How to structure collaborative relationships with other businesses?

[conorm]

I run a cocktail delivery service in my local area and have had interest from other local businesses in collaborating, with the purpose of expanding our respective reach, bolstering our brands, and increasing sales.

I have some fun ideas about what the collaborations could be (e.g. a bespoke cocktail using a local coffee retailers coffee, bundled cocktails with local meal kit delivery, etc.) but am looking for advice on how these types of relationships are normally structured. Are there models out there for revenue share, etc. in a collaborative relationship?

Thanks,
Conor

 

[Mark T Jones]

There are many different ways, ranging from full joint venture to simple split of revenues.

In every case the critical components are solid, in-depth discussions and a properly set up agreement

We all know what assumptions do!

 

[conorm]

Thanks for your response. Really appreciate that.

In terms of norms, what are the factors that go into a discussion around revenue share? I imagine it is a combination of each party's size, reach, what effort they put in, what finance they put in, logistics, etc. - but is there any generally held understanding that some factors count for more than others?

 

[Mark T Jones]

There may be norms within your sector - but hey don't need to define your deal

 

[fisicx]

Even with a collaboration there has to be someone in charge. If it’s you then you lead the discussions. There are no norms or standards.

 

[BrandLogoHere]

No rules as already mentioned, but a quick starting point could be:

1. Work out the costs to each party (COGS, Marketing, Delivery, etc)
- Let's say 50/50 assuming all costs are equal (unlikely)

2. Add a % for the party in charge of sales (you're cannibalising your sales, they're not)
- Now it's 60/40 in your favour

3. Add a % for marketing reach (let's say they have a larger organic marketing presence: email, social)
- Back to 50/50