Exclusive distribution rights for a new business
Discussion
Hi everyone. I am in the process of starting up a new business, designing and manufacturing bespoke automotive artwork. I'm currently running a funding campaign on Kickstarter and it has been generating a fair bit of interest on social media, with most of the interest coming from the US.
I have been approached by a company seeking exclusive distribution rights for my work in the US, both to retail it and distribute it to other resellers. They are offering a significant portion of my funding goal to secure this deal, which is extremely tempting.
Obviously, the ongoing contract terms would need to be discussed in depth, however in the first instance I am not really sure if having a sole US distributor would be advantageous to me.
Any advice from the PH business bods for a total novice?
I have been approached by a company seeking exclusive distribution rights for my work in the US, both to retail it and distribute it to other resellers. They are offering a significant portion of my funding goal to secure this deal, which is extremely tempting.
Obviously, the ongoing contract terms would need to be discussed in depth, however in the first instance I am not really sure if having a sole US distributor would be advantageous to me.
Any advice from the PH business bods for a total novice?
Having tried myself to 'crack' the US with a products business I am involved in, I can say we found it very hard and expensive and have decided rather than selling to end users ourselves, we are now selling to 2 distributors who in turn sell to end users. We have had an offer of a sole distributor but we can't make the pricing work. This is much less hassle than having an operation in the US (we used to have an office and a few staff, but now just have a fulfilment warehouse). It works for us, but every business is different.
I guess it depends on what the exclusivity contract says, ie how long are you tied into to them for, and what is the minimum volume per annum they will agree to purchase from you? In the early stages, it could be very handy to have a guaranteed revenue stream from the US. eg. They agree to buy x pieces of art spread over various price points per year for a 3 year exclusivity arrangement.
After that 3 year agreement, your brand would better established, you'd (hopefully) have better funding, so could then make a decision to renew the contract on increased volume commitments, move to a different distributor, or set up an operation yourself.
Their offer (subject to the terms) seems like a low risk way to get going in the US, and indeed meet your overall funding requirements.
I guess it depends on what the exclusivity contract says, ie how long are you tied into to them for, and what is the minimum volume per annum they will agree to purchase from you? In the early stages, it could be very handy to have a guaranteed revenue stream from the US. eg. They agree to buy x pieces of art spread over various price points per year for a 3 year exclusivity arrangement.
After that 3 year agreement, your brand would better established, you'd (hopefully) have better funding, so could then make a decision to renew the contract on increased volume commitments, move to a different distributor, or set up an operation yourself.
Their offer (subject to the terms) seems like a low risk way to get going in the US, and indeed meet your overall funding requirements.
The thing is, I have no idea what I want to get to. This company can probably market my stuff far more effectively than I can.
This all started out as a one off, a couple of people said "That's cool, can you do one for me?" and it's kind of escalated from there, and now I'm looking at this a couple of months later and thinking that it all looks rather intimidating!
This all started out as a one off, a couple of people said "That's cool, can you do one for me?" and it's kind of escalated from there, and now I'm looking at this a couple of months later and thinking that it all looks rather intimidating!
Kozy said:
The thing is, I have no idea what I want to get to. This company can probably market my stuff far more effectively than I can.
This all started out as a one off, a couple of people said "That's cool, can you do one for me?" and it's kind of escalated from there, and now I'm looking at this a couple of months later and thinking that it all looks rather intimidating!
With the greatest of respect you are asking people for money to invest in your business, so you need to get an understanding of what you want out of it pretty damn quick.This all started out as a one off, a couple of people said "That's cool, can you do one for me?" and it's kind of escalated from there, and now I'm looking at this a couple of months later and thinking that it all looks rather intimidating!
I appreciate you only want £15k, but I wouldn't give you a £100 unless I could see how I was getting that back. I'd want to see a business plan that included sales & costs. Getting an exclusivity arrangement with a min revenue agreement from a reputable business in the USA would add massive value and attraction to you as an investment.
I'm shocked that people are committing money to you, no matter how small, without any idea of how that will be returned. I must be getting old!
foliedouce said:
With the greatest of respect you are asking people for money to invest in your business, so you need to get an understanding of what you want out of it pretty damn quick.
I appreciate you only want £15k, but I wouldn't give you a £100 unless I could see how I was getting that back. I'd want to see a business plan that included sales & costs. Getting an exclusivity arrangement with a min revenue agreement from a reputable business in the USA would add massive value and attraction to you as an investment.
