Found a business partner that could result in a very profitable product, but i'd like to renegotiate how the profits are split. Would it be acceptable to split profits based on retail/e-commerce? entrepreneur how earn by blogging blog

Hi all,

I have a family company that sells a consumer goods product. Our costs are high due to our very complex, yet secret formula for creating a unique product. It's coffee. Our coffee is not in retail because we have yet to crack the code and don't have the connections to get our costs low enough to make the distributers and retailers happy.

I've been introduced to a business owner with a multitude of connections and owns many brands in a regional and national retail outlets, and I can tell he has made quite a healthy living off of it.

We have negotiated a partnership together. We will private label my coffee under his brand name (an iconic but long forgotten coffee brand). We create a new company and split the ownership, costs, and profits 50/50. This is a good deal for me, as I have the product, but he has the experience and supply chain to get it into 20+ stores.

The first order will be about $5k, whereas I could sit back and potentially earn some side profit and hope it grows, but I'm itching to see if I could gain an edge that will earn me higher profits, while benefiting the both of us.

I'm young, and the business partner is older (60s). I can tell he doesn't have much experience and wouldn't want to spend the time on e-commerce. That's where I believe I could help build this business, but i'm not sure how I would go about doing this.

Let's say I believe the company should spend $1000 on the website, and 6 months from now I may want $1000/month dedicated to SEO. That means either

1. I spend my profits on it, and still get 50% of the earnings.
2. I have to go convince him to share his profits in order to split the costs together.

To state the obvious: In retail, your profit margin is greatly reduced due to distributers and retailers. You circumvent these costs by going direct to consumer through e-commerce.

.

.

Here's what I'm thinking.

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The company ownership is still 50/50. But 70% of retail profits go to him, and 70% of e-commerce profits go to me, the caveat being that I solely run the e-commerce business and don't have to include him in costs associated with hosting/SEO/advertising. This could be great because our margins in retail would be 50%, whereas if listed at the same price on a website, our profit margins would be 130% higher than retail. He benefits from the higher profits in retail, I (potentially) benefit from the higher margins in e-commerce if I am smart and operate it efficiently.

Yes you go down the rabbit hole of what "selling medium" yields the most profits, which ultimately depends on volume. Retail could out-surpass e-commerce by a long shot even with the lower margins, but I could do the work of putting it up on Amazon, automating FB, IG, and Adwords advertising, developing a shopify site, sending marking emails, etc. (which I currently do, and have much experience doing so). I run and maintain my family's business that pulls in $15k/month through the website, and $10k/month through Amazon. I have absolutely no experience in retail.

Would any e-commerce/retail entrepreneurs have any advice on what tactic I should go with?

This was a long post, so I much appreciate any feedback or advice!

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