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James Millar
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Syd_Mick, post: 102639 wrote:
Hi All,

I am about 2 months in to the launch of my own business. Whilst it has only been 2 months, and over a busy period of Tyne year in Xmas, I’m still finding myself getting restless and anxious that I’m not getting any sales through.

Anyway, this leads Me to my question. I am doing all I can from a DIY marketing perspective at the moment (in the time I have available – I work part time to finance this biz) but I have recently been speaking to some people who have gotten me thinking about aligning my business with a celebrity who I feel represents that same values as my business. I managed to get a meeting with the business partner of a relatively well known celebrity in my business category and was told that ‘there is some interest and she’d like to know more’. Problem is I have never put together a proposal before!

This person is interested in finding out more about becoming the brand ambassador for my business, so I’d really love some help from the super savvy FS community to help me here as I don’t know where to start!

I won’t have a problem summarizing my business (who we are, what we stand for and what sets us apart) but I would love to know:

– How to structure the proposal
– What is attractive to people in relation to these deals (assume money is, but surely there are other things they would find appealing)?
– what is reasonable to ask for in return?

Thanks guys. Please feel free to include anything you feel I should consider.

Michael

Hi Michael.

Is this avenue definately the best alternative for your business? Hiring a celebrety comes at a cost and if it’s not cash it will be “sweat equity”. It will obviously still cost you something and the question becomes – what is the cost and what do you have to give up (which is based on business value)

Remunerating people with equity in an unlisted private company can be a challenge (its something we have lots of experience in – both commercial, tax and corps act) – however it can be done.

Key things to consider are

1. Is this the best alternative for the business? There may be cheaper and more cost effective marketing solutions. Evaluate this as if you were paying for the services in the normal way.

2. What is the cost of their service? Find out what they would charge if paid in cash in normal manner.

3. Are they interested in 100 % payment by equity allotment?

4. What is your business worth for the purpose of this calculation? You can’t decide on what equity to offer if you don’t have a business value in mind. Keep it simple but professional. You probably don’t need a 20 page investment information memorandum but you will need something.

5. What financial investment instrument to use? Ordinary shares, call options or other? This will be driven by both commercial and tax outcomes (free shares for “in kind” services are taxable income in most cases).

6. What is the investment return model you are offering? Long term income stream? Five year exit? Buyout options? Shareholder rights?

The good thing is that you don’t need to spend lots of time or money on most of these until you know if they are genuinely interested. You start with a general expression of interest, have a chat etc. if they are supportive of 100% sweat equity equity payment then you go away and prepare the numbers and the offer.

What you are proposing is really no different than any other small scale capital raising. You are asking them to invest in your business so the same issues apply (being valuation and deal parameters)

Drop me a line if you wish to discuss offline.

6.

Helping build better businesses and better lives with expert financial and taxation advice. [email protected] www.360partners.com.au 03 9005 4900