I'm shocked that people are committing money to you, no matter how small, without any idea of how that will be returned. I must be getting old!
With the greatest of respect, yes you are getting old.I appreciate you only want £15k, but I wouldn't give you a £100 unless I could see how I was getting that back. I'd want to see a business plan that included sales & costs. Getting an exclusivity arrangement with a min revenue agreement from a reputable business in the USA would add massive value and attraction to you as an investment.
I'm shocked that people are committing money to you, no matter how small, without any idea of how that will be returned. I must be getting old!
They're not investing in my business. Not in the slightest, that's not what I want. They are pre-ordering my products, a big difference. Everyone that puts in £100, gets one of my bespoke metal blueprints in return IF I hit that goal. If I don't then no-one pays anything at all.
That is what Kickstarter is all about, raising funds without bank loans or investors. If you've got a product but need money to get it started, you create a project there and generate the funds you need by selling your stuff in advance. For instance a band can raise the money to record their album by preselling a set amount of copies. In my case, I am looking to raise the money to buy the equipment I need by selling a certain number of my blueprint designs.
It's a great concept but a lot of people, yourself included, don't see it for what it is straight away. At no point is any equity offered or implied.
I'm not the one that needs to write a business plan here, I'm just a guy in a shed knocking out some stuff. it's the company that wants to handle US distribution that needs to propose a business plan if they want to be the only ones shipping my stuff in to the states.
Edited by Kozy on Wednesday 26th March 21:31
Kozy said:
foliedouce said:
With the greatest of respect you are asking people for money to invest in your business, so you need to get an understanding of what you want out of it pretty damn quick.
I appreciate you only want £15k, but I wouldn't give you a £100 unless I could see how I was getting that back. I'd want to see a business plan that included sales & costs. Getting an exclusivity arrangement with a min revenue agreement from a reputable business in the USA would add massive value and attraction to you as an investment.
I'm shocked that people are committing money to you, no matter how small, without any idea of how that will be returned. I must be getting old!
With the greatest of respect, yes you are getting old.I appreciate you only want £15k, but I wouldn't give you a £100 unless I could see how I was getting that back. I'd want to see a business plan that included sales & costs. Getting an exclusivity arrangement with a min revenue agreement from a reputable business in the USA would add massive value and attraction to you as an investment.
I'm shocked that people are committing money to you, no matter how small, without any idea of how that will be returned. I must be getting old!
They're not investing in my business. Not in the slightest, that's not what I want. They are pre-ordering my products, a big difference. Everyone that puts in £100, gets one of my bespoke metal blueprints in return IF I hit that goal. If I don't then no-one pays anything at all.
That is what Kickstarter is all about, raising funds without bank loans or investors. If you've got a product but need money to get it started, you create a project there and generate the funds you need by selling your stuff in advance. For instance a band can raise the money to record their album by preselling a set amount of copies. In my case, I am looking to raise the money to buy the equipment I need by selling a certain number of my blueprint designs.
It's a great concept but a lot of people, yourself included, don't see it for what it is straight away. At no point is any equity offered or implied.
I'm not the one that needs to write a business plan here, I'm just a guy in a shed knocking out some stuff. it's the company that wants to handle US distribution that needs to propose a business plan if they want to be the only ones shipping my stuff in to the states.
Edited by Kozy on Wednesday 26th March 21:31
Irrespective of the argument you are trying to have the point that was being made is that you have made some sort of commitment to do something if the funding gets into place. You gave the impression you have no idea what you want to do and don't have a business plan.
Moving on to your question. Having a distributor can be substantially beneficial. Main things to look at are the pricing and the length of term they want the exclusive rights for. Furthermore to this as foliedouce said you need to decide fast what you want to do: what vision do you have of your products; is it going to be mass production main stream or bespoke limited run type products etc
Don't be under any illusion that the distributor is going to give you an easy time. They will ask you 101 questions and will expect answers which show you know exactly what you are doing, what you want to do and most importantly how you are going to do it.
IATM said:
Bloody hell you are not going to get very far with that sort of attitude.
