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Don't make a bad deal

Guest post by: Seth Godin

Article Overview: Here's what entrepreneurs and bizdev folks ought to remember before they do a deal:

Don't make a bad deal

Here's what entrepreneurs and bizdev folks ought to remember before they do a deal:

First, doing a deal is a good thing. Despite my warnings below, you don't get anywhere if your idea is a secret. A leveraged idea is worth sharing.

That said, please remember that the idea isn't what is worth anything. It's the effort and the cash and persistence that pays off.

Don't do a deal where each side gets a fixed percentage. A 50/50 split of a company invented in a bar is always a bad idea. Even paying someone 5% for some sort of contribution can come back to haunt you. Instead, build the deal around a shifting percentage based on contributions over time.

Don't assume that the money you start with is going to be enough. Let's say you and a buddy each put in $5k and each take half the business. Then what? What happens when the money runs out and only one of you is willing to put in the next block of capital?

Think about taxes. If you build a Sub S company, and the company loses money, you both get a write off...

Don't forget the arbitration clause. Sure, your venture won't go bad, but others do. A clause that guarantees informal binding arbitration not only saves you time and money when stuff goes wrong, but it helps keep stuff from going wrong because no one will blackmail the other with court.

Do a deal with someone you trust, but don't do a deal with a friend. You'll likely end up with neither a partner nor a friend in the end.

Don't forget the shotgun clause. At some point, one of you is going to want to run with the project. So build in a clause that says, "At any time, one person can offer to buy the other out. The second person then has the chance to either buy the first person out at the same valuation, or sell." Money can solve a few problems, and this is one of them.

In case you forgot, reread #1.

Worry about control. A lot. Sooner or later, control matters. Do you have it? Really? If you don't, are you okay with that?

The myth of most legal documents is that the world is going to stay the way it is. Or that the world is going to change, but just the way you expect it will. It won't, and it doesn't.

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Article Tags: arbitration clause, bad idea, binding arbitration, first person, myth, one person, persistence, second person, shotgun clause, time and money, time don, time one, worry



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Franchise for food products - If you are looking for a high end food deal, look at Ruth. Franchise fee is 100K. Very high, but this one could make you a lot of money if your market is open. I wonder what "deal" Robert has up his sleeve?
Re: How to Promote a MLM Business? - In MLM a lot of it is hype. I know you like your product but you have to get people in like a circus does. Draw people in with attraction. Depending on your budget you should setup a tent in the parking lot of a mall/grocery store(with their permission or rent the space) and cook-out hotdogs and hamburgers, have a clown doing magic for the kids, make a nice presentation on projection screen. Show your prospects that you are larger than life. Sales is 90% attitude and 10% aptitude. With MLM it is usually simple to understand so make it so simple they cant resist. They should feel dumb if they dont sign-up on the spot. When you have a crowd it is like a feeding frenzy. They will sign-up just because other people are...especially if you have a relatively cheap MLM. You are not going to make any sales if your product in MLM is over $200. I know this part is self promotion but get a wireless credit card machine so you can take payment right on the spot. Dont give them any reason to leave without buying/signing up.
Re: How to Promote Your Blog – The Definitive Guide to Promoting - Great Post! Dont forget to put your blog in Anchor Text For SEO purposes for the keywords you want when getting backlinks (for example with article marketing)...Very important. You can conquer quite a few small Niches and get your site on the number 1 spot in Google!
Re: Due Diligence, Market Research.. Ahead of the curve. - Congrats! A few months ago I wrote extensively on market research. Check in the Inventors corner for the posts. Let me know if I can help further! Dont spend a dime on a protype or advertising until you do some research! Jude
Re: Who hates cold calling? - I saw this and had to chime in. I HATE COLD CALLS. lol its terrible and a wast of my time. Something i have done is gotten online and found all the networking event happening in my area for the next 2 months and i try and go to about 3 a week. Even just for an hour. Dont bring any business cards. Just meet new people ask them alot about what they do, not too much about what i do and follow up the next day or 2. Has worked well


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