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How much is an idea worth?
Question:
<<My "opinion" is that ideas are not worth anything.>>. Extreme opinions are in most situations just plain wrong… Researchers, business strategists, mathematicians are examples of frequently very well paid "idea" people who work exclusively with ideas. Since they are very well paid to generate ideas, your statement is incorrect. And yes, this is my opinion, J.P. Solyom KS Business Development
Response:
Dear you, That is a good question that I had to answer little time ago. 2 friends and I wanted to go into business, to develop and distribute a new product. Associate1 had the main idea. Associate2 did the design. Associate3 (me) did the development and Marketing. How should we split? We decided to look at it under 2 views: 1. we are shareholders, 2. we are employees. Since we had to invest some money, that is the way we went for it: I put 50% of the $ and they put 50%. So we split 50-50. Yes, a idea is worth nothing if there is not a certain investment in it. Then every time one of us works for the product (design, time,…) we charge the hours to the company. I don’t know how clear I am, please e-mail if I can be any help. Chris
Response:
Hi If you don’t see eye to eye now, I don’t give your chances of success a very high rating, because when you start a business, it always gets tough and stressful. How much is an idea worth, is the same as how long is a piece of string. Albert Einstein got the idea of the theory of relatively sitting on a tram. How much was that idea worth? When Izaac Newton saw the apple drop, it gave him the idea for the laws of gravity. How much was that idea worth? And when Walt Disney was walking around the Tivoli Park in Denmark, it gave him the idea for Disneyland. How much was that idea worth? Re deals: If you want to make deals that last, they must be fair for both parties, because when people are screwed down, those deals won’t last. Regards Mark Metcalf Your Own Virtual In-House Marketing Expertise Now Available. Breakthrough" We also work for accountants, consultants, etc. For more Info, FREE Newsletters, FREE Reports, and FREE Growth Assessment
Response:
Forgive the intrusion, I didn’t read the first part of this thread. My "opinion" is that ideas are not worth anything. If Albert hadn’t taught, written books, and made the a-bomb, then his theory of relativity would have been left behind on the tram. Same for Walt idea about Disneyland — if he hadn’t illustrated Mickey and built Disneyland, his idea would have been left behind, worthless, at Tevoli park. I say this because people often come to me with their "ideas", like I’m going to pay them money or make them rich or something. So I ask them, "Have you modeled anything up? Written anything down on paper? Done any market research?" Of course, they answer "no, no, and no." At this point, I recommend a few books to them regarding licensing and patents and so forth. But I never see any of these ideas go anywhere. The reality is that ideas are not worth anything. What’s worth something is the hard work and elbow grease you put into bringing your idea into the real world. — Save thousands of employee hours, and significantly reduce your business overhead. Extremely cost effective Consulting – Hide quoted text — Show quoted text – >If you don’t see eye to eye now, I don’t give your chances of success a very >high rating, because when you start a business, it always gets tough and >stressful. >How much is an idea worth, is the same as how long is a piece of string. >Albert Einstein got the idea of the theory of relatively sitting on a tram. How >much was that idea worth? >When Izaac Newton saw the apple drop, it gave him the idea for the laws of >gravity. How much was that idea worth? >And when Walt Disney was walking around the Tivoli Park in Denmark, it gave him >the idea for Disneyland. How much was that idea worth? >Re deals: If you want to make deals that last, they must be fair for both >parties, because when people are screwed down, those deals won’t last.
Response:
> A friend and myself are looking at going into business together, but are having > a bit of a hard time seeing eye to eye on how to split up the future rewards.
<snip> Really, surprise, surprise! You are actually fortunate that you are running into this up front rather than down the lines as it gives you the opportunity to address these types of issues before you get "too deep into it", ya’know? These types of issues are common in any type of partnership, so … > My basic take is that after the first year our value will be about the same > given that we basically split the workload. There are lots of good ideas, > but most don’t make money unless you make them happen, and since we are both > working equally hard to make it happen, in shouldn’t be skewed more than > 60/40 ish. Any input is greatly appreciated!