It was a bit offish, I apologise. I'm simply pointing out what is going on, I've had plenty of people tell me I'm going to get nowhere, assuming I'm looking for investment when I'm not, I'm actually trying to avoid investment. I started off wanting a little sideline income to supplement my day job, doing something I enjoy. This talk of distributors is all above what I had in my head, but I don't want to turn down a potentially valuable agreement. Unfortunately I know nothing about business or business plans so it's all a bit intimidating. IATM said:
Irrespective of the argument you are trying to have the point that was being made is that you have made some sort of commitment to do something if the funding gets into place. You gave the impression you have no idea what you want to do and don't have a business plan.
Beyond having a list of drawings to create to repay the people who put money into the project, I don't have a business plan. I honestly didn't think I needed one. IATM said:
Moving on to your question. Having a distributor can be substantially beneficial. Main things to look at are the pricing and the length of term they want the exclusive rights for. Furthermore to this as foliedouce said you need to decide fast what you want to do: what vision do you have of your products; is it going to be mass production main stream or bespoke limited run type products etc
Don't be under any illusion that the distributor is going to give you an easy time. They will ask you 101 questions and will expect answers which show you know exactly what you are doing, what you want to do and most importantly how you are going to do it.
The work is always going to be bespoke, how I imagine it would work with a distributor is that they collect orders from their customers and resellers, forward them to me, I make them, ship them back one parcel containing all those orders, which they then distribute out to the end customers.Don't be under any illusion that the distributor is going to give you an easy time. They will ask you 101 questions and will expect answers which show you know exactly what you are doing, what you want to do and most importantly how you are going to do it.
There would never be any stock involved. Well, at least not under than current mess of a plan that is rolling around in my head.
foliedouce said:
I'm shocked that people are committing money to you, no matter how small, without any idea of how that will be returned. I must be getting old!
I'm not. And not specifically related to Kozy here but it can be amazing how easy it is to get people to hand over large sums of cash. I was talking to a franchisor recently who said that after a 2hr meeting most people were ready to write him a cheque for £15,000. People want easy money quite often.Frimley111R said:
I'm not. And not specifically related to Kozy here but it can be amazing how easy it is to get people to hand over large sums of cash. I was talking to a franchisor recently who said that after a 2hr meeting most people were ready to write him a cheque for £15,000. People want easy money quite often.
I'm not offering any money though. Give me money, you won't see a penny back, I guarantee it. 
I know what you mean though. I have actually had people offer me £5-10k without seeing any business plan.
Edited by Kozy on Thursday 27th March 09:51
Another benefit of having US distribution is that, should anyone try to infringe your work overseas, then the distributor would hopefully sick the legal hounds on them to protect their interests - I would have thought that is a *major* plus - virtually all good designs/ideas get ripped off and protecting them can be hugely expensive, even for the rights holder.
Kozy said:
With the greatest of respect, yes you are getting old.
They're not investing in my business. Not in the slightest, that's not what I want. They are pre-ordering my products, a big difference. Everyone that puts in £100, gets one of my bespoke metal blueprints in return IF I hit that goal. If I don't then no-one pays anything at all.
That is what Kickstarter is all about, raising funds without bank loans or investors. If you've got a product but need money to get it started, you create a project there and generate the funds you need by selling your stuff in advance. For instance a band can raise the money to record their album by preselling a set amount of copies. In my case, I am looking to raise the money to buy the equipment I need by selling a certain number of my blueprint designs.
It's a great concept but a lot of people, yourself included, don't see it for what it is straight away. At no point is any equity offered or implied.
I'm not the one that needs to write a business plan here, I'm just a guy in a shed knocking out some stuff. it's the company that wants to handle US distribution that needs to propose a business plan if they want to be the only ones shipping my stuff in to the states.
Apologies if you felt my post was negative, it wasn't supposed to be, I was only trying to share my experience of starting a business which I thought maybe helpful.They're not investing in my business. Not in the slightest, that's not what I want. They are pre-ordering my products, a big difference. Everyone that puts in £100, gets one of my bespoke metal blueprints in return IF I hit that goal. If I don't then no-one pays anything at all.
That is what Kickstarter is all about, raising funds without bank loans or investors. If you've got a product but need money to get it started, you create a project there and generate the funds you need by selling your stuff in advance. For instance a band can raise the money to record their album by preselling a set amount of copies. In my case, I am looking to raise the money to buy the equipment I need by selling a certain number of my blueprint designs.
It's a great concept but a lot of people, yourself included, don't see it for what it is straight away. At no point is any equity offered or implied.
