Splitting the pie without the drama: A plain guide to revenue sharing agreements

Revenue sharing sounds simple on paper. You do the work together, and then split the earnings. But in reality, it gets messy quickly if there is no clear agreement in place. Whether you are working with a partner, an influencer promoting your product, or a collaborator helping with distribution, having a solid revenue-sharing agreement is a must.

The first thing to get clear on is what revenue actually means in your arrangement. Is it gross sales before any expenses or is it the money left after costs are deducted? That one detail can make or break a partnership. Many fall into the trap of agreeing to a split without defining what is being split. That is where misunderstandings begin.

Then comes the percentage split. Fairness is not always about splitting things fifty-fifty. It should reflect the value each party brings to the table. If one person is investing more time, resources, or taking on more risk, then that should be reflected in the share they receive. The idea is to avoid resentment by making the split proportionate and transparent.

Make sure your agreement deals with how and when payouts will happen. Will it be monthly or quarterly? Will one party handle the finances and send reports or will you both have access to a shared system? Delayed payments and vague timelines often lead to breakdowns in trust, especially when money starts flowing in.

It is also important to agree on what happens if the project ends early or if one party pulls out. Does the revenue share continue based on past work or does it stop immediately? These things need to be written down up front. Partnerships that start out friendly can turn sour quickly when money is involved.

Protect your intellectual property as well. If the revenue-generating product or service includes your brand, tech, or content, you need to be clear on who owns what and whether any rights are being licensed or transferred. That way, you avoid a situation where someone else ends up using your assets after the collaboration ends.

Finally, keep things flexible but documented. You can always renegotiate terms as things grow, but those changes need to be in writing and signed off by all parties. Handshake deals are great for friendships, but not for running a business.

A well-structured revenue-sharing agreement helps you work together without stepping on each other’s toes. It gives everyone peace of mind and keeps the focus on building, not bickering.

The StartUp Legal offers expert legal services tailored for SMEs, helping you secure a winning edge. For personalized support, book a complimentary consultation: https://calendar.app.google/thxigR9yhDAu4LP86 or email us at hello@thestartuplegal.co.za