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Need some business advice for this proposed business deal
BBCMember




msg:3600328
 7:22 am on Mar 14, 2008 (gmt 0)

I have a project that has dropped in my lap, and I would like some advice as to the business deal that was proposed by them. It is a deal that involves a replicating website project.

Here is some background on this project:

5 partners invested money into a DVD project. They were originally going to just sell the DVD, and they had the distributors of the movie "The Secret" to handle the distribution of it. However, the distributors backed out because of a "conflict of interests."

As luck would have it, that's when I called the producers just to ask permission to use a portion of the earlier version of their DVD. They just finished the new DVD, and have not even started to sell it yet. So that's why I was asking about the earlier version.

In any case, I suggested that instead of just selling the DVD (which is a slow process if you are selling it internationally, and this is for an international company), that they create a replicating website based on the DVD, and sell memberships to the reps that would allow them to have their own version of this website that they could use to sell this type of product. They could also sell the DVD through this website, as there will be many occasions where using the DVD would be more suitable.

They loved the idea, and offered me the project. Here is what they offered me to create the website for them:

40% of the proceeds from the membership subscriptions of the replicating website
40% of the proceeds of the DVD sales generated by the website
40% of the leads that are generated via video websites where I will post some of the videos, like youtube (I happen to be a rep for the type of product that the DVD promotes)

With respect to 40% of the leads, they will be splitting up the 60% of their leads amongst the 5 partners, and I will get 40%. The largest portion that one of the partners would get would be 20%. So, I would be getting double what the largest partner would be getting.

I then brought up the cost of production of the website, and asked how that would be paid for. They said that since they put in so much money into the DVD, that they figured it would be the cost of doing business on my end. I suggested that they ask the investors who were not at our meeting, and see if they would be willing to pay for the site. They said they would ask, but that they may not be happy about investing more money. I did not mention it, as I thought of it later, but we could certainly give them an extra percentage back so they were assured a return on their investment.

Another way to pay for the site would be to see if the designers would be willing to take a percentage of the revenue (up to a certain point) in place of being paid up front. I would offer them more if they opted for the percentage of the proceeds vs. the entire fee when the project is complete.

In any case, the advice I am seeking is do you think 40% of the deal is fair for me? I will be producing this website, and will also be marketing the heck out of it via blogs, video websites, social networking, etc. I will also be maintaining the website. They will just be providing the content, which is pretty much already done.

Thoughts?

 

vincevincevince




msg:3600337
 7:47 am on Mar 14, 2008 (gmt 0)

Is this an exclusive deal (i.e. 100% of DVD sales and the media related to it will be through this new distribution contract... no sales through other channels)? If it wasn't then it would be a deal breaker for me.

I suggest that you tell them they'll have to pay up-front for all your costs (consultation, website, promotion, etc.) but that as money is made you will forgo your 40% share until the amount forgone is equal to what you were paid for the site.

In that way; you're not getting more than you would otherwise get, but you are not risking doing a lot of work and never getting the funds to cover your time. Any extra money made is therefore a bonus.

BBCMember




msg:3600377
 9:06 am on Mar 14, 2008 (gmt 0)

Thanks for your advice. Do you think 40% is a fair share? Do you think it should be more?

And if I am going to get paid for the work that I do (and then they will get reimbursed by the initial proceeds), why do you say it would be a deal breaker if 100% of sales were not through the site? Whatever promotion I'll be doing for it, I will promote the website as the only way to buy it. By the way, I agree with you. I just want to know your reasoning behind it.

There was another distributor who had a package that he created for distributors to send out the customers, and one of the producers of this DVD approached him asking if he could include this DVD as one of the choices to choose from when distributors go to the other distributor's website to create the package that they will send out. If the producer negotiates the deal, you think it should still be part of the deal I have with them? Why?

Or do you say that he should not be able to make that deal?

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