I've invented. How much should business partner have?

Very interesting, thank you.

Yes, my skills are only the inventing. I cannot even socialize properly. I prefer to sail alone than with crew too; make mistakes when I sail with crew as I am trying to be kind often and don't tell them of their mistakes etc etc to save their feelings. Nonsensical in the long run I know as they would learn if I told them, but I am what I am.

Make mistakes when I try to socialize too actually, big foot in mouth very often.

I think this project stands a good chance with Kickstarter and that can draw in considerable money for a good product - heck I saw $40k for a blooming icecream scoop spoon today ! So the dotted line to sign upon may well turn up.

So giving the chap less %, but an incentive to work hard and make it a success sounds great.

Now is where I try to broach the subject with him ...-... and stand a good chance of cocking it up owing to lack of aforementioned skills and having no business partner and 100% of an idea that gains be £0. So I will try very hard to be very careful how I proceed.

Many, many thanks.

As to money - having worked nuts off for 20 years and not getting much money, doing what I truly love (creating) and gaining a reasonable amount or more than I gained as a salary will suit me - I am not the greedy type.

In fact the chap asked if I could make another prototype for his friend because he thinks the product is so good and I think I got more joy from the fact that he likes the idea and really wants one for his friend than if I had been offered £100. If I had been offered £10k, it would be a different story - that would excite me - buy a boat that could take me anywhere (not in comfort) but it would be an adventurous sail.
 
I typed #21 before #17 and subsequent ones were posted, then I had to go and see to the dog and then I clicked send, so thanks to the people after number 17.

Some great info there. Going back for a double read now.

Thank you.
 
And on pricing make sure you build in distributor and sub-distributor margins.

Let's say it costs £10 to make each item - the price from your company to region / main distributors should give you a 40% gross margin to allow for overhead and a 10% net profit EBITDA, so they would pay you £16.66. Similarly they would need 40% gross margin, so the price from them to sub-distributors (giving them wiggle room for volume discounting) would then be £27.77, and the final RRP should give the retailer a 40% Gross margin (I doubt it is a fast moving consumer good - FMCG - with much lower GM's) so the final RRP paid by punters would be £46.29.

A big mistake is thinking lots of people will work hard for very small margins - they won't.
 
Comrade Red said:
Err, no - without someone prepared to angel invest time (more important) and some money the idea is dead in the water.
Click to expand...

Yes, you are exactly right. After many years of failing to do it myself I have to have someone else on board to do what I cannot.

I have an awful lot of inventions and so I am not afraid to let it go either which is a good thing as you point out. If it is worth £10million and I only get £500k I will be happy because that will be more money than I've ever seen before.

Also, I have had inventions at the prototype stage and then not been able to do anything with them on my own so they have sat on the back burner, only to see someone else think of the same product some years later and seen it create a revolution of publicity in the market place. I didn't kick myself too hard, because it was my fault for not having acted, but I didn't know how. It was only the NEC show that opened my eyes to Kickstarter and so many other avenues to market.
 
Tempus said:
+1 and not much to add, but your lack of interest in money should be a real worry to yourself. At the end of the day you need to take some interest as its the liquid upon which the business world floats (or sinks). I'd expect someone to put in around £100k up front for a sensible (20% to 40%) stake in a business that will "sell millions" particularly without requiring much work from them. £2k sounds great - where do I sign? :encouragement:
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Sailingsaveslives,

You are a nice chap - that much is clear. From memory you have a family to feed and so this really matters and you are entitled to benefit from your skills and knowledge.

Some very good advice here (and it was free). Read Tempus' post again and read RalphMalph's again. As Tempus says "where do I sign?" Is a couple of thousand quid a fair price for what you have invented including all your time.
If this is a potential flyer you really need some advice before you give away half for relative peanuts.

Get the IP sorted and in your name or in the name of a company in your exclusive ownership.
Once you have the IP sorted, how that can exploited is a different question - are you going to manufacture (are you remotely set up for this) or would you be better taking it to an existing manufacturer.
It's one thing getting the IP, can you afford to defend it if someone just ignores your rights - can your potential partner afford to defend your IP or is it just a fairly easy punt.

I believe inventors can get advice - will try to find out.
 
Do not give anything much away unconditionally. And certainly not 50% (which is a bad idea as you can end up in a totally blocked situation). Set up a company asap (it does not cost much, and you must isolate personal property from the company if something goes seriously wrong - e.g. getting sued for millions for causing injury by a cup of hot coffee falling on some ones lap as a result of a lack of concentration caused by your invention).

