We are looking for a indie partner to develop our business for revenue share
Hi,
We are a bootstrap product studio (4 developers) based in Lisbon and last August we've launched BUK (https://buk.app), a scheduling app for small business and we are looking for a partner to develop our business.
Our business model is a recurring Saas model and our prices start at $20/mo and can go up to $150/mo with 10 users.
We have many ideas about how this deal could be made but we are more interested in discussing and listening to IH members opinion and ideas.
History:
We started by activating it manually (not in a digital way) to get our first clients, to get some local credibility and to prove that this software is working properly.
We decided to focus on barbershops owners because they seemed more independent and early adopters than others.
We've just reached our first 10 paying customers but it took a lot more time than we were expecting and that's why we are turning to IH community for help and support.
Our proposal for this deal is:
Conditions:
- Manage BUK with us like it's your business and you are part of the team
- We take all costs of servers, domains, etc.
- We don't have a marketing budget.
PROPOSAL 1
- 50% revenue share of the customers you bring
- Revenue share up to a total cap of $100k
- If you stop working with us you will continue to receive your share until the cap is reached.
PROPOSAL 2
- Develop our business for the next 6 months
- 20% revenue share of all customers to a total cap of $100k
- Minimum Goal of 100 paying customers.
- If you stop working with us you will continue to receive your share but only if you reach the goal.
Which one do you prefer? Do you have an alternative?
Best,
André
Here's my issue with your proposals - both cases put risk on the "indie partner" and no risk for yourself. Additionally they both encourage the exact behavior that you don't want from your quasi-contractor. There's no guarantee of pay, so you need to keep that in mind when thinking about compensation. Let's delve deeper and break down why for both cases:
Proposal 1: 50% revenue share is very generous. The 100k cap is less generous. Most importantly, it's pretty difficult to attribute a "paying customer" to a single person, unless it involves direct sales. From the 50% revenue share, I assume the direct sales person is what you're looking for. This set up immediately drives away inbound marketers and other long-term "growth hackers" from working with you (best time to set this up is yesterday). Additionally it incentivizes someone to bring you a few clients and then leave since there's no benefit of getting over that cap. This strategy makes sense if you're banking on the majority of your marketing strategy to rely on long term inbound that you're doing yourself (which doesn't seem to be the case since you have no marketing budget), or referrals (a crap-shoot unless you're REALLY good). I would highly recommend lowering the revenue share and removing the cap - you could put a cap on each customer instead to incentivize bringing on new customers. It's also very difficult to attribute direct sales if alternative strategies like blogging/social media/SEO are used.
Proposal 2: In particular, if I understand this situation correctly, your sales/growth partner would only get paid after passing a threshold of 100 customers for the company. "Develop our business for the next 6 months" refers to a more long term marketing campaign strategy paired with direct sales - aka you want a marketing director and their team. These positions would typically involve a very hefty stock/equity package. There's a very good reason for this - sales and marketing is easier to do the more established the company for most industries. Work done to strengthen sales/marketing infrastructure pays dividends in growing the company in the future. This is why the lifeblood of a successful company is usually sales/marketing, and it's difficult to quantify the impact of long term inbound marketing strategies and the effect they have on direct sales. Let's say for example that your direct sales person finds a client and is able to convince them to sign up. Who knows if they signed up because of the sales person or because they read a bunch of blog posts and reviews that were carefully curated over the years? Just to be clear long term marketing is not inherently better than direct sales - there's a healthy balance that differs for every company and industry. Now theoretically speaking, let's say you find a miracle growth hacker that wants to do this for fun - with no marketing budget they would essentially have to be marketing Jesus. The pay off for long term marketing campaigns can be several years. Now let's say you say screw long term marketing, and just want as many customers as possible NOW - that's fine and dandy but to be truthful, I would be suspicious to find someone who is interested in cold sales when there's no guaranteed payout. This is what's odd about this arrangement, it seems to encourage long term marketing but penalizes it at the same time. I would recommend you extend the 6 months to as long as they want, and to not place a cap on the revenue share. If someone were to stop working they would continue to get a percentage of the users who existed during their tenure. I would also make this equity vested - making it 5% the first few months, 10% the next few, and when you're comfortable with the progress making it all the way up to 20%. Each stage should have an evaluation stage however where the equity would vest after passing a checkpoint.
