looking for a fair agreement

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neurodoc

neurodoc

Senior Member
Joined
Feb 8, 2014
Messages
115
Location
Argentina
Vessel Name
Fitzcarraldo
Vessel Make
55 Ft Steel Trawler
Hi there, greetings from Buenos Aires!
I am evaluating the possibility of starting a small business with my boat (50 plus Ft trawler). My idea is to offer boat tours for birdwatching, photo safaris, etc. I am finishing all my homework at PNA (Argentinean Coastguard) in order to get my personal license (Master Capt) and the boats documents issued. Due to the size of the boat, PNA requires me to have a licensed mate on board.
As I cannot afford paying him a salary (and the guy I have in sight has a job), my idea is to make him a partner and offer him a percentage of the incomes.
Based on a win | win relationship, what would be a reasonable approach for such an agreement?
All comments are welcome!
 
Sounds like you are developing a fun business in a beautiful area.

What would be an average salary for such a position? Project your potential income and calculate a percentage to equal a salary. Or calculate profit sharing to be commensurate with a salary.
 
I don't think you need a partnership agreement. He won't have any ownership in the asset you use- your boat. In most of these cases, like a deck hand on a head boat, just a verbal agreement to share the income and a handshake is all that is needed, even in the litigious US.

What percentage? I don't really know. You are using your time, your expertise as a licensed captain and your boat. He is supplying his time and expertise- his mate license. 20% makes sense to me. Or think of it this way: two shares for the captain, two shares for the boat and one share for the mate- 20%.


David
 
Moonfish said:
Sounds like you are developing a fun business in a beautiful area.

What would be an average salary for such a position? Project your potential income and calculate a percentage to equal a salary. Or calculate profit sharing to be commensurate with a salary.
Click to expand...

Hi Darren, my idea is to retire from my current position and continue generating incomes from a quite different (and hopefully fun) new business.
The problem with salaries in local merchant vessels is that they are quite low and would mean an underpayment to the guy I have in mind.
He has a lot of skills and personal qualities, which make him one of a kind. For this reason I would like to offer him the fairest possible agreement.
This includes sharing my incomes with him.
 
I suggest sharing profits by first taking expenses off then a 3 way split, 1 for the boat, 1 for you and 1 for him.
 
Hi David,

djmarchand said:
I don't think you need a partnership agreement.

I don't have many alternatives he is either my employee... or a partner...
In the first case, it implies to pay a monthly salary (quite risky in a starting business), to register him in an official crew book of the boat... etc

The second alternative implies to share my incomes (if) with him, and no other obligations from my part (except covering him with with a work insurance).

He won't have any ownership in the asset you use- your boat. No, just the work.

In most of these cases, like a deck hand on a head boat, just a verbal agreement to share the income and a handshake is all that is needed, even in the litigious US.
HMMMM.... although I am the verbal agreement and handshake type of person... we must face that the world has changed a lot: so it will be a written agreement

What percentage? I don't really know. You are using your time, your expertise as a licensed captain and your boat. He is supplying his time and expertise- his mate license. 20% makes sense to me. Or think of it this way: two shares for the captain, two shares for the boat and one share for the mate- 20%. This percentage sounds quite reasonable to me: I calculated to discount the expenses, and divide the money in one share for the boat, the mate and me.... This is more or less the 20% you proposed.


David
Click to expand...
 
The simple 20% of charter income approach is easy to figure and you can pay him in cash at the end of the charter- no waiting to figure out expenses which probably varies trip by trip. That is what head boat captains do with their crews.


Little surprised that you insist on a written agreement. Is this to lock him into the deal perhaps.



David
 
Little surprised that you insist on a written agreement. Is this to lock him into the deal perhaps.

David[/QUOTE]

Hi David, Yes, a written agreement (and a good share of the profit) will lock him into the deal.

On the other hand, I don't know him THAT much to assure we NEVER will have troubles in our work relationship: my youngest son had a good friend working every now and then in his small brewery, one day they had a discussion, the guy resigned, some months later my son was fined by the Ministry of Labor for having had this guy (who also had to be compensated) allegedly working on a full time position...

Finally> if two partners have good intentions, why would they not sign a written agreement?
 
I hate partnerships and will not suggest any such agreement. It's your boat, you should retain all equity.

Now, what I might suggest is you make him a non-equity owner as such. He has no ownership of the business but he gets a percentage of the profits or the revenue. Profits is difficult because it's not his asset so I'd suggest a significant percentage of all revenues but not as a partner, as a contractor with you. That also leaves him free to work for others when you don't have work.
 
I would own the business and have your mate sign an employment contract. But I don’t know your employment laws...
 
BandB said:
I hate partnerships and will not suggest any such agreement. It's your boat, you should retain all equity.

Now, what I might suggest is you make him a non-equity owner as such. He has no ownership of the business but he gets a percentage of the profits or the revenue. Profits is difficult because it's not his asset so I'd suggest a significant percentage of all revenues but not as a partner, as a contractor with you. That also leaves him free to work for others when you don't have work.
Click to expand...

