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Business Senario - Solve this dispute - What do you think?

Discussion in 'Making Money' started by KevinZaki, May 13, 2013.

  1. KevinZaki

    KevinZaki Junior Member

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    Okay, so me and a friend of mine are looking to start selling a product under our own brand and push it both wholesale and retail online. What I bring to the table is, I am going to do all the SEO, online product marketing, Create the website and maintain it, and create all the marketing materials. What he brings to the table is he knows the business and he owns two stores that have the market for this product. He has the connection overseas for the product and he is a great speaker and will handle offline sales and finding places to put our product on their shelves.

    The issue:
    He wants to make a separate order for the product with OUR brand on it and buy it at COST for HIS store and sell it at retail. Now this is for his two stores, so I will be seeing NONE of the profits made for these items his store will though making him profit off the item.

    My opinion:
    The two business are separate and should be treated as so and although him making a separate order doesn't take money from the company he is selling a product that I AM trying to BRAND and create a market for online so him putting it in his store at no extra cost is him selling what I am working hard for with no benefit to me.

    His opinion:
    We are good friends and him buying them would mean he is profiting off himself which is stupid and I am profiting off him which is also stupid because we are friends. He shouldn't have to pay extra for a product that is his(half his) to put in his store. Also he believes this will be nothing compared to what we can make and shouldn't be a big deal.

    What do you think? I think it is an issue of friendship vs business. This will determine if we actually go forward with plans. Your thoughts and explanations are appreciated.
     
  2. KevinZaki

    KevinZaki Junior Member

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    You may have misunderstood. He has two stores as in physical locations. And in my situation I would want him to pay the wholesale price we would sell it at to anyone else.
     
  3. nanavlad

    nanavlad Jr. VIP Jr. VIP Premium Member

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    Just open an a couple of amazon stores of your own. Then you keep the profits from them, just like he keeps the profit from his stores.

    See if he likes that idea

    If he can have a business within your business , You too should have this oportunity
     
  4. reallife

    reallife Jr. VIP Jr. VIP

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    He owns the stores, right? Pays the employees, pays the rents, has all the overhead - and you bear none of those costs? It sounds like you want to profit on his existing investment, when in reality the online market and the retail market are probably two different things and you're never going to lose a single online sale to his stores. I say be a friend and let him run his stores with the benefit of the wholesale price, while you focus on the online business.
     
  5. steelballs

    steelballs BANNED BANNED

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    Two different issues, wise up man his established business is his not yours...

    If you cut a deal on a new venture that's fine...

    But don't interfere with his existing business, because if you do expect to see your business deal down the pan, and your friendship on the rocks...
     
  6. mikeydell

    mikeydell Senior Member

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    Honestly to me it doesn't sound like your partner is being unreasonable with the request. Considering he has the overhead of the two stores, he should be able to realize a substantial profit from the sales taking place in his stores. When you add up all the expenses he is probably running, it's really not that unfair . And considering he wants to actually buy the product you guys are selling and then retail it, makes me think you have yourself one hell of a partner and friend. My advice, be flexible and make money together. Good partnerships only come around once in a lifetime if ever, and it sounds like you have a great friend and partner. Good luck to the both of you! Make sure to come back and update us on how it went. I love hearing success stories. Here's to your success!!:beach2(2)
     
  7. KevinZaki

    KevinZaki Junior Member

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    I think people misunderstood, let me be clear. He wants to get the product and buy a seperate batch for his store with our brand on it for COST only. So really him having in his stores does not benefit me at all. He puts it in his store makes 100% of the profit but uses our product name. While he is doing that I'm creating a name for the product so I should not let him use it and see no personal benefit from him having it in the stores. Everything is 50/50 down to the initial investment so really Should have everything seperate. I'm still open to ideas though.
     
  8. KevinZaki

    KevinZaki Junior Member

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    I was thinking as a compromise I can put in less capital for initial start up cost and let me have what he wants. Is that a good compromise?
     
  9. reallife

    reallife Jr. VIP Jr. VIP

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    You could also look at it as he's creating some brand awareness by selling the brand in retail locations. The bottom line is still that you're laying out no money for product that he's selling his stores with him paying all of his overhead costs. Who is paying to physically brand the products (put the name on the product, print the literature that goes with it, etc.)? Maybe there's a little room for negotiation there if you're both paying to label the product and print the manuals, etc. but it still seems like you're looking to profit off of all the money he spends to sell the product in his stores.
     
  10. KevinZaki

    KevinZaki Junior Member

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    Well maybe I was not clear. He has two physical retail locations where he will sell the product, but the product is a separate venture then his stores. We are both putting in about 5k each to start up the company thats including online marketing and the products initial order. So my question was if he puts it in his stores at the cost of the company that would mean he is selling the brand im creating and I am not getting anything out of it. If he bought the product for the wholesale price which is just about double the cost price, and then he sold them in his store which is double the wholesale price he still making a lot of money on them and I am not seeing any of it. Yet, all the hard work I put in online may drive people to his store just to get the product (in a perfect world) therefore I should see some profit. My second idea that I have not proposed to him is that I put in a lesser amount of capital to even things off. His store overhead and all that has nothing to do with me at all, we are just creating a product that happens to go well in his store, doesn't mean he should get them at cost and make all the profit for himself.
     