Thank you so much! Really, thanks @momotaro!
This is exactly the reason I wrote this post was to get honest feedback about the arrangments and discuss ideas on what's the best way to do it.
We are not attached at all to any of that 2 proposals. They were just a point to start the conversation.
Just wanted to clarify some points:
We are NOT against giving equity we were just checking if it's possible to do this type of deal without any equity involved. Or at least start a commercial relationship without an equity deal.
We were hoping to track customers by giving discount codes that could be used to track sales on different channels. But agree it's not the best way.
Regarding 1st approach comments:
The second arrangement definitely was us thinking of a more long-term relationship and it's the one we preferred for exactly that reason.
I think we did not explain it in the best way but anyway I really like and prefer some of your suggestions. The original idea was:
We share 20% revenue from the whole business (all customers) since the day you start working. The 100 customers goal was just an idea to create a minimum in case you wanted to stop working for us you would only get 20% revenue share if you met that goal in the time you worked with us.
But regarding your suggestions, I definitely would work with this options:
Interested in discussing this models in more detail in a call?
Thanks
André
I agree with @louisswiss that focusing on barbershops makes the most sense and the first 10 customers are hard to get, so congrats!
I'd like to see more focus on barbershops in Portugal since that's where your first users are located and you can use that as relevant social proof.
What lessons did you learn from manually getting those customers? What where they using before BUK? Did they expect to pay for a booking solution? How tech savvy were they? Do they run their business from their phone or integrate with another system? What objections did you hear? Was there a feature they really liked most? (Like email or text reminders to lower cancellation rates). Did you meet with them in person or over the phone?
I signed up for a trial account to check it out. Looks like it's focused on EU (24hr clock) so I'd try to focus on getting sign ups for Portuguese and English speaking service providers in PT and maybe the UK so that you don't have to do additional development work until you get more customers in other countries. I like how you show pro level features in the free plan to get users to upgrade. I worry about including pricing fields in the services set up since you don't process payments as part of the booking functionality and that might be confusing.
Have plenty of ideas for how to move forward with growing the user base. Would be happy to talk. In the meantime, here's the notes from You Can Book Me's MicroConf talk that might be relevant for you.
Hi @ness,
Thanks a lot for your comments and notes from microconf talk. Let's chat next week?
Regarding the proposals for this type of deals does this make any sense to you?
Look forward to chatting next week. The proposals look more complicated than they need to be.
A standard affiliate or partnership agreement for a SaaS is 20-50% of sales generated for the customer lifetime. Partners aren't responsible (or rewarded) for anything that's directly on your website or owned by your company. You'll be expected to bring more than a great technical product but enough social proof and marketing support to show that you can convert prospects.
You'll need to build trust on the website - even more testimonials and niched landing pages for the different groups you'd like to bring on as customers (Like the Zapier case study for seo traffic posted a few days ago).
That's generally a Marketing-type role and it's work that doesn't directly lead to sales. You'll need to figure out what you're willing to do and what you expect other people to contribute to the arrangement for it to be a win/win.
Hey guys,
I like the simple look of the product. Also like the fact that your company is based in Lisbon. I vacationed in Portugal this summer and Lisbon is an amazing location for a bootstrapped startup, with lots of access to local businesses around every corner!
Heres my 2cents:
As others have pointed out, I don't see what differentiates your product from other scheduling apps. Even Instagram has launched something similar.
My partner works in beauty industry and their spa has challenge of getting customers especially around non-peak season. However, when I go to barber I hate waiting, but i can usually call/text ahead of time to reserve a spot. So scheduling isn't a HUGE pain.
