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Opening my own language school... Barry's Percentage Share

Viewed 1124 times 2012-7-26 16:57 |Personal category:Opening my own language school...| Investment, Language school, Business, NanNing, GuangXi

When Barry, Jack and I decided to start the school, we agreed on a 33.3% split, but given that the situation has changed dramatically since those early days, the company needed to sort out the partnership share.

 

As of this second, the current total investment is 62,940.61 RMB, 10,010 RMB has been invested by Barry, 22,400 has been invested by Raymond, 2,400 of which was in the form of fixed assets (A few computers and some office furniture which he brought from his family company), and 30,530.61 RMB invested by myself.

 

Barry has not invested any money since the very start (even though I have asked him to) and for almost 2 months, he has made no contribution to the running of the company. He is useless. Recall the incidents with the 2 computers and the telephone line? Totally useless!

 

Since Jack left I have wanted to buy Barry out of his share, but this is not so easy, he wouldn’t just agree to giving up his share and he has not done anything which could be considered misconduct so I can’t just give him the boot. In addition, I don’t have the required cash to just buy him out, the school will still need additional investment and so that is the priority financially, so Maria and I have plotted to slowly drive him away.

 

I know this may seem like a really terrible thing to do to a friend, but business is business. I will not leave him out of pocket; he will get his full investment back and I will also forget about the 3,500 RMB he owes me, so he will actually be slightly better off.

 

As I mentioned previously, I had attempted to get Barry and Jack to sign a partnership agreement, but they had refused, it turns out that this was actually a good thing for the company as it means that there is no actually agreement saying that Barry is entitled to 33.3%. A verbal agreement means nothing in China, so reducing Barry’s percentage share would be a lot easier.

 

Given actual investment, Barry’s percentage share is 16%, Raymond’s percentage share is 35.5% and my percentage is 48.5%. I thought this was still too high for Barry, 16% of the school for 0% effort and minimal investment; this didn’t sit well with me. Maria said his investment should be less then 10%, so I copied my accounts spreadsheet and opened it and started to cook-the-books.

 

Barry is not the most intelligent person, so as long as the accounts looked realistic, we should be able to reduce his percentage share artificially. I increased spending across the board by about 50%, this reduced Barry’s percentage share to about 11%, the accounts started to look unreasonable to me, some of the figures would be hard to explain if he asked, so I stopped adding to the accounts. Maria said I should reduce his percentage further, but at this point, to reduce his percentage stage by 1%, I would have to increase spending by 10,000 RMB, and this was not easy. Maria asked why I would have to increase spending so much to reduce his share so little, so I gave her a simple mathematics lesson.

 

Reducing his share from 33.3% to 11% at this stage was acceptable to me as this was only the first step to getting him out.

I arranged a meeting at the school with Raymond and Barry and explained to Raymond what I was doing. Raymond had no arguments.

 

We got to the school and I showed Barry around, he had not been to the school since the decoration was complete. I talked about our difficulties finding students and about how much things had cost to buy and then sat him down and showed him the accounts. He asked a few things, but didn’t complain about the displayed spending. I told him Raymond had invested 50,000 RMB making him the majority holder and that Raymond had also bought 10,000 RMB of my investment, making Raymond’s total investment 60,000 RMB. Barry didn’t say much.

 

I pulled out the partnership contract, this time he had no choice but to sign. He filled out his name and signed the form; he said that the investment information should be filled out by me, so I filled in the figures. Total investment 89840.61 RMB, Barry’s Investment 10,010 RMB (11%), Raymond’s investment 60,000 RMB (67%), my investment was just less than 20,000 RMB (22%). We all signed and took a copy and Barry left. About 1 minute after Barry left, we threw away our copies of the contract, but at least Barry now knew he only had an 11% share. Success!

 

The next step towards getting him out will be done in the following weeks, but it is not 100% clear how we will do it, but for now, we are happy that he has agreed to a small stake in the company.

 

(Opinions of the writer in this blog don't represent those of China Daily.)


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daniel_hs_walsh

My name is Daniel, I am 27 and I come from The UK. I have been in China since September 2009.

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