Make him CEO and set up a contract where you pay him (and yourself by the way) a proper CEO's salary in IOUs/bonds (interest bearing) which can be redeemed once the company can afford to do so and/or wishes to do so. NB these IOUs are on the company not on you.

You can offer him some stock or stock options in connection with how well the company does as well - but nothing which will vest before at two years of satisfactory service. I.e. he needs to be properly committed to get the real reward.

A CEO can be sacked by a majority vote of the shareholders. I.e. by you if things need be.

If he seriously believes in the project to the extent he seems to be telling you, then paying him with IOUs will work and stock options will work.

However, setting up those IOU things will probably require a solicitor and will cost money (almost certainly more than the patent fees).

You need to put all of this into a proper contract - there is nothing worse than thinking you have a reliable and motivated business partner to find out later that this is not the case. You can find lots of horror stories of people who gave away a significant part of the company to some one who promised the earth and then did absolutely nothing. Be careful of hot air promises.

Good luck!
 
One word of caution to the OP. Post 1 sentence 1 "It is a boaty product"

Not many things sell millions in the boaty world and not many fortunes being made there by small inventors from what I see. You do need a realistic view of how big the market is.
 
michaelchapman said:
Do not give anything much away unconditionally. And certainly not 50% (which is a bad idea as you can end up in a totally blocked situation). Set up a company asap (it does not cost much, and you must isolate personal property from the company if something goes seriously wrong - e.g. getting sued for millions for causing injury by a cup of hot coffee falling on some ones lap as a result of a lack of concentration caused by your invention).

Make him CEO and set up a contract where you pay him (and yourself by the way) a proper CEO's salary in IOUs/bonds (interest bearing) which can be redeemed once the company can afford to do so and/or wishes to do so. NB these IOUs are on the company not on you.

You can offer him some stock or stock options in connection with how well the company does as well - but nothing which will vest before at two years of satisfactory service. I.e. he needs to be properly committed to get the real reward.

A CEO can be sacked by a majority vote of the shareholders. I.e. by you if things need be.

If he seriously believes in the project to the extent he seems to be telling you, then paying him with IOUs will work and stock options will work.

However, setting up those IOU things will probably require a solicitor and will cost money (almost certainly more than the patent fees).

You need to put all of this into a proper contract - there is nothing worse than thinking you have a reliable and motivated business partner to find out later that this is not the case. You can find lots of horror stories of people who gave away a significant part of the company to some one who promised the earth and then did absolutely nothing. Be careful of hot air promises.

Good luck!
Click to expand...

No one except a fool would put any money in on this basis - what experience do you have to give such advice?
 
Tempus said:
One word of caution to the OP. Post 1 sentence 1 "It is a boaty product"

Not many things sell millions in the boaty world and not many fortunes being made there by small inventors from what I see. You do need a realistic view of how big the market is.
Click to expand...

I'm not qualified to advise on the business structuring side, but this definitely rings true to me. The leisure boating world has seen any number of "garden shed inventors" with a clever widget - most have disappeared into obscurity, a few sell enough over the years to keep a sort of hobby business ticking along, but I can't think of any examples of huge success and profits.

Wish you the best of luck, though.

Pete
 
Selling out up to 50% of your idea on day 1 for a measly 2k is a non starter.

At least pu in place some performance related goals. 5% to start, 5% when patent finalused, 5% when first wholesaler contract in place, that sort of thing.

Guys like you are chaff to the venture capitalists! They'll chew you up and spit you out in a heartbeat.

Try a seeders approach, raise 50k and hire a business partner!
 
Does the businessman you are talking to know the market for your product? If not, your product is probably doomed to failure. If your patent application is lodged and has a priority date, as you indicate, why not take your idea, or better still a prototype, to an existing market leader in the boaty industry? You are far more likely to see the product on sale that way.
 
Not exclusively boaty

Tempus said:
One word of caution to the OP. Post 1 sentence 1 "It is a boaty product"

Not many things sell millions in the boaty world and not many fortunes being made there by small inventors from what I see. You do need a realistic view of how big the market is.
Click to expand...

Quite right. Alas I have lots of pure boaty inventions on the back burner.

This one started off from my passion for boating.

All that have seen it (including public at NEC) thought that every household would want one (at least one) as well as being super useful to boaters, walkers, campers etc.

It is the household item that clinches it of course.

Now if only I could think along toys... there is a large market.
 
Others have covered it, but £2K for 50% of a big earner is not a good deal.

