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Advice Please: Don`t Know How to Structure a Deal for Win-Win

marcelocarsonmarcelocarson subscriber Posts: 1
edited March 2008 in Business Planning
There is a medium size retailer invite our company to be their partner. They are selling refurbished computer equipments and some popular electronics, and they are pretty well established and doing a pretty good job. They like us because we know the internet technology and a bit of online marketing. Ideally, it is an extremely good opportunity for us because they have a good supply of inventory, good items to sell online, a long email list of target customer (10000+), a good post sales operation, and a good repair team. They would like us to grow the online business to 2 million dollar in 3 years. Nevertheless, they can offer us a profit of up to 5% of their online revenue because it is not a very high profit margin industry (It is about 20% for them). It means that it is only $100,000. If we don`t do anything and gain this profit, it will be so great. However, in order to grow up to $2 million business, we might need to invest more than $100,000. I don`t want to miss this opportunity because they are an idea partner for us, but at the same time I don`t know how to grow an online business so much without certain investment. I am stuck!
Dear smart entrepreneur, Is there any creative idea to make our deal successful? I really need your advice. Thank you thank you!
Marcelo
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    marcelocarsonmarcelocarson subscriber Posts: 1
    Hi Craig,
     
    Thank you for your suggestion. In terms of profit margin, it is pretty low. Therefore, it is the thinking point for me. Otherwise, it will be a perfect business to join. I really don`t know how I can structure a good business deal with them.
     
    Marcelo
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    NuevolutionNuevolution subscriber Posts: 30 Bronze Level Member
    Win-Win Situation are very rare, to my knowledge there is no such a thing as a win-win situation, In the end someone is going to get the dirty end of the stick.
    If you`re going to take such a high risk, I would suggest you talk to them first and both of you establish a strategy together, not you on your own. You want to make sure that all the if`s and`s and buts are outlined and in writing. After you create your perfect strategy, you create your perfect exit strategy, Who`s to say things are going to work out, but then again who`s to say they aren`t going to work out... this is where you draw down your ideas for your exit strategy. Make sure you leave with what you had.
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    RicWillmotRicWillmot subscriber Posts: 14

    My question to you is ... and seriously consider your answer before replying:
    "If you were being asked to give your best advice to another person about this same scenario; and your challenge was to provide them with a low-risk alternative that achieves a greater ROI - what advice might you provide?"
    Rgds,
    Ric
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    nevadasculnevadascul subscriber Posts: 3 Member
    I provide this advise I received from an instructor many years ago.  He had a friend that entered into a seemingly win-win deal.  The friend designed and hand crafted dresses.  Her shop did very well and eventually she was approached by a major dress design chain.  The national company wanted to form a partnership with her.  They also offered to pay to expand her business, buy all new equipment, give her a healthy increase in personal income and even provide funding for more employees to meet the anticipate increase in demand for her dresses.  In return, they would get an outlet for their products in her area.  Win-Win.


     
    There was only one catch.  She would have to take a out a long term lease in her name for a store front in a new shopping mall.  The mall was some distance from her established customer base.  This proved to be the major factor in the collapse of her new business venture.  She also had to declare bankrupcy to get out from under the long term lease agreement. 
     
    So what`s the moral of the story.  Win-win isn`t always win-win in the long run.  My advise to renegotiate the terms of your agreement with an eye on the long term implications.
    nevadascul3/20/2008 12:01 PM
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    SalemHSalemH subscriber Posts: 4
    Having potential profit of $100,000 in 3 years, you have to think of what else your $100,000 investment into Your company could be used for.  Safe Treasury bonds, 3-4% interest would get you a better return, or even maybe a savings account.
    Your ROI is not going to look all that great with these numbers (it will be negative)    .  There should be some more negotiations or even better, like Craig above, set a cap per year and slowly grow the business to mitigate your costs (if thats possible).
    Cheers.
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    marcelocarsonmarcelocarson subscriber Posts: 1
    Thank you for all your invaluable comment and I really appreciate that.
     
    I have discussed this opportunity with my partner, and we agree that since we are small and the retailer is big, so we need to give their top management a good presentation and sell them a dream - a picture that we both get a win-win, why do they need us to help them grow, and projected sales. Then, we will ask for more, potentially half of the profit. Then, it is a good plan that we can proceed.
     
    Any flaw here?
     
    Thanks.
    Marcelo
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