So what I am trying to say is maybe use the scheduling as a trojan horse, where your main selling point is HELPING SMALL COMPANIES FIND MORE CUSTOMERS AND SCHEDULE THEM THROUGH OUR APP.
Also I'm a little confused about your proposal. It sounds like an affiliate model for a product that hasn't found product market fit? Or are you looking for partners to roll this out locally, city by city?
Cheers
Lol i'm going to reply to my reply to add more to why :
HELPING SMALL COMPANIES FIND MORE CUSTOMERS AND SCHEDULE THEM THROUGH OUR APP
Is a good idea.
If you can come in and basically say we will take care of booking clients for you, if you use our app, that has huge impact on their bottom line. Rather than heres another app you have to pay for, plus you still have to find your own clients.
If you go this route, you control customer flow into these companies, you get to collect valuable data points, and you can potentially to add on more services later
-Event planning
I think there is lots of untapped opportunities in this space, from personal experience. But I don't think a scheduling app alone adds the much needed benefits these business require.
Ok I can't help but adding some more arguments for:
HELPING SMALL CLIENT FOCUSED COMPANIES FIND MORE CLIENTS AND SCHEDULE THEM THROUGH YOUR APP.
The longevity of your subscription for a scheduling app(any scheduling app) is completely dependant on how well that company is at marketing and getting new customers. Ultimately they will see value in your product if they consistently use your app to manage customers.
On the flip side if they stop getting customers(through no fault of your own) then they stop scheduling clients through your app, and they stop seeing value in paying for your product.
So by focusing on finding customers for these businesses your ensuring the survival of your business relationship with them, and your providing direct value for each customer you bring.
Additonally, think of how many customers these business are capturing no data about. Their usual clients, random walk-ins from the street, and even if they run google/fb adds they're still not professional marketers.
So they are not really getting the most out of their customer data :)
Ok that's the last one. I swear.
Hii @dchase thanks! Please, continue this is valuable to us :)
More important we were seeking IH community opinion on the deals we were proposing and we were expecting more discussion around that point and not so much about how BUK could get more clients.
It's funny though :) everyone is helping us with suggestions when what we are seeking is people to actually apply those ideas in the practical world.
Regarding your point, I personally agree that there is much more value on what you are proposing than in BUK app alone.
Why we never did it?
First we didn't want to create a marketplace. By design we aimed at creating products with only one side/customer (In the past we had 2 marketplaces and the cost to maintain and grow was very high).
Second we don't know much about how to get customers for them in a cheap way. Maybe there's a cheap way we haven't explored maybe even simple raise the value of subscription and automated ads could be a thing here.
Third, we thought there is plenty of similar products that prove that there is product-market-fit so we just needed to offer a slightly different solution.
Would be great to talk to you about future plans! Available next week for a call?
Glad to see you've thought of this idea before, and you see the value. Yet the argument for not pursuing it is that it is too hard? So you chose to create a product thats slightly different than what's already out there. This give does not me confidence in the product direction your team is pursuing. I am not saying anything negative about your team or their efforts.
I mean ideally you'd want the product to be highly differentiated from what's out there. And I am not saying that my idea is a winner or is better. Nor am I saying a "marketplace" is what you should build. Just my thoughts :)
In any case it is still unclear what your proposal is, because you're essentially trying to get global marketing when you haven't solved product market fit locally? Not to mention there are big markets close in proximity to Lisbon (France, Spain etc) ???
With only 10 paying customers, why do you think global distribution is the answer?
Regarding your questions: For me, It's not just that it's hard, it's more that we have no clue how to do that.
Also, this means BUK becomes a different business, not just a scheduling app. It also means we need to prove that we can bring customers.
Maybe I need to explain our studio strategy to be able to explain the context of our decision.
We created this product studio 1 year ago, 4 developers that already worked together in the past and know they have all the skills to create and bootstrap digital products. From design to backend and frontend.
