Business Owning acquaintance offering to take over business and give royalties on each product sold

[Jake_]

So I've been moving the needle along on this mythological sculpture candle business I've been building, making about 5 sales a week. Each product is a scented artisanal approx 2 kg candle with artistic mythology themed sculptings on each side, selling at $45 with about a 50% profit margin.
For context, I'm a guy in his early twenties, still quite inexperienced.

I just got a call from my mothers friends husband, this guy is a successful business owner in his late 40s as far as I'm aware.
He was suggesting that we meet up, talk numbers and that I potentially allow him to take over the business side of things. He essentially is suggesting that I give him permission to sell them and he gives me royalties off of each product sold. This way I focus on just product creation and henceforth make royalties from each product.

I'm currently selling solely in Australia and hand making the products myself, after talking to him he seems to have the know-how to successfully establish manufacturing in south east asia, build the sales to the American market and eventually bring the product to a department store. This was my plan all along and my first thought is that it would be great to focus on building products and leave the rest to him, but there remains the concern about losing control. Not to mention I won't have the opportunity to sell the business when I want to experience a liquidation event.

At risk of TMI, my other concern is that I have a troubled upbringing, rocky relationship with my mother and there's the chance that she could sabotage this at some point by speaking negatively about me to this dudes wife. Based off of the way he was talking, I believe she may possibly have painted me as the creative type, devoid of organizational skills and needing someone practical to help me build my business. With that said, he seems friendly, positive and sharp as a tack * he wasn't rude or assumptive in any way, I just got that feeling.

I would love to get some perspective, advice, and suggestions, thanks! Also If you have any ideas as to what I should expect to receive as royalty on a product like this/profit percentage etc, I would love to hear it.

 

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[Jake_]

.

 

[Choices]

and hand making the products myself

Won't scale

So the promise is that this guy will free you up so that you can only focus on designing new candles, while he takes care of manufacturing, marketing and sales, and you get some commission off each sale.
If that's your goal go for it!

---

If not, start thinking how to automate the candle creation.
- get a wax pourer
- make molds of your sculptures
- let your machine pour the wax into the molds
- you should now be able to do $45 x how many candles an hour your machine can output
- hire someone to break the candles from the mold and package them
- have the AU Post or something come pick up your candles at set intervals
- need for your candle grows? Just add another machine & employee.

That's a business.
Not sculpting things.
That's a hobby. (unless you can sell them for thousands a piece)

You work more. You learn more. You earn more.
And you get to keep control.
And you help your local economy.
Beautiful country, wanna visit at some point.

---

What's your marketing like?
What type of wax/fragrances do you use?
Are they even slightly toxic to people? Is it gonna potentially trigger allergies?
If yes, use hypoallergic & non-toxic materials and put this in your marketing materials.
If not, put that in your marketing materials anyway.

You can now still say that they are "Made in Australia".

Your employee is still touching the candles when breaking the mold, so you can still market them as hand-made....technically.

---

You say you've had a troubled upbringing. And yet here you are, starting businesses, "moving the needle". Awesome. Congrats!

Let's talk about your relationship with your mom.
The more you keep this in the back of your mind, the less you are focused on your life and business.

Here's what I'd do:
Try to talk to her about how you feel.
- if she starts crying and apologizing, great, take it from there...
- if she starts getting defensive and/or aggressive....

...then let her know that you love her but this type of relation is hurting you, so you will have to distance yourself from her.

Both of these will be very hard. That's how life is sometimes....
You can keep avoiding your problems, or you can choose to face them head on.

 

[Jake_]

Won't scale

So the promise is that this guy will free you up so that you can only focus on designing new candles, while he takes care of manufacturing, marketing and sales, and you get some commission off each sale.
If that's your goal go for it!

---

If not, start thinking how to automate the candle creation.
- get a wax pourer
- make molds of your sculptures
- let your machine pour the wax into the molds
- you should now be able to do $45 x how many candles an hour your machine can output
- hire someone to break the candles from the mold and package them
- have the AU Post or something come pick up your candles at set intervals
- need for your candle grows? Just add another machine & employee.

That's a business.
Not sculpting things.
That's a hobby. (unless you can sell them for thousands a piece)

You work more. You learn more. You earn more.
And you get to keep control.
And you help your local economy.
Beautiful country, wanna visit at some point.

---

What's your marketing like?
What type of wax/fragrances do you use?
Are they even slightly toxic to people? Is it gonna potentially trigger allergies?
If yes, use hypoallergic & non-toxic materials and put this in your marketing materials.
If not, put that in your marketing materials anyway.

You can now still say that they are "Made in Australia".

Your employee is still touching the candles when breaking the mold, so you can still market them as hand-made....technically.

---

You say you've had a troubled upbringing. And yet here you are, starting businesses, "moving the needle". Awesome. Congrats!

Let's talk about your relationship with your mom.
The more you keep this in the back of your mind, the less you are focused on your life and business.

Here's what I'd do:
Try to talk to her about how you feel.
- if she starts crying and apologizing, great, take it from there...
- if she starts getting defensive and/or aggressive....

