Trying to determine the profit split for a business plan


2

I am working on a business plan that I will be pitching to someone very specific. Due to the fact that they are a very large name in their industry (and many others for that matter), the business model will not work without them, because it is directly linked to their name and brand.

My question is this:

I plan to do all of the work, but their company will provide the name, marketing and future merchandising considerations of which I will be a part. How would I determine the profit split to propose to them without cutting myself short, while still recognizing that it will be their name and marketing machine that will push this into the realms of profitability?

Thank you very much for any help you can give me.

Business Plan Proposal Profit Sharing

asked Apr 26 '11 at 03:06
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Joshua
11 points

2 Answers


1

You are in trouble: if your success is 100% dependent on your potential partner, then your partner has all the leverage. If they say NO, you are dead, correct? So they can ask for anything they want from you.

The real question is whether you even have anything of value to them. Why should they be interested? You think they'll make more money thanks to you? If they are such a big company, how significant would that be, especially compared to the hassle of doing business with you, the risk, etc...?

answered Jun 25 '11 at 23:15
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Alain Raynaud
10,927 points

0

One way that I found useful is coming up with a cost model. Estimate how much would it takes to get your business going, to maintain it and to survive during early part of development. With the cost in place, negotiate with your "partners" (those large companies) share the cost with you. You are using their brand names and promoting their products, most likely you will become their partner or supplier. Based on how much they willing to give to cover your cost, you could split it that way. Go with the model that said " I will make money only you make money". Don't think that everyone out there want to take a portion of your share. They know that they will need you to market for them or make them more money and if they take a portion that make you unhappy, it will lead to dispute and will not motivate you to push your product forward and they will not anything as a result. It really boils down to, how much can you really give up and still be able to make some money, think of this in the short and long term. You might have to give up something now to reap the benefits later on.

answered Apr 26 '11 at 03:42
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Sthanh
1 point

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Business Plan Proposal Profit Sharing