Rather than focus on potential value and contributions to the business, one recommendation I could make would be to develop a method / agreement regarding the division of any rewards proportionate with the amount of investment made in the business. Now, investment can take many forms – capital, equipment, time, etc. So I would suggest that you sit down and develop a fair and equitable plan for the valuation of the various investments into the business. You then track the investments each partner makes and distribute profits proportionately. One of the things I really like about this type of schema is that it gives each partner a strong incentive to invest in the business rather than relying on more "vague" commitments and then reacting when these are not followed through on. Hope this helps. What do the rest of you think? I look forward to hearing from you, – Michael S. DeVries Principal, Virtual Consulting Firm Global Business Marketing, Inc. (TM) Consulting Services, Training / Courses and Mentoring To Help You in: * Business * Management * IT/Computer Phone: (205) 761-9051 Fax: (205) 761-9227 ****** http://www.Creative-Trade.com/vcf.htm ******
Response:
Dear All, A friend and myself are looking at going into business together, but are having a bit of a hard time seeing eye to eye on how to split up the future rewards. He had an idea of what we wanted to do and has some contacts in the field that I will be somewhat new to, we both have sales backgrounds, I have a bit more general business experience and education. In general terms, does anybody have any input on how much having the original contacts and idea are worth in the long run? It is non-technical, non-patentable service we are talking about. My basic take is that after the first year our value will be about the same given that we basically split the workload. There are lots of good ideas, but most don’t make money unless you make them happen, and since we are both working equally hard to make it happen, in shouldn’t be skewed more than 60/40 ish. Any input is greatly appreciated!
Response:
- Hide quoted text — Show quoted text – > Dear All, > A friend and myself are looking at going into business together, but are having > a bit of a hard time seeing eye to eye on how to split up the future rewards. > He had an idea of what we wanted to do and has some contacts in the field that > I will be somewhat new to, we both have sales backgrounds, I have a bit more > general business experience and education. In general terms, does anybody have > any input on how much having the original contacts and idea are worth in the > long run? It is non-technical, non-patentable service we are talking about. > My basic take is that after the first year our value will be about the same > given that we basically split the workload. There are lots of good ideas, but > most don’t make money unless you make them happen, and since we are both > working equally hard to make it happen, in shouldn’t be skewed more than 60/40 > ish. Any input is greatly appreciated!
In my experience you will avoid future dissagreements if you spell out exactly what each is to do and if you can set it up on a 50/50 split. If you cannot trust him to work on this basis, IMO you should not go in business together. Herb Island Men International, Inc.
Response:
It really depends on how you are valued by your partner. You do not mention your partner’s position on the distribution of owner’s equity (i.e. % ownership for each). The real issue appears to be control. You appear ready to give your partner a 10% share for the initial idea. This leaves 90% split 2 ways. On the other hand, you do feel both you and your partner are relatively equal as contributors to the new business. Crafting an agreement both you and your partner will find acceptable requires both parties present their initial viewpoints with supporting rational. I suggest using a "third-party" perspective to work out a sharing of responsibilities and performance. Compensation for each partner’s contribution should be market based… i.e. design the company on paper and assign each functional hat to one or the other partner. During the start up phase mix the high-end and low-end work equally among the partners. Plan on hiring staff to take on the support work as soon as the cash flow will support it. Keep track of hours worked and try to keep the numbers about equal so you will avoid the "I work harder than you do" issue. Obviously both you and your partner will not take out the full value of your equivalent market compensation. This is the "sweat equity" you are investing to grow the business. You will however need to work out an acceptable compensation rate based on your personal needs. If both you and your partner take the same amount you will not need to adjust the equity position. On the other hand, you might want to buy back the 10% difference over time. You might want to resolve the control issue by considering operational control and equity as separate. You can agree to different percentages for voting purposes and distribution of net profits. In your situation, I strongly suggest you either keep an equal voting right in the decision making process (with a specified conflict resolution mechanism) or spell out how net profits will be distributed (with the cost structure of the business required to be in line with equivalent businesses). Otherwise, it is possible for one partner to increase expenses to zero out profits… potentially leading to a nasty situation. These are a few guidelines to consider. Keep in mind these are only guidelines for the purposes of discussion. Your final agreement will depend on the concensus reached between you and your partner. Don’t wait too long to resolve the issues because the process will become significantly more difficult as time goes on. J.P. Solyom KS Business Developement