You are either partners or your not. If you need to keep score, are you really partners?

By setting commissions for work brought in, you are making a statement that this is more valuable than every other thing the partnership does. Is that true?

In my area, getting work is the easy part. Hiring and managing a production force is far more difficult. The bonus should be on production in my area.

Now, are you bringing in more work, or is he?

I'm not trying to negate the team aspect of a partnership whatsover. I just believe that capitalism works, and if you incentivize the parties involved, you will build a more productive organization. Also, I have seen several partnerships disintegrate because one feels he/she is doing more work than the other, but splitting the profits 50/50. I don't feel that way now, nor do I foresee this, but I know that life has many twists and turns in store for us all and you should be paid for the effort you are putting in at the time. I have and am indeed bringing in more business to the company, but he also has some great prospects that could be rewarded in his favor if we set up some type of bonus system. I'm still up in the air on this, and am hoping to get some more feedback.

Who has the bankroll? If it is you, then you'd better hash this out and keep an open dialog. I had an ex who went into engineering sales. The man with the established business gave him a draw against his commission and a small percentage of the stock. The more he was able to document he brought into the business, the more of the company he owned. It was understood from the get-go, however, he would never have an equal share.

There are many assets partners bring to the table, and not all of it is money. Experience, sales ability, hours worked, and only the two of you together know how to even think about putting a dollar figure on it. Partnerships are not an easy road to hoe unless you keep it strictly business. Partnerships are also not always 50-50.

Why do you only consider bringing in the sale as what is worth the commission? When you define one thing as being the most important, it deminishes everything else. Often a one dimensional reward system shifts someones focus entirely in that direction. You may find yourself with more sales than you can deliver and a partner that is gaining the lions share of the profit while you have little help finishing the job after the sale. This is the type of stuff that wrecks partnerships.

The best situation is that which keeps both partners focused on the bottom line of the whole company, not one part of the company. The first thing you need is profit before you can figure on how to divide it. Nothing is a better incentive to do the things that you don't want to do more than reward vs. penalty. If every aspect of the company defines that, than every aspect will be paid attention to. If you weight one aspect heavier in in the way someone gets paid, they will be less interested in the parts that don't pay.

If money gets tight under that system, how are you going to convince the partner to take a break from sales and help with production. You will be asking him to go without the bonus and do things that he may not really want to do.

You are the one making more sales, yet you are the one who wants to divide money based on sales commissions. Right away, you are basically wanting to pay yourself more by the sound of it.

You said you formed the partnership to take on business that was being turned away. That clearly means that sales is not the aspect of the business that needs an incentive program. It means that the company turned away business because it could not keep up on the production side. What is more valuable to the company is the increased production. A salesman is worth nothing without a product. A shoe salesman needs shoes and a landscape salesman needs the built landscape.

The incentive should be shared profits from the entire body of work. That way one one area is suffering, both of you are all over it to make it work.

It does not make sense to bring someone in to increase production and then divert his attention to sales. I do not think that is your intent.

Why would the other guy want to partner up with you? There had to be a reason. Is it because he could not keep busy enough on his own, or what? Whatever that reason is, you have to take that burden from him all of the time or it will not be working out for him.

You basically said that you needed him to increase production. That is what he needs to do for you to keep the partnership viable.

My guess is that you are a great salesman and he is not. That is what brings you to need each other. If I'm correct, don't ruin it by proclaiming what you do to be more valuable than what he does or you will be right back where you started - turning away work.

Thanks so much for your input. From this conversation, I can see that indeed a commission on sales is probably not the best route to build incentive into our particular organization, if there even is a way to do that. Basically, i'd like to get paid co-measurate with how much work I put into the business. Maybe this simply means each of us keeping a log of our hours and splitting profits along those percentage lines, but then again this could have a whole host of other problematic issues (how do you really keep track of all the hours, etc...). I started this thread both to ask my particular question about commission on sales, but also to see if there were any other ways that professional landscapers created incentives (to either work hard or be more efficient with time/materials) within their organizations.

Hello Travel ...

"Basically, i'd like to get paid co-measurate with how much work I put into the business."

Sure .. we all do... but that by itself is a job not a business. Indeed you should get paid for the time you spend in your business ... just like the general manager that works for any business on your block..

In addition as a business owner ... you are an investor .. if your company does well you should be paid on your investment .. like someone that owns stock.

If you are taking on a partner ( not a salesman ) then he to should be paid for his time in the business as you and every other worker in the business.

In addition he should recieve a return on HIS financial investment in the business. If his investment is ZERO he is not an investor... so his return .. ZERO. That makes him a worker .. so figure out what his job title is and pay him accordingly.

If you are both partners and would like to motivate each other each morning to get out of bed .. I can't see why some type of financial incentive plan could not be devised as long as you both understand money does not grow on trees.

Myself during my years in business I had and still have one partnership in my life .. "marriage" ... and I never wanted another partnership besides that one.

Good Day ...

In a partnership, especially a legal one, everything is split 50/50. The capitalism part of it is your partnership against other businesses, not each other. If you want to be in control of the business or how much you get paid, be in business for yourself and subcontract to your friend if needed.

Partnerships do not have to split everything 50/50. They can agree on splitting the amounts of pass-through income by any percent they wish. However, partnerships do open both parties up to joint liability and hassles if one partner wants to dissolve the agreement and one doesn't. Subcontracting is great, I do it, but be very careful if you do that you understand the tax requirements you must meet if you wish to work with somebody as a sub-contractor. Sometimes an audit reveals you have actually "hired" your help and then you open yourself up for all the little worms in that can.

What a great thread with lots of good discussion points. Laag's brought up some really good observations, and Traveler - you're to be commended for being open-minded enough to listen to them.

There are ways to design incentive systems to reward the behavior you want rewarded. For example - initial sales, completed projects, repeat sales, referrals, profitable projects. They just require an open mind, well-articulated objectives (truly - the hardest part), and the ability to lay out a reporting and calculation structure that makes sense and doesn't overwhelm.

Seems to me that bringing the project to completion on time, on budget, and with a happy client should be worth as much as a commission for a new sale. Takes less initiative perhaps, but probably more time and effort. (Can you tell I'm a worker bee, not a salesperson?) And that repeat business and referrals should also generate something for the person who satisfied the customer the first time around, not just the salesperson.

If you start off assuming that if you both work equal hours with equal investment, are roughly equally qualified, and each doing the work that best fits your strengths -- then is it reasonable to assume you both should make the same amount of money? Of course, things are never quite that equal -- but better to get that on the table and confront it now if one of you expects to earn more/be the larger partner.

But if you design an incentive system to reward you both proportionately for doing the things you agree need to be done -- a certain amount of sales, a certain amount of production work, profitability goals -- with a little tweaking you should be able to come up with something that works well for you both.