As suggested he either gets 5% for that and has to work to get the bigger holding or he fronts up more money.
 
There are a large number of very good points made in this thread, some of them inevitably totally contradictory! Your options range from on the one hand doing the whole thing yourself and earning all of the rewards, to the other extreme of selling the idea to a manufacturer for a percentage of the revenue. The best option probably lies somewhere in between those two extremes.

It seems to me that you need to find someone to help you get your thoughts about the best route forward organised - ie you need a business plan of some sort. It won't be right, but will at least give you a rough guide about which route to follow. It will also enable you to have a basis on which to negotiate with this potential business partner, or to raise the initial funding which you need. The most important part of that will be an honest assessment of the value of the marketplace – as has been noted above, the boating market may seem to those looking in from outside to be full of money, but the reality is quite different!

Ideally you might be able to get a friend to help you with this exercise, but in the absence of that someone with the necessary experience will probably want to be paid, either immediately or in some sort of share of the action - what is known as “sweat equity”. Depending on where you’re based, you may be able to get of assistance from a local enterprise partnership, and there are a number of websites which gives a lot of assistance to new ventures, such has Smarta. Another approach would be to try and get match funded professional advice using the Government Growth Voucher scheme; the trouble with that type of scheme is that you have to be able to pay for 50% yourself.

Your website suggests that you are based in Essex, and I work for a small business in Chelmsford which gives strategic, accounting, and marketing advice to small businesses; we also help to administer a small private equity fund through which we are investing in some new companies.

If it is convenient I will be happy to have a conversation with you; please drop me an e-mail if that is appropriate.

Whatever you decide, the best of luck!
 
Some very good advice here, at this stage a near equal partner would need to be putting in as much time, money and previous knowledge from the areas you are weak in as you have done over the creative period. So a business head to just go out and get money is something you can get at a consulting rate, there are also many government funded business help schemes that are effective. Some great support and advice down here in Plymouth from industry mentors and universities as well as places like the national composites centre. (although they know little about composite bearings)

50% is putting the partners value too highly, I believe with what we know from this conversation, unless he was the one to be putting up all the money and time and be devoted to the success for a few years (if this product has the potential you suggest)

I've run start ups for France Telecom, set up a few ventures and worked with three (sometimes eccentric inventors) I have got their products out there and have (mostly) enjoyed doing so and making a good living. The most important thing is the relationship. At this stage the value of the company is your ideaI if he is not bringing money to the table, effectively he is bringing nothing (unless he owns or runs a business within the same sector as this product will be marketed in)
His value is based on his performance so I would be looking to scale his share rewards on some sort of performance.

If I was looking at a new invention that I believed in that was potentially worth a few £M in net profits over say five years, I'd give it all my time and expect 5% increasing to 15 or 20. If I was putting in all the money myself I'd be looking at 49% as a max.

Whatever happens good luck (marine is a tough market) and if you want any advice sepecific to the marine market I'm happy to help. I introduced Seatorque systems that are now used on Port of London vessels and have been quite successful supplying the quicKutter and bearings and setting up agents in Europe and further afield. The bearings are now taking off in the commercial pump sector with customers such as Thames water, and this is potentially worth 1000x the marine market. I own no part of the quicKutter invention but work very closely with the inventor, with customers from Malaysia (Grand Banks yachts) to US navy projects (submarines) . I hope it goes well.
 
There seems to be a lot of expertise on this forum about how to structure the business agreement, and perhaps how to move forward. Way out of my league.

But, I am curious about the IP.

Do you have a patent attorney or not? If so, are they helping you? Some patent attorneys just draft patents all day long and have no commercial awareness.

This would seem pretty important at this time because any value that you may attach to your invention is only available to you if you have the IP sorted out and tightly protected and in your control.

Has someone done a freedom to operate search on your product?

Has the application been fine tuned to achieve the best protection for the product compared to your competitors?

Which countries are you looking at?

If you do have a good patent attorney, I think that they should be able to give you some advice on the options for a commercial agreement with your business partners, be they investors, licensees, or manufacturers etc. I believe that the agreement you would make with a well resourced professional investor would perhaps be different from one you make with some one who is investing 'a couple of grand'.

I'm no expert but my wife is IP director of a large company who produce healthcare equipment, and all the above is what she seems to do all day long.

She also spends a lot of time finding the gaps in competitor's patents and their claims and working round them, so you can never be sure that IP can insulate you from the big boys if they want to move in to your business area.

Cheers

Garold
 
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