I Get A Consulting Proposal

Since I occasionally have exchanges such as this, I figured I will post it so people can get access to my thinking on these two topics... click to read on...


Hello John,

A friend of mine recently turned me onto your method (the small business import/export method) of manufacturing and product development. I have to admit that at first I was a bit skeptical, every source I've ever come across, with only slight variations, tells entrepreneurs that the only way to get a product to market is to:
1) Come up with a good product idea and prototype it
2) write the business plan
3) form a company
4) pitch it to investors
5) and when that inevitably fails to work, mortgage the house and take on lots of risk until you can demonstrate revenue.

But after listening to my friend go on about your methodologies and then finally watching the video clips you made available on YouTube (all 37 of them), I have to admit that I see the wisdom in using the approach you've spelled out. In fact I'm kicking myself a little for spending (seemingly wasting) the last year doing the above steps, 1 through 4, and the only thing that's really been developed in that time is my ability to write a business plan and give a power point presentation.

So I'm a convert, all hail the chief- but I'm not even sure if the project I'm doing is feasible with your method. My friend tells me that you consult, which I can't afford because I'm an entrepreneur that's been doing the wrong thing for a year, but I'd like to get your thoughts on some things. Do you think that there's a way that we could meet informally? Perhaps I could treat you to a beer or three- maybe you're a wine or sake lover like myself? I'll work with you if there's a way to make this happen.

Cheers,



Sean,

Thank you for your kind note...  I am somewhat overwhelmed between now an new years...  there is also a book out there HOW SMALL BUSINESS TRADES WORLDWIDE which you can read for free on googlebooks, and I have a class coming up ...www.johnspiers.com.

You can always email me questions, but first tell me, name a few of the companies you expect to be your customers...

John

On Nov 6, 2008, at 3:44 PM, Sean wrote:
John,

You're welcome- and thank you for your response. It's funny that you should mention giving your book away on Google books - you also mentioned doing that in your YouTube video clips - because as it turns out I did the same about an hour ago with a children's book that I wrote... it hasn't appeared online yet but I understand it typically takes a few hours.

I appreciate the offer to join your class this Saturday, I would but sadly even $135 is out of my range at the moment. It's a long and somewhat interesting story, but suffice it to say that my fiance and I are actually both employed but for different reasons not bringing in paychecks. So I'll have to pass this time around, though my friend who took your class at the UW raved about it. So there you go.

To answer your initial question let me start by saying that there are two distinct types of customers. The companies that would purchase my product for resale and the companies that would use my product for use. In terms of resale the target consumer is high-end baby boutiques - however I've been told that Costco is actively moving into the higher-end goods so they might be a target customer too.

In terms of companies that would potentially purchase my product for use (a market I have not explored very much) I see Starbuck's, Tully's, and anywhere that has an image=value model and odor is an issue is a potential candidate. Though perhaps less so now that the economy has turned down? But frankly I'm unfamiliar with their buying cycles and acquisition criteria to say with any certainty.

I am certain of the former - resale market - however.

-Sean


Sean,

Notice how far away from the question the answer is...?  So I'll press the point...  name a few resale market stores you'd expect to buy from you.

John

On Nov 6, 2008, at 9:46 PM, Sean wrote:

I see. Well specifically in this area:

(Editor’s Note: Ten stores are named, complete with email addresses, names deleted to keep this nonspecific).

Sean,

Very good...  now, within the next week... try to buy your idea from each of these stores.... maybe visit several times at different times to talk to different people...  ask as a customer of the store...  think of materials extraction, to processor to manufacturing to importer to sales reps to retailer... and grab this whole knowledge base by the retailer, as a customer, and find out what the entire system's intelligence is on your idea... do not go in as if you are in business... go in as a consumer of the item, and see what you can learn for free by grabbing the entire system by the retailers and shaking all the info you can, free of charge, in advance of doing anything at all regarding your products. AS the carpenters say, “measure twice, cut once.”

John


On Nov 7, 2008, at 2:52 PM, Sean wrote:
I've done this to some degree already, but as a business - talking to the owners and asking if they would sell my product idea, why they don't sell competitors products, what's their required markup, what's their buying cycle, etc. - but I think I could do more in-depth inquisition as a customer. Very interesting.

