Small Business

The Right Tack to an Alliance


By Karen E. Klein Q: I have spent considerable time developing a concept for a voyaging educational exposition. I need to find an international marketing firm that will get the word out and stick with us. Not having the funds for fees that such a marketing operation would command, I have been thinking of offering a share of the profits in return for successful work on their part. How might I best locate such a company? And what equitable percentage of profit-sharing would I offer them? -- M.F., Conn.

A: This is a tough order. Think about it: Not only do you need to find an ally with expertise in the travel industry, in international marketing, in attracting large sponsors, and in special-event and/or educational marketing, but you must find one that will take an enormous risk and work with you -- and do so without any payment up front! It might not be impossible, experts say, but it certainly won't be easy.

While most marketing and public relations firms work on retainer, some digging on your part may well uincover an entrepreneurial marketing outfit prepared to take a chance on promising ventures, says Dan Sondhelm, a partner in the Alexandria (Va.)-based SunStar marketing consultancy. "You'll have to sell yourself," he warns. "You'll have to have a good story, a good business plan, excellent revenue potential, seriousness on your part, and partnerships with key people in your industry, who have already been successful with high-risk, high-reward situations like this."

SCANING THE HORIZON. There are several ways to go about your search. Perhaps the most obvious would be to solicit referrals to marketing and publicity firms from your funding and/or management partners. Bankers, venture capitalists, and individuals on your board of directors who are (or should be) familiar with your business proposition may have some contacts with firms that might consider working with you on the basis you outline.

If you haven't got funding partners for the project yet, why are you worrying about marketing? The need for financing is certainly much more pressing. So, if you haven't yet secured investors, back up, put together a serious business proposal, and start shopping it to individuals and institutions that might invest.

Assuming you have a business plan and a management team in place, and you are working on raising capital, you might touch base with venture-capital associations, suggests Steve Rapier, vice-president of advertising and marketing outfit Artime Group. The National Venture Capital Assn., or California-based Venture Point may have contacts with marketing professionals accustomed to working with startups on tight budgets, Rapier says.

GET THEM ABOARD. Another way to go about your search is also one of the most obvious: Tap the power of the Internet. "Search for small marketing firms whose clients are similar to yours in terms of locations, types of businesses, size, and financial resources," Rapier suggests.

While your concept is unusual, you can probably find a trade association where your business would fit. The Internet Public Library has a guide to associations online, and you can also check your local library for The Business Organizations, Agencies and Publications Directory, a publication of Gale Group. Joining a trade association will not only give you a great place to find resources and potential alliances or partnerships, but it will also give you access to an industry services directory, says Sondhelm. "Vendors often pay to be listed as preferred vendors in these directories and they typically work fairly closely with other companies in the industry and know quite a lot about the business," he says. Since yours is a startup, finding vendors and suppliers with expertise and connections in the industry will be invaluable.

When you get to point of negotiating a deal with a marketing firm, the terms will be quite subjective. "Companies may work for anything between 10% to 50% of revenues for a specified time frame, when it comes to pay-for-performance pricing," Sondhelm says. "Alternatively, they may want a standard fee but agree to reduce it significantly if you guarantee them a commission on the back end or equity in the company."

DOT-COM HANGOVERS. Lynn Sarkany, of Marketfinders marketing consultancy, says that if she were approached with a deal like yours, she would take into account the overall profitability or profit potential and the countries in which you would want to concentrate your marketing efforts. "Immediate out-of-pocket costs would have to be paid by the client," she says. "These immediate costs would be for such things as writing translation of marketing materials into other languages, graphic design, printing, mailing distribution, and Internet marketing Web design. I would have to consult directly with the client and assess their specific situation to come up with a definitive percentage answer."

One caveat Rapier brings up is worth mentioning: "Many consulting firms, especially marketing firms, were caught up in the Internet craze and provided services to firms that offered a similar arrangement in lieu of payment. It is safe to say that more than a few may not jump at the chance of repeating their previous experience without a compelling business plan."

Have a question about your business? Ask our small-business experts. Send us an e-mail at smartanswers@businessweek.com, or write to Smart Answers, BW Online, 45th Floor, 1221 Avenue of the Americas, New York, NY 10020. Please include your real name and phone number in case we need more information; only your initials and city will be printed. Because of the volume of mail, we won't be able to respond to all questions personally. Karen E. Klein is a Los Angeles-based writer who specializes in covering covered entrepreneurship and small-business issues.


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