Our plan is to take the risk out from creating a team and decided to create several small products to validate if some of them actually solve global problems and gain global traction.
These products, even if small tools need to be somehow different than what is out there.
BUK, on the other hand, ironically is not an example of the type of tools we wanted to create, it's not a small product as we imagined in the beginning. It started small but we definitely underestimate the complexity of this type of solution. That's why we are looking to develop the business and stop developing features since we feel it's mature enough to grow more. Also, we don't want to spend much more time on it if it does not start to generate more revenue.
Regarding if a global distribution is the answer that's the type of questions we want this new partner to discuss with us and make decisions about and the direction this product will take. In a sense, we are looking more for a co-owner long-term relationship.
Would love to chat more with you in a call next week. Are you available?
Ok, so your team is a dev studio. Now i'm starting to put the pieces together. It is definitely an interesting model, and there are definitely teams who have successfully created multiple products and businesses using this model, by either:
I'm curious why you didn't go either of these routes?
Also, the fact that you've tested this product, and there is some traction, but not clear product market fit. Usually means you have to keep refining what the problem the product is solving, rather than adding features. But it sounds like
I'm also curious to know what other products your team has launched/in mind ? And when do you decide if the product is not working and move on?
I'd be up for a call, but we can keep hashing this out in public on here.
I think it's better to book a call. Can you make it next week? https://calendly.com/andremoniz
Olá André!
The idea sounds great and the product looks great as well. Are you going to focus on Portuguese market or worldwide?
What does your product offer that services like (https://10to8.com/) or (https://gigabook.com/) do not offer yet? In other words, what sets you apart from the competition?
Boa sorte!
The idea here is to find a partner to focus worldwide.
Most of the competition is a combination of different biz variables so it's difficult for us to have more features than older players.
We focus on delivering a slick, simple product that offers a simple merchant page. Other features are: unlimited text reminders and google calendar sync.
Thanks a lot for the feedback
Firstly, congrats on getting to 10 sales! That it seems to be barber shops only so far is maybe a sign you should focus in on a niche... ;)
Your product looks slick!
I don't have time for the kind of thing you're proposing right now, but i did build sales/marketing for a company selling to similar clients in the not so distant past.
I'd be happy to jump on a short call with you guys sometime next week and answer any questions you might have, if you'd find that useful.
That would be great! I will send a message.
I was also interested to know if this kind of deal would be interesting for you (in case you had time)?
Hello,
I've been looking at a lot of online booking services to help grow my own company and expand my product base. A couple features stick out that a lot of services similar to yours lack.
If 1 and 2 are implemented properly, you will have companies like mine only wanting to push your service because it lets me create end to end solutions for my clients. In the end I generate more revenue.
Companies like the ability to use one payment processor for all their services.
A solid white label service for your app for resellers would be great.
Congrats on the launch and the paying clients.
Wow thats' good advice thanks @thedangler.
We actually have a fully 100% working API since our frontend is an angular app and backend a nodejs.
1 point solved.
How were you imagining point 2?
I'm very intrigued by this and your business let's chat this next week?
I'll email you to start the dialog.
Andre. I would be interested in learning more. I was in Lisbon just last week for the WebSummit. Let me know if we can setup some time as I need additional information for both options.
Hi @manishb01 definitely let's chat.
I will send you a message.
Thanks
Congrats. The product looks great. I agree with @louisswiss you may want to focus on a niche like barber shops, beauty salons, chiros, etc.
Thanks! This is an option on the table. Any comments on the deals proposals?
I don't have any extra time to help do biz dev for you but I my concern is why would it be capped at $100K? I'm not too familiar with the structure of your comp plan. Have you tried just going with a commission plan where the sales person get 10% or some sort of percentage for all users that sign up using their link or code?
My point here was also to stress this type of deals.
We don’t need a cap as long as the revenue share continues to be only on the users that exists during the period you’ve worked with us.
We were not looking for a simple affiliate model but a more engaging plan