Finding and evaluating revenue sharing partners
When looking for suitable revenue-sharing partners, you should start by evaluating your operating ecosystem and identifying the competition, marketing influencers, skilled professionals, and other stakeholders.
Suppose you already have professionals offering fee-for-service and you like their work. In that case, you can approach them to become your revenue-sharing partners to increase their performance and buy-in. You can also approach marketing and social media influencers, and bloggers with a significant following among your target demographic.
Once you find potential partners, you need to evaluate if they fit into your business model. But, first, get to know them personally and do your due diligence.
Deciding on the type of partnership
There are three primary revenue-sharing models you can choose from when deciding on the type of partnership you want. These include:
- 50/50 split: Revenue sharing puts all parties on equal footing. However, these partnerships tend to be lopsided and benefit one partner more.
- Royalty: The business pays a percentage of the total amount of revenue to an associated party as royalty based on performance.
- Retainer with Royalty: Here, the business pays an associated party a flat rate fee and royalties.
- Drawing up a revenue-sharing agreement: When drawing up a revenue-sharing agreement, you should agree on a standard reporting method and schedule and a means of verifying the numbers, such as an audit. Additionally, as the responsible party, you need to stick to the agreement for it to work. Appoint a point of contact for all associated parties in your revenue sharing agreement(s) to handle all queries, suggestions, complaints, and follow-up.
In addition, ensure that the revenue split is clear and has no ambiguities. It should also be relatively easy to calculate how much you will pay your partners. Finally, ensure your agreement accounts for different scenarios, such as selling the business, cloning the idea or business, terminating the partnership, handling intellectual property, and handling liability issues.