running

Most of your questions have been related to how the company may change after it has been in operation for some time. I'd like to discuss some of these issues here. The problems you've raised are problems that I know no complete, clean solutions to. However, business, like life, is an endless series of problems to overcome. You always try to avoid problems where possible and mitigate the effects of the ones you run into. But if you refuse to do something because there are potential problems, you end up never doing anything. But enough preaching...on to the grimy details.

``How do we handle it if one partner doesn't meet his commitments?'' This has been the most commonly asked question, indicating that I am no more cynical about participants in business ventures than you. Obviously, we only want to go into business with people we respect and trust, and the first level of screening is performed when we get together and decide who wants to work together in this venture. If somebody seems not to fit, either based on their goals, their approach to the venture, or their ability to get along with and work with the others, it would be a mistake for all concerned for that person to become involved in Marin Software Partners. Of course, you can make a mistake. I made such a mistake in my selection of an original partner in Marinchip, so I'm very aware of this possibility. The solution in that case was what usually proves best; the rest of the partners buy out the partner who has lost interest in the venture. If the business is prospering, this buy-out can be paid for out of sales revenues. If the business is failing, the partner's share is not likely to be worth much in the first place. I know of no solution to the case of the partner who just refuses to work or becomes obstructive but who refuses to be bought out. So we don't include any assholes, O.K.? (It might be possible to write the agreement in such a way that the other partners retain an option to buy out a partner for a certain price for a stated term. I think this is a terrible idea, since it would put the financially strong partners in a position where, if the business ``took off'', they could grab the business from the less strong. While, of course, nobody involved in this venture would think of such a thing, it wouldn't contribute to a partner's equanimity knowing such a coup were possible.)

``Are decisions affecting the partnership made by unanimous consent or by majority of partnership share?'' This question is really irrelevant if the limited partnership is used, as MSL would make all decisions. I also don't know the relevant law (we will, of course, find out as we work with a lawyer to draft the partnership agreement, although I'd like to believe you can have anything you want put in the agreement). I think that the majority share makes the most sense, even though it has its obvious risks. After all, all stock corporations work that way and they seem to make out all right. I'd be worried about one stubborn person being able to immobilize the entire company (after all, I've been known to be stubborn--and dead wrong--myself).

``Suppose the company takes off and I want to quit my job and do this full time. How can I increase my share?'' In this case, you would purchase an additional share in the partnership at a price agreed to by the other partners. Your share might be sold to you by another partner who wished to reduce his share (MSL might want to ``cash out'' to free up money for other ventures, for example), or could be a new share which effectively dilutes the shares of all the other partners. The partners whose shares were being diluted by this act would be compensated by the payment you made for your additional share, and by the presumed increase in revenues which would result from the additional work you did for the company. The price you pay for your additional share is the price the other partners agree to sell it to you for. If the company is a corporation, change ``partnership share'' to ``shares of stock'' and everything is the same.

``How do we bring in new people?'' In the case of new partners, the case is exactly the same as that discussed above for an existing partner increasing his share. Of course, a new partner may buy in by supplying any form of consideration, such as rights to a software package he had developed. If we decide to expand the general operation side of the business, we may decide to add some conventional employees. This would just involve salaries paid out of the general revenues of the business and doesn't affect the partnership in any way.

``Suppose I want out?'' This is just the reverse of the case of adding to your share. You sell your share back the other partners for whatever they're willing to pay you for it. They recover what they paid you by the increased shares they own after yours are liquidated. Of course, if they don't want to sell, you're stuck. They'd be stupid not to, though, for otherwise they would have to continue to pay you your partnership share of the revenues in return for your doing no work.

``I'm worried about having the business expand to the point where I have to quit my job. What do I do if this happens?'' This is the kind of problem that is good to have. Basically, you have to calculate the equity value of your job, which is just like valuing a company: what is the income, how secure is it, what are the growth prospects, and what is the equity I sacrifice by quitting (seniority, pension fund equity, future employment prospects, etc.). If the job is so valuable to you you'd never quit, then you shouldn't consider going into business for yourself. If the job has a value (they all really do, of course), then you should only quit to take a job with greater value. I'd quit a $50K job with, say, Consolidated Engine Sludge to take a $10K job with Advanced Robotic Widgets if I had a stock option for 20% of the company, but everybody has a different situation and has to make his own decision. Working out the value of your job in your head is a worthwhile effort in any case as it gives you a better perspective on what you've got. I believe everybody constantly acts to maximize their overall gain in life (not just economic, of course; personal happiness, adventure, are calculated in as well), and that if the time comes where participation in Marin Software Partners is seen as better than your current job, you'll have no trouble making the plunge. Those that can't are the Hamlet types who never do anything and always fail in business anyway.

``I'm not sure I have the experience to be in a company like this.'' I have found that a sincere desire to be in business for oneself and to work hard is far more important to success in business than detailed technical knowledge. If you can do a job well and the partnership needs that job done, you belong in Marin Software Partners. We'll have to look at the mix of talents we have in the people who are interested in forming Marin Software Partners and address the areas where we're deficient. We'll almost probably have to go outside for advertising preparation, but we'll probably have the in-house capacity for all the technical writing we need. At this point we can't say whether anybody fits into the company--we can evaluate that only after we see who's interested and who's not. Being in business is an excellent way to learn about thousand of things you never intended to learn about. If you're looking to learn new things and expand your horizons, this is one way to do it (although getting run over by a truck may be less painful).

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Editor: John Walker