...then let her know that you love her but this type of relation is hurting you, so you will have to distance yourself from her.

Both of these will be very hard. That's how life is sometimes....
You can keep avoiding your problems, or you can choose to face them head on.

Awesome

Thanks for your thought out reply. That all is really helpful

 

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[Ronak]

This guy may be correct with his strategy.

Building the product, and building the business around the product require two different skillets. What do you prefer to spend your time doing, given the choice?

That's the first question to answer.

Then, what is your vision for the business? Like someone alluded to earlier, do you want to sell tens of thousands to the mass market, or fewer, handmade, but much higher priced/margin units? Positioned correctly, you could probably sell them for much more than you are now, in the hundreds of dollars, and make a nice living for yourself.

Once you determine that, if you choose to partner, the next question is, who is the right partner? Just because this guy has the right strategy, doesn't mean he's the right partner. Make sure you do your due diligence-- is he really who he says he is? Trust, but verify. Has he done the things that will be required in the business? For example, what happens if the suppliers steal/copy the design and stick it up on alibaba to sell to the world?? Suddenly, any joe schmo can buy your unique product and compete with you on amazon. Do you see yourself working with him long term? Spend some time with him to get a better sense of things. Working with friends and acquaintances can be a mixed bag. What happens if things go south, will it affect personal relationships? Do you share the same vision and business approach? Check out the reviews for his various businesses to get a sense of how he operates.

As far as financial split, don't underestimate the amount of work it would take for a partner to do their share. For a good partner who takes care of the things you mentioned, IMO, if he offers you a 50/50 split, that's extremely generous, and more than fair. That said, check out stuff from Stephen Key regarding selling your concept to larger companies for a royalty. If I remember correctly, the royalty can be 8 to 20% of wholesale cost, with a minimum guarantee component. At the end of the day, more than the percentage is the $ in your pocket.

Lots to think about, but worth the effort to do so before jumping in.

 

[woken]

. He essentially is suggesting that I give him permission to sell them and he gives me royalties off of each product sold.

Can I have his number too?

there's the chance that she could sabotage this at some point by speaking negatively about me to this dudes wife.

The only thing he should hear is revenue & profit.


Personally I don’t think you need extra support/ directions from partners. All you need is a will to make it and continue what you do.

Making, selling and wearing all the hats yourself won’t scale, true.

But 5 sales / week are not that time consuming, assuming your prices do reflect your labouring time.

You can build this to 50 sales / week and reassess from there.
What do you sell on? Own website? Facebook? Etsy?

 

[Lyinx]

Won't scale

So the promise is that this guy will free you up so that you can only focus on designing new candles, while he takes care of manufacturing, marketing and sales, and you get some commission off each sale.
If that's your goal go for it!

---

If not, start thinking how to automate the candle creation.
- get a wax pourer
- make molds of your sculptures
- let your machine pour the wax into the molds
- you should now be able to do $45 x how many candles an hour your machine can output
- hire someone to break the candles from the mold and package them
- have the AU Post or something come pick up your candles at set intervals
- need for your candle grows? Just add another machine & employee.

That's a business.
Not sculpting things.
That's a hobby. (unless you can sell them for thousands a piece)

You work more. You learn more. You earn more.
And you get to keep control.
And you help your local economy.
Beautiful country, wanna visit at some point.

---

What's your marketing like?
What type of wax/fragrances do you use?
Are they even slightly toxic to people? Is it gonna potentially trigger allergies?
If yes, use hypoallergic & non-toxic materials and put this in your marketing materials.
If not, put that in your marketing materials anyway.

You can now still say that they are "Made in Australia".

Your employee is still touching the candles when breaking the mold, so you can still market them as hand-made....technically.

---

You say you've had a troubled upbringing. And yet here you are, starting businesses, "moving the needle". Awesome. Congrats!

Let's talk about your relationship with your mom.
The more you keep this in the back of your mind, the less you are focused on your life and business.

Here's what I'd do:
Try to talk to her about how you feel.
- if she starts crying and apologizing, great, take it from there...
- if she starts getting defensive and/or aggressive....

...then let her know that you love her but this type of relation is hurting you, so you will have to distance yourself from her.

Both of these will be very hard. That's how life is sometimes....
You can keep avoiding your problems, or you can choose to face them head on.

Nice answer!

word of caution: you lose all control. if this guy controls all of the sales, he can scale it until it gets to the point where you can't produce fast enough... then he'll have to source it elsewhere to keep up with the demand. when demand wanes, he'll keep selling the other guys (cheaper) candles. IF you go this way, make sure to get another seller or two, so that you are not relying on only one seller.

oh, and it would be good to share that with him... tell him straight up that you will try to develop other customers as well, so that he doesn't think you are trying to go around his back.

unless you want a partner? he might be able to come on as a business partner or paid contractor? that would let you keep the control... or half of the control, depending on how your partnership is set up...

 

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[woken]

What on earth… If you don’t want to scale this yourself like I mentioned above,

Just make him an affiliate for god’s sake.

He gets his money you get yours and you don’t lose control.

If he only wants the money from the sales, he will accept.