Sean

Dear Sean,

Right... plan B is to say to retailers "I believe if I produce (name your item), you will buy them form me.  Am I right?" So this you have done.

But it cuts off too much creative interaction and frank conversation, which you can incorporate into a product.  Plan A will get you that interaction. And as a customer you might get to the point where a responsible party, seeking what you wish to buy from the entire network behind the retailer, is forced to tell you "it is a good idea and does not exist..."  at which point you have a virtual invitation to start a business.  This, of course, is the Plan A approach.  Too late?

John


On Nov 7, 2008, at 6:43 PM, Sean wrote:

It's definitely not too late for the Plan A approach. I only spoke with the first three stores on that list and that was about ten months ago, so I doubt anyone would remember me if I was to re-approach them as a customer.

Thanks John!

-Sean



Sean,

Start with plan A now, and in about nine months you should be able to get samples from the supplier and enough orders form customers to cover the suppliers minimum production run in a workable amount of time, profitably... and then you are on you way...

John



John,

Wow, that week just disappeared into thin air... So you were saying- start with plan A. I'm wondering about the in-between steps and some other general entrepreneurial things that you might have some insight on.

What have been your experiences with partners? I started this project about a year and a half ago with two partners, partner one and partner two. Partner one was supplying most of the initial capital to rent a little shop and do the prototypes... but unbeknown to me he was dealing with some alcohol addiction issues and a highly unstable relationship, which caused him to become highly unreliable- not showing up to work, for meetings, showing up intoxicated, becoming irrational and wrecking things... Over the course of about 6 months it became evident this situation wasn't going to improve, and I was getting burnt out from always being the one carrying the torch. But the final nail in the coffin came when I showed up at the shop to finish work on a very nice prototype that I was going to use as a demonstration piece at an important meeting, and partner one had gotten drunk over the weekend and thrown all of the prototypes over the side of a ledge into some blackberry bushes and - the icing on the cake - changed the combination on the equipment locker... and forgot the combination. Perhaps needless to say partner two and I decided partner one's time was at an end with the project.

Partner two ended up exiting the company about 9 months later under much better circumstances. He and I decided that he just didn't have the time or will to be an entrepreneur, and he was adding any value to the company with his presence.

Then the design firm I had been working with for about a year to put together a deal for the past 4 months - flakes out and the deal falls through. There's a good story there too, but I don't think I have the energy to tap it out in an email.

But my experiences haven't been all bad with partners... I think it's just that some people have a very romantic view of what starting a business is actually going to be, and when the reality doesn't sync up with their vision many - if not most - people get disillusioned.

Anyway, enough rambling. I'd like to hear about your point of view.

Cheers,
Sean

Hey Sean,

To answer your question, I go back to customers...  when you start with customers, you will know whether or not you need partners, and if so, what partners.  It is clear to me from your stories that you and others "partnered" around a neat idea.  Organize around customers and you'll be tripping over potential partners who've spotted what you have. It is likely you have complimentary skills, and can work together.

Such is the story of Jobs and Wozniak at Apple, but there is a little told story about the third founder at Apple.  The fellow got nervous that Wozniak, employed at Hewlett Packard while working on the Apple computer, would bring down the wrath of HP upon all three if HP found out.  The third fellow sold out for $800.  As if HP could care at all.

Point is, there will always be big miscalculations and stories to tell the grandkids.  

There are no in-between steps, there is the first step... customers, and subsequent steps based on customers.  Customers are the most important, and the product or service will be the hardest part of the biz.  Start with the customers, then worry about everything else.

John


On Nov 18, 2008, at 1:47 PM, Sean wrote:

I can certainly see the wisdom in the customer centric approach on an abstract level it makes total sense, but break it down for me. Give me an example of a time you've put this into practice and it's both worked and another when it's failed.

***Your earlier examples of visiting the few stores, what I called plan B was along those concrete lines... in your case plan A would be to start by trying to BUY your idea from the retailers you'd expect to be your customers (you named them earlier...)

Working backwards... handknotted carpets with no dye and North Coast Indian designs...   Bingo...  another might be my book, that took 16 years to write because i kept putting the info in front of my customers (students) the examples are countless and boring because the process is not interesting to observers, it is only interesting as a participant

I think Forbes magazine does a god job of laying out examples of biz done right and wrong if you want case studies...

