Am I Crazy: Chronicles of an Entrepreneur Part 4


Negotiations are in progress...let's recap the players:

Factory 1: the current factory that I have been working with for 8 months and have made the recent, yet very late, super sexy prototype sitting on my desk looking at me right now. Owned by westerners.

Factory 2: new contact from China, better fit with what I am up to in regards to their current product lines and sales channels as well as general business philosophy. Really motivated, owned by an American.

Factory 3: out of Ohio, not a great fit with current product lines, but huge (they trade on NASDQ), well financed and willing to expand out of their current product base.

Ok, so yesterday I had calls planned with all three factories and time to put down the offer. Up until now we have been discussing sales potential and getting an idea of how they currently do business, who they do business with and how they would move kelvin into the market. Also getting a feel for the people and what it would be like to work together. Don't be fooled son...everyone is on their best behaviour at this point, but I look for things in the conversations...for example, the owner of Factory 2 practices yoga a couple times a week...his stock just went up in my book.

So here's how the negotiations went down:

First call was at 100p with Factory 3. As I mentioned, I missed it due to being wooed by a cool amber ale on the patio of Chill Winston's. I tried t re-schedule for today (Friday), but the contact there has no time. I hope my lazy lunch didn't close this door for us.

Second call was at 530p with Factory 2. We Skyped for over an hour. Great chat but things got a touch chilly when I dropped the numbers. Understandable...I asked him to commit to paying out $150k in royalties plus close to $20k in molds before he has even shown his first potential customer. He came back this morning with a counter offer...$50k guarantee and molds. I replied about 20 minutes ago with a min guarantee of $75k, 25% paid quarterly, and willing to exchange a lower upfront commitment for an increase in royalties...I am now asking for 20%.

Third call was 900p last night to Factory 1. That didn't last long. They are not willing to commit and they think that my retail price of $30 CDN ($25 US) is unrealistic. No worries, I knew that once the digits were discussed it would separate the dust from the sand...

My other move, completely out of the blue, was to contact an industrial designer friend of mine about the possibility of partnering up. There would be more margin this way, but we would have to build up our own sales channels and that would take some time...not as instant as going with a partner that already has existing customers, but a possibility none the less. Don't forget, all the companies I am talking with at the moment had their first days, with their first products and now look at where they are at...the smallest company is generating $15 million in sales. So although running an entire brand from here is not as appealing (i would rather focus on my strengths as a product developer than my weakness of being a sales manager), it is another door that certainly deserves some exploration.

Well, there's the negotiations update. If Factory 2 says yes I will consider that a huge success. Not as much upfront dollars, but they have the sales channels and if kelvin.23 is truly hot, it will be accepted by retailers with open arms and the minimums will be of no concern at all. Also, I will have increased my portion from 15% to 20% earning more in the long run.

Stay tuned...more updates as they unfold...