Hi BandB, thanks for your input! I agree with your opinion. When evaluating a partnership with the mate, my idea was to split incomes with him, but (of course) not the ownership of the business.
The problem with local labor laws is that if you repeatedly hire a #contractor # for XX hours a month, law considers this person as an employee.

So, one one hand I do not want to take advantages of my future mate.... and on the other I don't want to be exposed to loose all I have if something goes wrong.
 
Last edited:
You could look at how fishing boats operate, not that you need to replicate it exactly, but it will give you an idea. There are surely people here who know much better than me, but I think I have heard things along the lines of:


- 50% goes to the boat owner
- Of the remaining 50%, 2 shares to the captain, and one share to each crew.


All this is after operating expenses. The above would give your mate 1/6th of the profits. If you end up needed a deck hand, it would further dilute each person's share.
 
neurodoc said:
Hi BandB, thanks for your input! I agree with your opinion. When evaluating a partnership with the mate, my idea was to split incomes with him, but (of course) not the ownership of the business.
The problem with local labor laws is that if you repeatedly hire a #contractor # for XX hours a month, law considers this person as an employee.

So, one one hand I do not want to take advantages of my future mate.... and on the other I don't want to be exposed to loose all I have if something goes wrong.
Click to expand...

Then if they work that much, make them an employee. If you run a business, it's natural to have employees.
 
Sorry, but from your perspective first mate's objective, I don't see much incentive for the guy you want to hire, as you note "The problem with salaries in local merchant vessels is that they are quite low and would mean an underpayment to the guy I have in mind"

You note that you are thinking that you want to pay him a percentage of the income. I think it needs to be clear what you mean by income? Are we defining income as remaining revenues after paying all expenses? If this is true, then his part of the income may be $0. On the other hand, if business is great maybe he would make more than his salary in his current job.

I think a potential difference between yourself and the fishing (and/or maybe crabbing) examples that I am familiar with is the captains of those boats have some type of track record in the industry.

I think you need to try and get a feeling how much risk your potential employee is willing to take. Maybe he is willing to work without a guarantee of payment, or maybe not. I think it only an answer that he can give you.

Jim
 
Hire someone appropriate for the job. Hiring someone grossly over-qualified, then attempting to do a profit share with that individual in an attempt to match their current income makes no sense. That is a business model destined to fail.

Hire a person with the requisite skills to match the job, and is willing to work for the wage the job calls for.
 
Whether contracting or employee, hire the right person and pay them appropriately. If you can't afford to pay them then you don't need to be in business. You talk about income, well, that is after paying employees.

Now, the pay can be a percentage of revenues, as long as it's adequate to meet wage laws in your location. For example, in Florida, you could agree you're paying 30% of the revenues. Then you collect $5000 for the one week charter and he gets $1500. But if you collect $1000 and he worked 70 hours that week then you'd be required to pay at least $8.46 per hour times 40 plus $12.69 per hour times 30, so $719.10.

In the US, all wage and hour laws do apply. In other countries the laws vary. Also, for these purposes a US flagged boat is considered in the US wherever it is and subject to US laws.
 
Mark P said:
If u make him a partner in the boat, they will share in liabilities. Get it in writing
Click to expand...

You are absolutely right... but (if), he will only be a partner in the profit this cruising project generates. The boat will remain 100% mine
 
BandB said:
Then if they work that much, make them an employee. If you run a business, it's natural to have employees.
Click to expand...

Right, I would love to hire him right now.... but I prefer to do some temporary agreement now and, let's say in 1 year or so reevaluate the entire business.
 
I had to copy and past my reply because when trying to post reply on original text, the MESSAGE: YOUR REPLY IS TOO SHORT APPEARED AND DIDNT LET ME PROCEED


JLD said:
Hi!, my reply below...

Sorry, but from your perspective first mate's objective, I don't see much incentive for the guy you want to hire, as you note "The problem with salaries in local merchant vessels is that they are quite low and would mean an underpayment to the guy I have in mind"


Well, this guys idea isn't to get a underpaid job on a merchant vessel, but to start his own business: he owns a tiny boat, and would buy a larger one (perhaps a 20 footer with 90 HP outboard). His idea is to take people out fishing. In the meantime he would work part time with me on my project, and in a certain time from now re discuss our arrangement: as a B plan he may get into my business with his own fishing boat, as to offer different alternatives to our customers.

You note that you are thinking that you want to pay him a percentage of the income. I think it needs to be clear what you mean by income? Are we defining income as remaining revenues after paying all expenses? If this is true, then his part of the income may be $0. He may be willing to run a certain risk for a certain time, but in our (soon to come) discussion. The basic idea is if we have no tours, he does his regular job.... on the contrary, if we go out, it means we all will earn some money. I also may offer him a certain sum for being at call once or twice a weeks.
On the other hand, if business is great maybe he would make more than his salary in his current job. right, and it is fair to me

I think a potential difference between yourself and the fishing (and/or maybe crabbing) examples that I am familiar with is the captains of those boats have some type of track record in the industry.

I think you need to try and get a feeling how much risk your potential employee is willing to take. Maybe he is willing to work without a guarantee of payment, or maybe not. I think it only an answer that he can give you.

