You are here:

Negotiating Business Deals/New startup product advice -5

Advertisement


Question
Hi, I am Mourad the CEO of a new startup called LocName which is a web and mobile App that converts your  point on the map and address details to a short, unique and permanent name that you can remember share easily. www.LocName.com

We have developed a new tool for Websites to use our application to capture their users addresses accurately instead of filling long address forms (pls download presentation for more information http://goo.gl/1OyQvt)

For the launch we are planning to do a partnership program with incentives for early birds, with this program they can become an indirect investors in a promising start-up and LocName success will be their success, we have 2 models in mind:

Model 1 - Revenue share
We will offer each website using our tool a revenue share percentage for 2-3 years based on the hits come from their users
i.e. if you have 1000 users and the hits coming on them are 20% from our total hits then they represent 20% from our revenues, the incentive is that we we will pay you 10% from the 20% revenues for 2-3 years.

Model 2 - Free Ad space
We will offer each website using our tool a free Ad space on his users only for 2-3 years, and he will have the total freedom to used it to display his Ads or sell it.

We need your opinion regarding the two suggested models, is it a good idea? which model is better? what are your recommended tweaks for the best model? Any different new model you suggest?

Thanks,
Mourad

Answer
Hi Mourad

Thank you for your question.

I haven't had time to study your system or how exactly it works, but my initial reaction is that the percentage agreement seems to be more inviting to potential investors than ad space. The percentage of revenue sharing allows the investors to grow with you - if you have success they will too. If you don't have success than they won't either, but they also will have limited investments so it's ok.

For the second scenario, ad space could be advantageous but not knowing how much traffic the site is going to get offers little incentive to be involved. As compared to the first model, the second has less to offer (at least at the beginning).

It is always best to offer the early bird investors something that is based upon growth only, versus what "might be" growth in the future. That way, they feel you are willing to take risks with them, and it gives them confidence.

It seems you may have a great idea going there. I wish you well!

Rhett  

Negotiating Business Deals

All Answers


Answers by Expert:


Ask Experts

Volunteer


Rhett Kniep, CBB

Expertise

There is a philosophy behind all negotiations, and having the right perspective and approach is vital to successful deals. I can answer questions regarding business and personal negotiation, and advise on successful strategies.

Experience

I have been a business and real estate broker for over 12 years and a building contractor for over 20. I have done numerous trainings in commercial real estate and real estate investment and have managed multi million dollar funds for real estate investment clients. I have counseled both buyers and sellers in high dollar real estate and business deals.

Organizations
Ca Association of Business Brokers, Contractor's State License Board, Better Business Bureau.

Publications
The Contractor Investor, Phi Logos Publishing, 2011

Education/Credentials
Certified Business Broker, California Association of Business Brokers, AA Communications, student at Lincoln Law School of Sacramento, dozens of real estate investment and negotiation trainings.

Awards and Honors
Stormy Seibring College Scholarship, Rescue Mission Service award, Film School Certificate

©2016 About.com. All rights reserved.