  11. Duffers5000

    Duffers5000 Elite Member

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    If the Product is costing you $10

    And you have decided that the retail price is $18.99 but you have a wholesale figure in your of $14.00

    Then he should be paying the company $14.00 for stock that he sells at his store.

    Now sometimes when you are launching a new product it is in your interests to sell your product at a silly price, even cost to a big company thats going to get your product out there and help you establish a firm footing for yourselves.

    So I dont know the full story if your friend has a cool business and the majority of the sales will come through his store then he needs to be cut a preferential deal.

    His company is still company B and he has to buy from company A and deliver some profit. Business is not charity.

    You need to explain this to him in clear terms. Some guys just view business as a dual to the death and have to win every coin toss....others realise if I dont leave any profit for this guy then why the fuck would he bother ?

    By the way I've been in business with plenty of old friends. Your friendship will go out the window pretty quick and you need to be prepared for that.
     
  12. KevinZaki

    KevinZaki Junior Member

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    This was exactly my point, his business might not be the best selling business that we will put our products in but it is still a business that has our product and I should be seeing something out of it. Im guessing that our best sales will come from online because we will have the biggest margins selling at retail making 300% of cost which is lower price then what other companys are charging.

    What do you think of a compromise where I put in less capital to begin with, whats your opinion on that?
     
  13. Duffers5000

    Duffers5000 Elite Member

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    Its a balance.

    I still think company A and company B are seperate. And I have been in the exact scnario before. You cant have the directors all helping themselves to free stock or else your company is going to tank.

    If he gets the stock at cost and its not moving for him. He could lower and prices drastically and damage what you are trying to establish online.

    The compromise for me would be the product costs $10, Wholesale price $14. Both Directors get Preferential trade rate of $12 but agree to never sell below the trade price of $14. and sign a contract on that.

    That for me seems fair but its up to you how much you are willing to compromise. If the business is reliant on your pal because he has the contacts, well then maybe you have to try harder to keep him involved as without him theres no product.

    I wouldnt look at putting less dough into it than him as then from the start you are the junior partner and not an equal.

    When you are starting a new business. You will have a buzz about you. You will be planning sales, websites, press releases thinking about succeeding in general. If after negotiations with your friend you feel that buzz is gone. Like you are not getting a fair deal I would recommend getting out there and then. I have seen lots of people sleepwalk into business arrangements that were not right for them. Unless you feel 100% motivated and feel the deal is fair and you have no niggling doubts then it wont work.
     
  14. srb888

    srb888 Elite Member

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    So in other words, you are more of a producer and he is more of a marketer in your JV.

    IMO, give him (his 2 or more stores actually) reasonable monthly (or weekly, or whatever) targets to achieve at normal splits, and then whatever he sells above it, he can keep the 100% profits (or less, say 75%, or whatever, in single or multiple levels of targets).

    There can be more than one level of sales targets, and corresponding profit margins for him to achieve...
     
    Last edited: May 13, 2013
  15. bluecoyote

    bluecoyote Junior Member

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    NEVER EVER EVER EVER go into business with a friend. if you value that friendship.
     
  16. srb888

    srb888 Elite Member

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    Infosys was started by 6 friends...
    Microsoft was also started by 2 best childhood friends...
    Sony Corporation was also started by 2 best friends...

    There are plenty of other instances where the friends remained friends long after their very successful startups. :). Probably their friendship was key in keeping them moving towards gigantic success after the early hardships these companies had to suffer.
     
    Last edited: May 13, 2013
  17. jdog37

    jdog37 Power Member

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    I agree with Duffers... having a target wholesale price would be the best option to keep the partnership in balance.

    Just put an example scenario to your friend. Suppose the product explodes onto the market and is a must have for everyone. Would he be okay with you getting the product at cost and selling it on your personal Ebay account. Or perhaps you make a killing and decide to start your own brick and mortar biz..... Maybe you rent the property across the road from his and sell the product yourself (getting it at cost).

    If it is an equal partnership then you gotta get your cut from every piece sold and so should he. Just try to ensure that the workload is balanced as well. Keep records of the time you put into your side of the project. He might be pounding the pavement and burning gas money to launch the biz and start thinking that you do nothing but sit on your ass in front a pc playing with facebook.

    Treat it like a freelance job and set goals and keep records of what you achieve and put a price on it as well. Make a bill of sell or receipt or something so you have something physical to prove your input into the company. You may even want to talk to a lawyer as well cause friendship is between friends and business is just fucking business.

    Hope all works out for you but don't jump into anything without covering your ass. A minor dispute like this at the beginning could be a sign of major ones further down the road.
     
  18. dlinewd

    dlinewd Newbie

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    Hey Kevin, I guess this is your first test of friendship/partnership. I really wish you the best of luck on your venture. My opinion, definitely go 50/50 on capital invested and if the business is a true 50/50 then why should his business profit and not your partnership?
    Just curious does he allow you to buy products from his retail store at his cost because you are friends?
     
  19. kamaa

    kamaa Junior Member

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    To break the deadlock may be you can suggest x amount of products at his terms (Production cost) per month then any product above that he will get at the normal wholesale price.
     
  20. KevinZaki

    KevinZaki Junior Member

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    Thanks you guys have a lot of helpful responses I'm going to talk it over and see what he says and let you guys know