What's The Best Route?

[davegood]

Hi all,

Today i'm posting because i'm in the middle of a problem.

To make it as short and simple as possible: a friend and I decided to start our own marketing agency. In this agency we'd work on branding/design/videography/graphic design/etc.

Our first client happened to be a mutual friend of ours, together we conceptualized this idea for our client's soap company. We created a complete rebrand/strategy that has the potential to really help his soap company.

The idea was so well presented he offered us a share of the company. We would split the business three ways even. When offered the share, I got a bad feeling in the pit of my stomach. I'm not sure if it's fear or if my gut was trying to tell me to stick with the creative agency as the business I should be focusing. I know MJ preaches how we should all focus on one business. What do you all think of this situation?

The pros of the creative agency is: No partners, multiple creative projects, I'm great at it, I'm excited about it
The cons of the creative agency: It's very competitive and I've heard that agencies have gotten overly saturated

The pros of the soap company: Possibility of it being very profitable, very interesting concept, stands out from the crowd, not as overly saturated
The cons of the soap company: Share with partners (possible drama)

What do you guys think? Let me know below. I'd love to chat with somebody with experience about this.

 

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[Jerma]

You don't have to accept his offer. You should try negotiating. If you are willing to walk away from the deal, you are in a great negotiation position.

I would try negotiating a flat % of revenue (or profit if he won't go for it) instead for the next five years of the new campaign so you can focus on what you like and still capture the upside (without the downside/risk). Then, maybe tell him you might revisit the share split later after having more experience working together.

Idk, be creative. You don't have to just say yes/no.

 

[Johnny boy]

Is it documented and signed that you own 1/3 of this soap company?

 

[Itizn]

Would you rather

own 1/3 of a soap company you didn't build?

Or

own 1/2 of a digital agency you did build?

 

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[heavy_industry]

When offered the share, I got a bad feeling in the pit of my stomach.

That would be enough for me to decline the offer on the spot.

 

[Kirk84]

The idea was so well presented he offered us a share of the company.

What is the company worth ? What is the guys motivation to offer?

 

[_Master_Shake]

What makes you think soap isn't oversaturated?

Everyone from Dove all the way down to your local hobbyist who sell their crafts at the local farmers market are making soap. It has a very low barrier of entry. You can buy everything you need in bulk to start for less than $100, just look on sites like The Bulk Apothecary.

Most people now use body wash, not bar soap. (body wash isn't technically soap, it's a detergent).

The most successful recent startup that I can think of is Dr. Squatch. They have some pretty funny advertising, but I couldn't even guess how much money those 3 guys are actually making.

 

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[Victory!]

It sounds like your friend can't afford to pay you in cash or doesn't want to.

I can't count the number of times people have asked me to "build their app idea" in exchange for equity. This will happen often if you're running an agency and dealing with startups. Say no every single time and demand cash. The equity is worthless. The odds of it ever being worth anything are slim to none.

When they try to tell you "but the valuation is $X,XXX,XXX and your X% is worth hundreds of thousands" remember it's still worthless. Unless somebody has money on the table ready to buy the company the equity is not worth anything, especially in something illiquid like a brand new startup.