And in terms of personal experience, there was a time before I found the guiding light, where I made every mistake possible... Chinese medicine, satin gung fu shoes, dolls, arrrgghh...

John


On Nov 23, 2008, at 8:24 PM, Sean wrote:


If you would agree to mentor me through the whole process from beginning to end with my product, I'll give you 50% of whatever profits are realized from the first iteration of the process. What I'd ask in return is that you actually do the whole process with me there so I can learn from literally watching you work.

I'd like to assure you that this is a serious and legitimate offer I'm proposing. In fact, to assure you that I'm not just a random yahoo with delusions of grandeur (at least that's only partially true) I'd be happy to take you to lunch downtown and meet my attorney,. I've heard you're not terribly fond of attorneys, correct? Well I think he might change your mind about attorneys- he did mine!

I'm happy to converse over email, on the phone, or meet in person - probably all of the above in due time - to address any questions you have. I'd also be happy to give you whatever references I can muster, which you could check out in whatever fashion suites you best. And in exchange I'd hope that you'd be willing to provide a quid pro quo set of references that I could check out... except I already have a pretty good idea that you're legitimate, but due diligence is never a bad thing.

Sean


Dear Sean,


Your offer is very flattering... but first regarding attorneys, I don't know where your apprehension of my view of attorneys would come from,... a month ago I was recruited to give a presentation to a dozen attys at a top firm in Seattle, and they earned CLU credits for it...  I don't believe lawyers have a role to play at the small biz level, and if I have any objection at all it is to biz people who convert biz problems to legal problems that are the trouble... lawyers don't troll small biz for work... it is biz people running to lawyers who cause the problems...  lawyers just get blamed for doing their job...



But back to your offer... I have a practical problem:  I've estimated I need to live 900 years to work through the projects I am interested in.  I had a $10,000 review fee for consulting, but the problem was people paid it, and I got stuck working on other projects. So now I have jacked my fee up to $25,000.  So far so good.  

Aside form the fact you need no mentoring, you would necessarily be unhappy with the deal you offer.  Since any success would necessarily be 99.9% yours, you would in time be very unhappy when you found yourself contractually obligated to give me 50% of the profits.  I never take deals where I know the other side is getting a raw deal.

Your offer underestimates what you bring to the table, and how the business reflects you.  The business is you.  You offer overestimates my worth.  At best I save you time and money, any success is yours.

You recently decided the powerpoint presentation/venture capital route is a nonstarter.  The heart of that is the lure that you can live off other peoples money for  while as a biz gets jump-started, possibly.  Offering me participation in profits for assistance is still along those lines. Things will start happening for you when you ignore resources (like me) and focus solely on the opportunity, the customers.

Your offer is a bold move.  So you got a hard answer.  I hope it helps.

And buy the way, what help you were willing to pay for you've been getting for free.

John

On Nov 25, 2008, at 1:16 PM, Sean wrote:
John,

I can understand how you might not be interested in yet another project. I haven't even completed a single deal and I'm having to turn down other projects too. So I can only imagine how someone with your experience and exposure is fairing in that department... super-busy I imagine!

And I do appreciate your consideration of my profit margins in this venture. That said, perhaps you didn't catch it before, but I'm only offering 50% of the realized profit on the first run. I would say that for what I'm asking from you in terms of on the job training the value you would provide me is well worth a 50% cut- at most $50k?

But your first point still stands, you don't have time for yet another project and clearly money isn't a big motivating factor for you. So how about this?... Since what I'm most interested in on the job training perhaps we could come to an arrangement that involves one of your current or upcoming projects?

-Sean

Sean,

$50K is 50% of 100K, which is the net realized profit of the first run?  At 10% net, that first run would have to be in the million dollar range. If that is your thinking, then back to the drawing board.  A first run should be more like $5k or 10,000, and subsequent transactions for modified items.  You are thinking of big biz as a model, which won't work.  What will work,  "just get started," needs no more instruction from me.  It would be a waste of both of our time for you to apprentice with me.  It is the customer you need to "apprentice" with, not me.

You can do this if you approach it as a small project that will grow where it needs to...

John

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