Configuring A Business Deal - Need Inspiration
Discussion
Figures are simplified:
Clever guy makes a device that 100 people use for £100 each p/a on license (no pay / no work) stable user base.
Device is as good as many at £1k a year and people are clammering to get one but training is the chicane.
Teaching people to use it and explaining it to new users takes up all his time so he cannot make the device better (2.0)
Approaches us to do sales, training and support and to expand the core user base - to learn how to use it you will pay £250 for some mild customisation.
So conundrum is how do we get involved and maintain his £10k (its much more than this) ?
If we take over the training we get £250 a go, if we progress to 2.0 we can charge more, we can sell a support package but structuring it so he ringfences his £10k and make him "go for it" is taxing me.
His income would naturally decline and is vulnerable to a hostile competitor so I dont want to end up guaranteeing his cash in declining sales.
Any help appreciated
Clever guy makes a device that 100 people use for £100 each p/a on license (no pay / no work) stable user base.
Device is as good as many at £1k a year and people are clammering to get one but training is the chicane.
Teaching people to use it and explaining it to new users takes up all his time so he cannot make the device better (2.0)
Approaches us to do sales, training and support and to expand the core user base - to learn how to use it you will pay £250 for some mild customisation.
So conundrum is how do we get involved and maintain his £10k (its much more than this) ?
If we take over the training we get £250 a go, if we progress to 2.0 we can charge more, we can sell a support package but structuring it so he ringfences his £10k and make him "go for it" is taxing me.
His income would naturally decline and is vulnerable to a hostile competitor so I dont want to end up guaranteeing his cash in declining sales.
Any help appreciated
randlemarcus said:
Surely 2.0 would involve some sort of simplification of the user experience, so while he can now roll out 1000 users, none of them need training, so that's your £250 up the swannee, while he laughs all the way to Guernsey?
No 2.0 makes it more complicated the device does more and needs more "tailoring" to the user initially. Apart from our £250 every time a users circumstances change they need a bit of dev time (not all of them and not much but enough) which is chargeable.We think the users can easily be expanded by 50% and the yearly charge increased for us.
How about becoming a reseller? You'd get 20-40% of list, any training revenue is 100% yours. Make it online training and he can resell your training courses/videos or whatever with a similar deal for him. Win-Win hopefully. He should operate a deal registration process to stop you poaching his customers assuming this is b2b.
1. YouTube videos. Works whether it's a professional product or consumer - people will sit through a series of five minute videos explaining how to do X, Y, Z when they won't read a manual, search a website FAQ or email a question. A good video also acts as a hell of a promotion for a product - it's one of the few areas that you can still optimise for search.
2. Invest in a configurator - doesn't matter if it's a web site, app or a PC app that only you use, just automate the hell out of any set up efforts. If you've had to do the same job more than once, why haven't you automated it? Even better if the automation is 'self service' as the user feels in control of this powerful feature.
How do you structure it? Maybe as an exclusive license to sell v1.0, staged payments with clauses for under/over performing in the market. So he gets cash up front to get going on 2.0, and if the market declines too much you can walk away. If you make a killing, he gets a fair share. In the mean time, you can establish yourself as the sales channel and there's no confusion in the market as to who to turn to for help etc.
He gets the benefit of peace and quiet and a protected income stream, and when he gets 2.0 out there you will hopefully have built a partnership that will be in a position to take it to the next level.
2. Invest in a configurator - doesn't matter if it's a web site, app or a PC app that only you use, just automate the hell out of any set up efforts. If you've had to do the same job more than once, why haven't you automated it? Even better if the automation is 'self service' as the user feels in control of this powerful feature.
How do you structure it? Maybe as an exclusive license to sell v1.0, staged payments with clauses for under/over performing in the market. So he gets cash up front to get going on 2.0, and if the market declines too much you can walk away. If you make a killing, he gets a fair share. In the mean time, you can establish yourself as the sales channel and there's no confusion in the market as to who to turn to for help etc.
He gets the benefit of peace and quiet and a protected income stream, and when he gets 2.0 out there you will hopefully have built a partnership that will be in a position to take it to the next level.
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A recurring revenue stream of the subscription plus the onboarding feeDELETED: Comment made by a member who's account has been deleted.
Yes this on offer setting up a new ltd company One person has got this far but the opportunity is clear and its a good income for one person, he wants to not risk his current income in this deal which is where I am struggling.
He is one of lifes givers and his motivation is to do more good for others not himself - quite amazing
Because he is an inventor and whilst aware of other competing devices he didnt price to market - the current users would pay more and the scope to improve the support is where we can capitalise then improve the product and charge more.
HOWEVER protecting his mythical £10k (its a 6 fig sum and rock steady over 6 years) is where I am stuck
Protecting his income is clearly the main problem. You could ask for a reseller deal in which you get 20-40% plus the training revenue with an option to purchase equity once over a certain level, i.e. once you've proved that you can increase his revenue by a substantial amount. However, if you think the revenue will decline over time, is he missing that issue? Does he think his income will just be static?
The other option might be a licensing deal which would result in you manufacturing the product too, but then you get into the same non-compete problem and deal registration doesn't make sense then.
For training, we're looking at putting our course materials in a training platform which charges a small amount per module. It's also a complex product which our customers would like training on, but paying for a 5 day course is often beyond their budgets/time.
