Should I Bring a Mentor into the Business?

By Tim Berry

Opinions expressed by Entrepreneur contributors are their own.

I'm building a startup and because I have no experience other than a great idea, I enlisted the help of a mentor. Since then, I've been working with him and paying him by the hour. Now that I'm getting ready to hire a team, the mentor offered to come on board as the CEO and wants a certain percent of the company. Until I raise enough money, he said he'd work on a part-time basis at a reduced rate. What ownership percentage is normal to offer? I really need his help, but should I find someone else to be CEO?
This is sort of like asking whether you should marry the person you're dating. That said, if you do a deal like this you better be sure this person is somebody you can live with day in and day out for a very long time.

Giving away a percent of your company is forever, and you only have 100 percent to give. What worries me is that you haven't done the deal yet and you're already wondering if you should get somebody else. That might be a bad sign. His offering to work on a part-time basis at a reduced rate, however, is a good sign. That makes it seem as though he believes in you and the business.

So, what percentage is fair? The answer goes all over the map. The idea by itself is worth nothing. It's the execution of the idea that creates value. Execution sometimes requires money and the people who put money in get the value with ownership.

Don't leave it between just you and your mentor. Find other people -- an attorney you both trust with small business experience, perhaps, or a counselor or several counselors at the local Small Business Development Center. Or perhaps somebody involved in entrepreneurship at a local community college or university can help you find a fair deal.

Whatever you do, don't make verbal agreements. Write it down and both of you should sign it before there's money coming in. And make sure you have a buy-sell agreement too: That's like a prenuptial in a marriage, laying out the terms you'll use to buy one or the other of you out when you get tired of it. That almost always happens, so plan for it early.


Related: How to Find the Right Investor for Your Business
Related: Sample Buy-Sell Agreement
Wavy Line
Tim Berry

Entrepreneur, Business Planner and Angel Investor

Tim Berry is the chairman of Eugene, Ore.-Palo Alto Software, which produces business-planning software. He founded Bplans.com and wrote The Plan-As-You-Go Business Plan, published by Entrepreneur Press. Berry is also a co-founder of HavePresence.com, a leader in a local angel-investment group and a judge of international business-plan competitions.

Editor's Pick

A Father Decided to Change When He Was in Prison on His Son's Birthday. Now His Nonprofit Helps Formerly Incarcerated Applicants Land 6-Figure Jobs.
Lock
A Teen Turned His Roblox Side Hustle Into a Multimillion-Dollar Company — Now He's Working With Karlie Kloss and Elton John
Lock
3 Mundane Tasks You Should Automate to Save Your Brain for the Big Stuff
Lock
The Next Time Someone Intimidates You, Here's What You Should Do
5 Ways to Manage Your Mental Health and Regulate Your Nervous System for Sustainable Success

Related Topics

Business News

'I Am Just Floored': Woman Discovers She Won $1 Million Lottery Prize While Checking Her Email at Work

Initially, she thought the email was a scam, but went to lottery headquarters and walked away with a six-figure check after taxes.

Business News

'I've Got the Bug for Business': See All of Mark Wahlberg's Entrepreneurial Endeavors, From Marky Mark and the Funky Bunch to Wahlburgers

Mark Wahlberg owns businesses in several categories, including entertainment production, apparel, fitness, and nutrition.

Business News

Google Wants Employees Back in the Office, Considering 'Attendance' in Performance Reviews

In an email, a Google executive reportedly told employees that many new features and products unveiled during Google's developer conference last month were "conceived, developed, and built by teams working side by side."

Business News

South Park Creators Spent 'Infinity Dollars' Renovating Iconic Colorado Restaurant, Set to Reopen Soon

Casa Bonita, a long-time favorite of South Park creators Trey Parker and Matt Stone, went bankrupt during the pandemic. The duo purchased and painstakingly renovated the Mexican spot "like a piece of art," Stone said.

Business Models

What New Aviation Practices Can Teach Us About Collaboration and Innovation

By identifying niche markets, embracing technological advancements and fostering collaboration, entrepreneurs are changing the aviation industry.

Growing a Business

14 Easy Ways to Rank Your Website Higher on Google

Despite Google's algorithm and regular updates, you can quickly boost your website's ranking with these tips.