I'm not the one that needs to write a business plan here, I'm just a guy in a shed knocking out some stuff. it's the company that wants to handle US distribution that needs to propose a business plan if they want to be the only ones shipping my stuff in to the states.
Edited by Kozy on Wednesday 26th March 21:31
Yes, the world has changed since I started up, I sold my house to put my share of the equity in and have sufficient funds to live on for a year. That sharpens your mind on planning!
Kickstarter et al weren't around then. It's great that budding entrepreneurs today have access to these global funding lines, but my personal belief is that there are some old fashioned basic fundamentals that still apply to succeed (like planning).
Good luck - at least you're getting off your ass and doing something and I wish you all the best in this endeavour. The product looks really good, and when my Defender gets delivered, I may come back to you to 'Black Art' it. I reckon a TVR Tuscan would look good as Black Art as well.
Apologies if this is already the case but perhaps making them available lasered out of dark blue as well as black might be a nice option? What about an old/weathered/handmade kind of finish?
What I mean is, paint over the metal baselayer with engineer's blue so you can see the brush strokes and laser out of that, and have an appropriate old looking frame around it.
You know, so it looks like it's got some patina/*appropriate word
What I mean is, paint over the metal baselayer with engineer's blue so you can see the brush strokes and laser out of that, and have an appropriate old looking frame around it.
You know, so it looks like it's got some patina/*appropriate word
- appropriate word which I can't recall being the one that represents some sort of authenticity - popular with auction houses?
foliedouce said:
Apologies if you felt my post was negative, it wasn't supposed to be, I was only trying to share my experience of starting a business which I thought maybe helpful.
Yes, the world has changed since I started up, I sold my house to put my share of the equity in and have sufficient funds to live on for a year. That sharpens your mind on planning!
Kickstarter et al weren't around then. It's great that budding entrepreneurs today have access to these global funding lines, but my personal belief is that there are some old fashioned basic fundamentals that still apply to succeed (like planning).
Good luck - at least you're getting off your ass and doing something and I wish you all the best in this endeavour. The product looks really good, and when my Defender gets delivered, I may come back to you to 'Black Art' it. I reckon a TVR Tuscan would look good as Black Art as well.
I know what you mean. Yes, the world has changed since I started up, I sold my house to put my share of the equity in and have sufficient funds to live on for a year. That sharpens your mind on planning!
Kickstarter et al weren't around then. It's great that budding entrepreneurs today have access to these global funding lines, but my personal belief is that there are some old fashioned basic fundamentals that still apply to succeed (like planning).
Good luck - at least you're getting off your ass and doing something and I wish you all the best in this endeavour. The product looks really good, and when my Defender gets delivered, I may come back to you to 'Black Art' it. I reckon a TVR Tuscan would look good as Black Art as well.
My planning so far was very simply to set this up (i.e get the machine) without the pressure of having to repay a debt or make money for an investor afterwards. There would be a busy 6-9 months while I made all the pre-orders that people had paid for, but after that I then have the machine and it wouldn't be an issue if it sat idle.
I could then work at a leisurely pace in the evenings creating these pieces, just generating sideline income and not needing to pack in the day job. I might place the odd advert here and there, if necessary, but I'm not really looking to drive the thing full time.
Obviously, the potential for a distributor may change that, I have no idea. I asked them a couple of questions and so far they haven't come back, so not sure what's going on now anyway. Maybe they weren't serious.
ReaderScars said:
Apologies if this is already the case but perhaps making them available lasered out of dark blue as well as black might be a nice option? What about an old/weathered/handmade kind of finish?
What I mean is, paint over the metal baselayer with engineer's blue so you can see the brush strokes and laser out of that, and have an appropriate old looking frame around it.
You know, so it looks like it's got some patina/*appropriate word
I know exactly what you mean. At the moment, black is readily available, blue anodising seems to be a more custom order type thing so I'd need a fair few to make it viable. I'm thinking about adding it as a stretch goal to the Kickstarter though. What I mean is, paint over the metal baselayer with engineer's blue so you can see the brush strokes and laser out of that, and have an appropriate old looking frame around it.
You know, so it looks like it's got some patina/*appropriate word
- appropriate word which I can't recall being the one that represents some sort of authenticity - popular with auction houses?
Good idea with the patinated look too, although it's not really something I can experiment with until I have my own machine, so it's not ideal to offer it on Kickstarter as I don't actually know how it would come out. Neat idea though, I like it!
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