Industrial Partner - how is it done?

[Lisa]

Hello everyone! I'm new here but I have been reading the threads and found them to be very useful and relevant. I do have a question that was not answered by previous threads. What is the rate of ownership that is normally offered to an industrial partner? There will only be two. Partner A will invest funds and also manage the business. Partner B will be the industrial partner who will endorse the product. Any inputs will be greatly appreciated. Thank you very much!

[dave@businessecon.org]

Can you provide more information? What type of products, what type of endorsements, what are the expected production costs, how much capital are we talking about? These all have a bearing on the final number.

Dave

[Lisa]

Hi Dave!

The products : beauty products (skin whitening, anti wrinkling, anti-aging, rejuvenating)
Production cost : products are already available in another country and will be imported by Partner A and re-packaged.
Estimated initial capitalization is about seven figures in pesos.
Partner B will be the celebrity endorser. Will take care of promotions although all costs incurred will be paid by the company save for the talent fee. Also, the supplier will be introduced by Partner B.

[dave@businessecon.org]

Lisa:

Every industry is different in how they deal with their situation due to costs of product and getting the product to market. So here you have Partner B that is soley responsible to endorse the product and get activity going on the product. My thinking is that I would limit the maximum amount to 15% of the revenue generated. As an example, many of the national food chains charge around 7% of revenue to use their name for their product. Natually there is a lot more volume involved with them. For you, not so much yet. So I'm thinking maximum of 15% of sales directly related to their endorsement (so that doesn't mean all sales). If I were in your shoes, I would offer 9% and allow yourself to be negotiated to a higher level. But make sure you limit this, because there are a lot of other costs you will have to endure before there is a bottom line.

Dave

[Paul]

I may disagree a little with Dave on the value of the endorser. Being somewhat familiar with the skin care and beauty market I can tell you it is EXTEMELY competitive, as I'm sure you know.

You are up against millions and millions of dollars of marketing and advertising, many well established brands and a slew of ‘celebrity endorsers”. With all due respect, your only real shot, in lieu of millions in marketing, is your celebrity endorser. Assuming that the endorser really can perform, their value cannot be overstated. That industry is totally driven by name brand and celebrities. It seems like every attractive female celebrity is involved with beauty or perfume.

As Dave said negotiate, BUT be prepared to go all the way to the bare bones IF the endorser really has the recognition and panache to pull it off.