Advice On Business Venture.

Hi Guys,
I'm currently in the final stages of negotiating a business venture with a family member. For privacy reasons I can't give exact details (brand, url etc.) away but I'll give as much as I can as I'm looking for experienced people's advice on what I have been offered.

My family member runs an Australian based company selling a product range in Australia, China, Japan and Hong Kong. They have production facilities in Australia, China and Japan and operations at least run quite smoothly. Sales in Japan and China are good (well at least good enough that the company can sustain) and we have 10 employees in Australia, about 20 in Japan and about 20 China.

I've just last year graduated from University and have spent the summer holidays working in manufacturing at the Australia facility. Now the Australian side of business is by and far the most lacking in terms of sales and cash flow - we have next to no presence/brand awareness and are only stocked in a small amount of shops. Our website I believe is quite visually poor and not very well geared towards driving customers to purchase our goods. I have conveyed this to my family member for years and each time they agreed with me but nothing has been done about it.
Finally, a month ago I snapped at the lack of drive in our Australian market and proposed that I help coordinate a rebuilding of the website and an online marketing push for the company (inside Australia only).

I got the login details for the website off of our IT guy in China and was absolutely shocked at the statistics - 5 sales in total in the month of January and 914 visitors in the month. As I believed this was nothing at all to compete with and that if I worked on this as an employee I would not be given the time or budget to complete it properly (and as I believe my family member really doesn't have a deep respect and understanding of the power of the internet as a sales and marketing tool) I proposed that I leased the official website off of them (for no fee) and functioned as a distributor selling the product. I detailed roughly how I would go about this with an itemized cost breakdown and sales forecast and said I would eat the ENTIRE cost of online marketing, running an affiliate program, shipping fees and maintaining social media outlets.

I proposed that I do this at our standard distributors rate of -70% and gave a guarantee that within two months I would have at least enough sales to make back that 70% against what was previously selling (as I said before 5 products in the month of January).

My family member was very keen on the ideas I presented to them but said a fairer rate would be -36%. As our average product cost is $60 and we have certain products for $22 I believed this rate would render the project completely undo-able considering the costs. I was also told I had to make a guarantee to re-invest at least 33% of any profit in to the venture. As I will not be bringing any capital to begin the deal (starting for the first two months working for free on the project before hiring someone if customer sales permit) part of me is just excited to be given the opportunity to do something like this. I have however been told by several friends that this rate was completely unfair given the costs my side of the business will be eating.

I would just like to know given the information provided what more experienced people think in terms of whether this is a fair deal, or whether it is even possible to do this on -36%. I think the key issues here are that there is next to no movement through the site at the moment and that the brand has almost no profile to benefit from. Any advice would be deeply appreciated.

 

It depends. Do you plan on doing this all yourself or are you outsourcing the work? Building a brand is not easy.

 

As I've got no capital to bring up front I planned on doing it myself for the first few months using Magento or similar service to create a nicer, more shopping focused site as a transition then using the money raised through the site to outsource to a developer and create an advertising video (online only of course).

 

If you're going to do it yourself, then yes, it's doable, but won't be easy.

 

I don't know if you've ever listened to the Dave Ramsey program, but just the other day a caller called him and his situation was kind of similar to yours. What I mean by that is you're entering into a joint venture with your relative with some pretty serious disagreements on how the business should be run. It doesn't sound like you guys are arguing, but still, you have pretty serious beef with his sales and strategic goals. (At least, it came across to me like you do. And forgive me if I am wrong. But when you say: (and as I believe my family member really doesn't have a deep respect and understanding of the power of the internet as a sales and marketing tool) that speaks a volume to me).

Now, having ideas and proposals are not bad, but I think you should enter this business venture carefully, as an observer first. Work for a few months, get some good feedback from your relative and co-workers (develop some trust, in other words) and then, gradually, push your ideas and suggestions.

Entering any business, with any partner while having some fundamental disagreements is never a good idea. And it's not just my opinion.

 

Honestly, it's never a good idea to do business with family to begin with.

 

Hi guys, thanks for the feedback. I understand the perils involved in going in to business with family, but perhaps I came across too critical of my family member in the first post. Our vision and views on marketing and presenting the product are actually very closely aligned. It is simply utilising the Internet to its full potential that I don't believe they understand - understandably though as they are quite older.

 

Not only that, it's also never a good idea to do business with friends either, unless you are prepared to potentially lose that friend! Business is almost never plain sailing and sooner or later arguments over the business will erupt.

 

Unfortunately, this is very, very true. Doing business with firends typically does not end well.

 

In business there are no emotions. You should not care about "what will he think if I do this" in business. Its all done to decision making. Also if you are going to entertain a family member or a friend in business then make sure that he is not an egoistic person or you will end up having grudges against you from that family member/friend.

Good luck.

 

Best way to create brand recognition in my opinion is to get a mascot. If you would like one feel free to PM me.

 

Its a diaster waiting to happen and your right.

 

I can tell you my personal experience. Working with family or friend can turn up bad. I had an amazing idea that I share with my friend. He suggest that we can work together. I was thinking that is better if I work with someone that I know then working with stranger. We disagree about everything so idea falls down,and we are not good friends as we use to be... But this is just my personal experience.

 

Looks like everything said about going in to business with family was right. After three weeks of discussions, plans, negotiating points right when it came time to sign the contract I was told by my family member that they would only do the deal if I worked it as an employee with no equity. While I would have loved to do that a few years ago I thought that the work involved, coupled with the fact that I had been led along for nearly a month under the assumption I'd be operating as a distributor made the choice quite easy..
Lesson #1 down.

 

Wow. Sorry, that's a bummer. But you know how they say: maybe something better will come along.

It would have been worse if after devoting your time for a few months there, you were told the same thing. Better sooner than later. Now you can start your own thing! Whatever that might be.

 

The idea of using their domain was a bad one because it could be taken from you at any time. Assuming you were successful at what you were trying to do, at any point they could just take it from you. I think you are probably lucky this died before you invested your time (your most valuable asset) in it.

If you were to go forward, you would need some contractual assurance that you would keep the rights to use the domain in question for as long as you were putting forth your best efforts or something similar. I agreed with Sarah's suggestion that you build on your own domain to avoid that problem entirely.

 

It looks like it turned out into your favour after all, I would not, for any "deal" in the world do it like you planned.

1. Dealing with family members or friends can only get you in trouble and many said it above me in the thread.

2. Starting with 0 capital to invest is a bad plan, as you would turn to spend many hours into nothing
3. You should have had a plan in first place, business plan describing the cost of marketing, etc. I'm sure to properly scale everything you would have had high costs and couldn't do everything by yourself.
4. Promoting a site/business all by yourself can have its limits and I bet you were hoping that it can feed itself up to a point where profits will be back as investment into the site again which is a big risk as you are dealing with a business not yours.
5. Also, I think you went on this just because its a family member, but infact, you're better do it alone, all you are missing is a good product to promote and good commission and its much easier because who knows how good their product is?
6. Your families business, has no marketing in Au' and only has a product which too me it sounds a failing business and perhaps a failing product as well.
7. If you really want to get into internet marketing and you think you'll be good at it, start from scratch with affiliate website where you'll have full control and ownership.
8. 5 sales a month isn't really a business, all they have is really just a product and if you can be a successful affiliate you'll have cash to invest and create your own product and then you can have full control over the niche (online as in serp results, media buying, etc etc) or maybe you will decide to create a totally different product instead at the end.