Absolutely right! ..

Jim
Click to expand...
 
The problem seems to be the size of your boat. That's a big boat for a business that has no customers yet, it requires you to have a mate on board which you can't afford and operating costs are greater for a bigger boat.

It sounds like the guy you have in mind might be over qualified as well.

If someone offered ma job with my pay based on revenue or profit, it would have to approximate about twice what I'd expect to earn as an hourly employee because of the risk involved.

If your mate's pay is based on profit, and you have a big unexpected repair, he doesn't get paid that week ???

It might make sense to get the business up and running.....and when you have your first trip booked, hire a temporary person for that trip. That way you aren't carrying labor cost when you don't have any revenue coming in. Once you are a little more established you can go hire the guy you want.

In the mean time you may want to find a boat that is a similar operation and apply for a job with them to learn as much as possible.
 
Shrew said:
Hire someone appropriate for the job. Hiring someone grossly over-qualified, then attempting to do a profit share with that individual in an attempt to match their current income makes no sense. That is a business model destined to fail.

Hire a person with the requisite skills to match the job, and is willing to work for the wage the job calls for.
Click to expand...

THANKS FOR SHARING YOUR OPINION!

The guy I have in sight is not overqualified, but the main difference between him and the other guys I talked with, is that he is the kind of person to work with tourists> educated, polite, respectful, middle aged... therefore (If I want to keep him) I will have to pay him more than the regular wage.
This is basically the reason I started this thread!
 
again the TOO SHORT REPLY MESSAGE!:banghead:


Benthic2 said:
The problem seems to be the size of your boat. That's a big boat for a business that has no customers yet, it requires you to have a mate on board which you can't afford and operating costs are greater for a bigger boat.

I have been owning this boat for some years now for sailing with family and friends, and maintaining it has been no problem so far...
If I start this project, at the beginning I will use it just part of the time ... and if the business grows, perhaps full time

It sounds like the guy you have in mind might be over qualified as well.

If someone offered ma job with my pay based on revenue or profit, it would have to approximate about twice what I'd expect to earn as an hourly employee because of the risk involved, yes, but this guy also has a project of his own (pls see otro replies) and we may fly wing to wing for a certain time....

If your mate's pay is based on profit, and you have a big unexpected repair, he doesn't get paid that week ??? No, repairs are on me, as I mainly use the boat for family & friends

It might make sense to get the business up and running.....and when you have your first trip booked, hire a temporary person for that trip. That way you aren't carrying labor cost when you don't have any revenue coming in. Once you are a little more established you can go hire the guy you want. right

In the mean time you may want to find a boat that is a similar operation and apply for a job with them to learn as much as possible. The majority of the boats doing the same are family operated and have no approval from the Coast Guard. When caught, they get a fine, and most leave the business.
Click to expand...
 
All very interesting. Some good ideas but to make any intelligent business input I suggest that you put together a REALISTIC budget - revenue and expenses and see where this is going. A written or agreement or a handshake? Up to you but if your prospective employee/partner is good, don't go cheap. What is your personal objective? To make a lot of money or to cover your cruising expenses while having something to occupy your time. If the former be willing to compromise.
 
The issue with employment is some places it`s hard to terminate. Some places deem a casual worker permanent after some period. Your concept is a profit sharing joint enterprise, like the fishing boat arrangements referred to above, where crew pay relates to the value of the catch.
The question is beyond boating expertise, though you may get some advice from people here with business and or employment law knowledge it`s not so much a question of fairness as getting legal or maybe accounting advice how to structure it. The man you have in mind sounds well worth keeping.
 
Boat on the hard. Dead tired. My day will start early tomorrow: it will be dustless sandblasting day... long day ahead. Good night! Tomorrow wll reply to latest post!
 
Mike Lowthian said:
All very interesting. Some good ideas but to make any intelligent business input I suggest that you put together a REALISTIC budget - revenue and expenses and see where this is going. A written or agreement or a handshake? Up to you but if your prospective employee/partner is good, don't go cheap. What is your personal objective? To make a lot of money or to cover your cruising expenses while having something to occupy your time. If the former be willing to compromise.
Click to expand...

As there are multiple potential holes in this business I will do some cruises in order to figure out what customers look for (besides what is obvious) and after that I will feel more confident to make a realistic budget. As negotiation with my prospective partner is an issue to me, having this budget will be of great help. By no means I want to go cheap.

Thanks for the input!
 
BruceK said:
The issue with employment is some places it`s hard to terminate. Some places deem a casual worker permanent after some period.

Labor laws in Argentina are inspired in those from France> hiring a person is very easy, getting rid of him *no matter how bad or inefficient, almost impossible


Your concept is a profit sharing joint enterprise, like the fishing boat arrangements referred to above, where crew pay relates to the value of the catch.
The question is beyond boating expertise, though you may get some advice from people here with business and or employment law knowledge it`s not so much a question of fairness as getting legal or maybe accounting advice how to structure it. The man you have in mind sounds well worth keeping.
Click to expand...

As said in a previous reply, will do some test runs to see how things develop and then will pay for a meeting with my accountant for putting figures together.
 
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