The other option might be a licensing deal which would result in you manufacturing the product too, but then you get into the same non-compete problem and deal registration doesn't make sense then.
For training, we're looking at putting our course materials in a training platform which charges a small amount per module. It's also a complex product which our customers would like training on, but paying for a 5 day course is often beyond their budgets/time.
mr_spock said:
Protecting his income is clearly the main problem. You could ask for a reseller deal in which you get 20-40% plus the training revenue with an option to purchase equity once over a certain level, i.e. once you've proved that you can increase his revenue by a substantial amount. However, if you think the revenue will decline over time, is he missing that issue?
I think thats a good basis to work with - thanks mr_spock said:
Does he think his income will just be static?
Yes and I am not causing friction by arguing the toss on it, I will accommodate it in our dealCan you offer a deal along the lines of for each £1 of T/O/Profit (your choice of metric) upto a certain level you only get 5p (whatever figure just covers your costs). But once his 6 figure expected income figure is reached you get a much bigger slice of the pie say 50p.
So if sales do decline then he isn't too adversely affected but with your skills and added value Sales rise then you get a big chunk of that benefit.
So if sales do decline then he isn't too adversely affected but with your skills and added value Sales rise then you get a big chunk of that benefit.
One other thing to throw into the mix is business continuity provision and the exposure you're risking with a one man band.
If he's been running the show for x years, he's clearly a capable individual, but holidays, illness, unexpected bus impact and so on should be a big concern to both of you. Equally, if he decides to head off in a different direction, you're in trouble. Any deal you make should deal with that - give him cover and protection and give you means to carry on if something unfortunate happens.
If he's been running the show for x years, he's clearly a capable individual, but holidays, illness, unexpected bus impact and so on should be a big concern to both of you. Equally, if he decides to head off in a different direction, you're in trouble. Any deal you make should deal with that - give him cover and protection and give you means to carry on if something unfortunate happens.
Guys all great points, its software and its configured to each user say 20% (80% is generic), we would have a developer shadow him for as long as it takes to ensure we have "abduction security" and a license / channel / user agreement is the way forward.
I am pulling it together thursday to present friday - our risk is purely staff employment weather short contract or whatever from day one we need first line help (admin), onboarder and a dot net dev (we have this already) so extra cost of say £5k a month to the business which is part of the plan but needs to be recovered.
I am pulling it together thursday to present friday - our risk is purely staff employment weather short contract or whatever from day one we need first line help (admin), onboarder and a dot net dev (we have this already) so extra cost of say £5k a month to the business which is part of the plan but needs to be recovered.
If it has the potential you think and the thing holding it back is the one man band aspect, you need to be JV in one way or another. If he doesn't believe by doing that he'll make more than his 'ringfenced' amount he clears now, is he ever going to believe in or be committed to what you're doing, however it's structured?
coyft said:
DSLiverpool said:
Guys all great points, its software and its configured to each user say 20% (80% is generic), we would have a developer shadow him for as long as it takes to ensure we have "abduction security" and a license / channel / user agreement is the way forward.
I am pulling it together thursday to present friday - our risk is purely staff employment weather short contract or whatever from day one we need first line help (admin), onboarder and a dot net dev (we have this already) so extra cost of say £5k a month to the business which is part of the plan but needs to be recovered.
I did a deal with a US software company. I negotiated the sole European distribution rights. If you need any help with the distribution agreement, feel free to PM me.I am pulling it together thursday to present friday - our risk is purely staff employment weather short contract or whatever from day one we need first line help (admin), onboarder and a dot net dev (we have this already) so extra cost of say £5k a month to the business which is part of the plan but needs to be recovered.
This has happened (nearly) our biggest issue was second guessing the developer who was far more flexible on stuff we thought he wouldnt be and rigid on the opposite.
A 3 month trial leading to a 5 year rolling reseller agreement is nearly agreed (talking percentages) and for the trial we will need our developer and a first line phone answerer trained.
I`ll update
A 3 month trial leading to a 5 year rolling reseller agreement is nearly agreed (talking percentages) and for the trial we will need our developer and a first line phone answerer trained.
I`ll update
DSLiverpool said:
This has happened (nearly) our biggest issue was second guessing the developer who was far more flexible on stuff we thought he wouldnt be and rigid on the opposite.
A 3 month trial leading to a 5 year rolling reseller agreement is nearly agreed (talking percentages) and for the trial we will need our developer and a first line phone answerer trained.
I`ll update
Congrats. I wouldn't mind some business like that A 3 month trial leading to a 5 year rolling reseller agreement is nearly agreed (talking percentages) and for the trial we will need our developer and a first line phone answerer trained.
I`ll update
Tuna said:
DSLiverpool said:
This has happened (nearly) our biggest issue was second guessing the developer who was far more flexible on stuff we thought he wouldnt be and rigid on the opposite.
A 3 month trial leading to a 5 year rolling reseller agreement is nearly agreed (talking percentages) and for the trial we will need our developer and a first line phone answerer trained.
I`ll update
Congrats. I wouldn't mind some business like that A 3 month trial leading to a 5 year rolling reseller agreement is nearly agreed (talking percentages) and for the trial we will need our developer and a first line phone answerer trained.
I`ll update
Our really big client project right now is many micro social influencers v one big daddy social influencer - I am favouring the former.
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