Business Practices

[EricBess]

I need some oppinions. I know that I can find a lot of hot air on this site, so I figured I would present my case here and let you lugheads help me out

Here's the deal. We can call this a hypothetical situation if it makes it any easier. I'm (hypothetically ) the owner of a small business that writes software for network marketing companies. Specifically, I have an engine which I customize for network marketing companies to calculate the compensation that they pay to their distributors.

Historically, software vendors in this industry provide a full package, including distributor genealogy maintenance, inventory tracking, orders, and commissions. The purpose of my company is to provide only that portion of things that we do best, which is the commission piece.

Occasionally, we find companies that are looking specifically for a compensation plan. However, the majority of our business comes from relationships that we have with other software vendors. Effectively, we subcontract with those vendors that have a full package, but realize that the overhead involved in customizing a compensation plan for each client is something that they would rather not tackle.

Currently, we have a relationship with two such vendors who send us all of their compensation plans.

I have a partner who works in another state. We "keep in touch" via the internet. My arrangement with my partner is that we both program, but that I do slightly more programming so that he has time to handle the bookkeeping.

Since the inception of the company, my partner has decided to take on more of a management roll. Basically, what that means is that he does even less programming, but he maintains relationships with the vendors (outside of their satisfied customers, that is).

A while back, my partner mentioned that there was a new vendor starting up and he had entered into talks with this new vendor about letting us program their compensation plans. He said that they were reluctant, but that he had managed to convince them to give us a chance.

Just recently, this vendor sold their first deal. My partner asked me to program the compensation plan. I agreed, but as I got into things, I realized that much of the database structure was undefined.

I asked my partner a series of questions and asked him to get me a contact person at this vendor that I could speak with. Over the next few days, a lot of information was revealed.

- My partner had attended a series of design meetings with this vendor.
- My partner had, to some degree, assisted in the database structure and therefore the architecture of the vendor's backend system.
- The vendor is using their relationship with my partner as a selling point of their software, as he is an "expert" in the industry.
- My partner has told me that this is a great opportunity to use the knowledge we've learned to make sure that this client has a great overall commission system. Remember, we write the commissions, but when it comes to reporting, check writting, returns, and so forth, we can only do as much as the system design allows. As such, we have a knowledge of many things that most companies do wrong, which gives us an edge in design.

So, keeping in mind that I just found out about this a couple days ago and it's been going on for nearly a year, I wanted opinions about how I should procede.

Feel free to ask questions if you feel there might be more information that I have left out. I tried to stick to the pertanent information only, but obviously, I've been in business for several years, so there is history (hypothetically, that is).

 

[Svenmonkey]

I don't understand...

But maybe it's because I'm 15 years old and sleep-deprived...

 

[EricBess]

Svenmonkey,

The point is that my partner appears to be assisting this new vendor with their design. Due to our position creating compensation plans for other vendors, we have access to what these vendors would consider trade secrets.

I have no direct proof of anything. My partner claims that he has sat in meetings with these guys for the last 10-11 months, but that he really has only given opinions when asked and he's never really been asked (then why is he in the meeting in the first place?).

What's more, the new vendor has told at least one potential client that my partner is working with them to create their backend product.

Imagine for a moment that you are one of our existing vendors and word got back to you from a prospect that one of your commissions programmers is helping an up and coming competitor with their design.

Anyway, I really do want a few comments. Some things to keep in mind, though. The information provided is one sided. It is the information from my point of view. What I am hoping for is that you can just piece out what must be fact and what is just my paranoid speculation.

For example, the fact the no one has posted yet seems to indicate to me that either no one understands what I'm talking about, like Sven said, or that everyone just agrees with my assesment and my assumptions.

But I figure there must be at least one person out there that would stand up for my partner and tell me I'm perhaps delusional. Any takers? Feel free to play Devils Advocate, but make it clear that that's what you're doing if you do.

At the very least, thanks for entertaining this enough to read it. I was hoping to spark up some conversation, but maybe things really are as bad as my imagination makes them.

 

[Svenmonkey]

Ah, I see. But I'm no businessman, so I still don't know what to think.

 

[Chaos Turtle]

From what you've said, it does seem like your partner is in risky territory. Even if he really is not using priveledged information, the "appearance of impropriety" can often be as harmful, business-wise, as actual wrongdoing. Not to mention that defending lawsuits is costly even when you've done nothing wrong.

I don't think you're being paranoid at all.

I would suggest asking your partner directly what is going on, and sharing your concerns. It may be that he has not considered all of the implications.

 

[Sammy Dead-O]

I'm with CT. Maybe he doesn't even realize all that's up in the air on this. Talk to him and explain your concerns. (And I don't know if you're thinking he's been up to some kind of business mischief--I'm still not clear on all that he could have done with the inside knowledge he has--but if you suspect he might suspect you suspect something, try not to sound accusatory about the whole thing.)

I guess just try to protect yourself as much as you can in the whole deal, and be as honest as you can be with the people you're dealing with.

Good luck with it, at any rate.

 

[Spiderman]

I had to add that voting option just so I can see the results

Not knowing enough about this kind of stuff either, I agree also. Looking at your partner optimistically, perhaps he's just trying to go all-out to gain this vendor's business and doesn't realize the full ramifications