Subject: Business Partner/Investor Agreements
Thank you for considering this question. For the past 8 months, i have
been working with a partner in forming a niche service company in the
legal industry. Two weeks ago, an investor emerged which alleviated
many of our financial risks in forming this entity. Both my partner and
i do not have any experience in negotiating business partner/investor
agreements and we would like some feedback as to how to protect our due
diligence done to this point.
Could you recommend some websites or provide insight as to how we can
protect ourselves from said investor to ensure we are not viewed as
'employees' of this entity, but rather equal business partners?
Any help or insight you could provide would be much appreciated!
Thank you in advance for your assistance in this matter!
Thank you for the question. First, I suggest you read a good
negotiation book. One of my favorites is "Negotiate This" by Herb
Cohen. It is a quick read and is good for business matters.
Because you and your partner do not have experience, I really think you
need a good business lawyer to negotiate the deal for you. It sounds
like your investor may be sophisticated so do not fall for a suggestion
that you let his attorney draft the agreement. You want your own
separate counsel to represent you.
I hope this helps!
Subject: Vendor Financing
Question: VENDOR FINANCING
I need someone to negotiate (or coach me to negotiate) vendor financing
to start an invention-based, online, wholesale/retail store.
Apart from the viability of the product and the trustworthiness of the
vendor, what are the basic principles that govern such negotiations.
Does it boil down to competitive bids? Is there a standard for
calculating compensation for such financing? How do you prepare for
“Is it feasible to negotiate an agreement to fund the
manufacturing of an entire project through a vendor who supplies the
parts, assembles & packages the product, and supplies the first
finished goods for distribution, in return for an exclusive
manufacturing agreement for a set-forth period of time.” (or
‘quantity of product’ - sic)
This seems to be exactly what I need. My new product (patent-pending)
is superior to the competition, can be cost-effectively manufactured by
fabrication of sheet acrylic in a relatively small quantity, in short
lead-time. It has a ready wholesale/retail channel in a major
product-sourcing, online directory used by online stores. I have
received quotations from seven contract manufacturers, two or three of
which I can negotiate with. The start-up costs are as minimal as one
can desire in such an enterprise.
It is very hard to negotiate for yourself and you are right to state
you need help. When you have someone doing your negotiating, that
person can take positions that you might not be able to take. You
should read a really good book on negotiation. I have my law students
read "Negotiate This" by Herb Cohen.
I am concerned that the proposed deal could result in your
business having all of its "eggs in one basket." Is the vendor a US
company? If not, particularly if the vendor is in China or another
country noted for ignoring patents and intellectual property, you MUST
PAY ATTENTION to Trustworthiness. I would be happier if you had several
vendors supply a discrete part with the final assembly in your control.
I know you have suggested competitive bidding. As a small customer, you
might do a lot better negotiating with a vendor you can trust and with
whom you feel a high level of comfort. It is easier dealing with people
you know and like.
I really suggest that you should retain a good attorney to negotiate
the deal for you.
I hope this helps!
Subject: Strategic guidance
Question: I am managing director of a newly stablished representative
company in office machines.
I started my cooperation with the investor 8 months ago. He owned a
company in Euroup and intended to set up a branch in the Midle East.
I prepared business plan, expenses estimate, and sales and cashflow
forcast. Thereafter everything was approved and the company was started
3 months ago.
Then the problems emerged: prolonged insufficient funding, lack of any
technical support dipicts a situation that I feel we are going to have
On the other hand my employer insisted on giving me 15% share of the
company instead of paying for my services before the time we sent mails
to our customers ie the whole 7 months of our coperation.
Moreover after 3 months of full time operation in the company I have
not received a single euro.
Please tell me what strategy best serves my benefits regarding that the
share of a newly setup limited liability company worths nearly nothing.
Frankly, there is no easy answer. It sounds to me like you have the
wrong business partner/investor. If you do not trust them, I suggest
you run from this business as fast as you can. Further, if you decide
to continue with the business, you need to clearly state your
expectations as to compensation. Set definite deadlines and insist the
budget and financing includes your salary.
I hope this helps!
Subject: Business partnership
Question: I publish a small online magazine and project potential
growth/success, but lack
funding. I have been approached by a media company that is interested in
funding the magazine and becoming a partner. How should I approach this
business opportunity? What kind of percentage should I offer and what kind of
proposal should I expect from this company? Would the two entities merge
under one company?
First you should research the media company. Have they made other acquisitions?
Are the owners/partners happy? Were they offering stock and stock options in the
I would use online searching (such as Copernic Agent) and if the company
is publicly traded, get their last 10k.
Next, think about what YOU want. Do you want to be a small part of a larger
company? Would you rather get a loan to keep control? Do you need the resources
of a larger company?
Next, I would have a generalized discussion to see if there is personal
"chemistry" between you and the media company. If there is a good chemistry, you
should hire an expert attorney to represent you in the merger/acquisition
process. Do not negotiate on your own!
Finally, I would read a good book on negotiating such as Herb Cohen's "You can
I hope this helps!
| If you have a question., call Ronald J. Cappuccio, J.D.,
LL.M.(Tax) at (856)