sonic7 wrote:
I’ve noticed this most engaging thread has gone a little quiet of late, so I therefore must assume that either Staurt and Jack are in the depths of negotiation, or that they have reached an impass.
Nigel, you have interesting observations and interesting ideas. I don't think we've reached an impasse as such, but it's iffy enough that I don't want to stand in the way of anyone who is ready to meet Stuart's terms.
Terms which, BTW, have improved hugely from the initial $40,000 down plus 7.5% royalty of his original proposal, which Stuart described on p.4 of this thread as...
> Gosh it sounds a very attractive deal to me!
> I wish someone had offered this deal to me instead!
...which left me thinking, "My goodness, Stuart is a talented designer and developer, but as a businessman he is a major loon," an opinion which I have since revised.
His terms are now (as described on p.6 of this thread)...
> perhaps the royalty payment should be $100 per unit and the licence fee reduced to $15000
> inc a shipped sample LHD kit to take a jig from and I will include moulds for the grp.
...which I consider reasonable, and well worth looking into if one had an extra ten grand to toss out there to prove one's sincerity/dedication/manhood. Including shipping there's $5000 worth of real stuff in that offer, plus the royalty payment is dropped to only slightly over 3% and since he wanted an amount rather than a percentage, a small kit price increase drops that royalty to 2-1/2%, which is workable from a 15% manufacturer's profit margin.
However, I can't do it. I don't have an extra ten grand for that, and having been on both sides of royalty agreements, I favor arrangements where all parties gain if it works, and no parties gain if it doesn't. And since Stuart wrote...
> Nothing to stop someone interested and capable making an offer.
...and since his second proposal, though beyond my abilities, was rational, I made him an offer.
I spelled out exactly what I had to put into a US Exocet project ($20,000 and a business year) and how I would like us to invest that money (in brief, I laid out a $10,000 marketing plan that I think would provide big impact for the investment, and get the business going with a bang). I offered Stuart...
> I'll give you your choice of $100 per Exocet kit or
> 2-1/2% of gross Exocet sales (not including whatever it costs me to make the
> Exocet meet US market specs) as a royalty for the design and the name. I'll
> buy a UK Exocet kit at retail and pay the cost of getting it here (including
> the cost of you crating it) <snip> Your costs will be covered and you'll start
> profiting from my first sale, but there will be no up-front fee.
...plus I'd pay to implement the marketing plan I'd proposed, and I've explained why I felt that proposal would offer him a better payoff than giving him all the marketing money up front and dribbling the Exocet into the US market on word-of-mouth.
He said no, he won't accept anything less than $15,000 up front, so okay, there it is. The Exocet license isn't valuable to me unless I have money left for marketing it here, so while we're not at an impasse, we clearly need additional funding. Today he sent me a message telling me to get on with it, so I'm going public with a funding request:
Would anyone out there care to invest $10,000 in Stuart's up-front licensing fee? I have all the tools and all the suppliers we need to be manufacturing Exocets in the US within two weeks of receiving the drawings and CAD files for the chassis, and the fiberglass molds for the body parts. My fiberglass suppliers stand at the ready, my preferred welding vendor ditto, I have a backup welding shop if there's a problem with my first choice, and yesterday I got favorable quotes from 4 to 20 pieces of the main tubes rolled to a radius between 9' and 12' (which I think covers what the Exocet uses, though I haven't seen the drawings) with a three day delivery. We're good to go, I'm prepared to put up $20,000, I have the facilities leased, and I'll share my marketing plan (off list) and other details of my business plan with any potential investor who is curious. I think the profit potential is good, but I'm not ready to mortgage my house for it and I don't think you should either. I'm risking $20,000, Stuart is risking the difference between $10,000 plus 2-1/2% of gross, vs. what he'll earn if he doesn't have me as a licensee, and that's all either of us is willing to risk on US-made Exocets.
I've proposed this to a couple of friends, and since their continued friendship is worth more than $10,000 to me, I've told them what I see as the unique risks in this offer (as opposed to the usual risks under the general heading of "sometimes businesses don't make money"). And since my continued acceptance on this forum depends on me not being part of a con, I'll tell y'all what I told them:
--Stuart may know something he isn't telling. For some reason he finds $10,000 in pocket now as more appealing than kick-starting the US business with $10,000 of seed money. He hasn't suggested any alternative promotions or marketing, and all I can assume is he doesn't see significant value in hitting the US market with ten grand worth of guns a'blazin'. Admittedly I know more about the US/NA market that Stuart does, but he knows more about his product and the support he will provide than I do. One of us is wrong and it might be me; this market may not be worth pursuing. He wants (and indeed says he deserves) to profit even if the US market is 10 kits a year, but where does that leave you and me?
--The necessary support may not be there. I suspect the chassis drawings may not exist. As best I can tell, the build manual is 64 words sandwiched between a paragraph on how to strip a Miata, and the line "THEN HAVE MASSIVE FUN". I'm getting the feeling there will be massive work to do before the Exocet meets the expectations of American buyers seeking "THE EASIEST KIT CAR IN THE WORLD TO BUILD".
--The development implied by "I have spent a small fortune developing the Exocet" and "Don't expect to get a fully developed and tested product that folk like to drive and look at though for less than $100,000" (p.3) may not be what we think. I don't know what he considers a small fortune (which is what he spent) and he may feel that what would take you and me $100,000, he can do with his genius and 1500 quid. A potential investor asked me about the Exocet's front /rear weight bias, I couldn't tell him and Stuart can't tell me. I've been asking Stuart since day one, what test data do we get for our ten grand licensing fee, and it's been pretty quiet. I will say though, if I were offering a production sports car kit, fully developed and tested to the level I'd expect with my skills and $100,000, I'd know which end was the heavy end.
But then, there are unusual opportunities in this offer too.
--Stuart is a brilliant designer, and I'm not the only person who thinks so. The MEV Owners' Group is filled with praise and though I haven't read any of it but quotes snipped from stories, apparently the UK kit car mags are just gaga over Stuart, MEV, and the Exocet. Us mere mortals may indeed be unable to achieve what Stuart can achieve, and no, I'm not being sarcastic.
--I've read the MEV Owners forum from cover from beginning to end, and have never read even a whisper of a dissatisfied MEV customer. Even if Stuart is paid up front, based on his reputation I'd expect him to follow through with the agreement.
--He says he's flexible and open to offers. Maybe he's being particularly hard on me because either A) he hasn't researched my record/reputation/capabilities, or B) he has, and didn't like what he found. He may be more flexible with you, and it might be better to have you be who deals with him, and I'll step back and concentrate on the manufacturing part.
And here's one I just learned from him today:
--Stuart is working on an (and I have chosen this word with great care) incredible profit margin. A margin unheard of in my long experience as a manufacturer and a designer, as a licensee and a licensor. A profit margin that would make a crack dealer blush. I haven't a clue how he's doing it, but if his techniques are transferable to the US economic environment, you and I are going to make a bundle as his Exocet licensee.
If you'd like to go in with me on this, let me know off list. If you'd like to go in this by yourself, let Stuart know off list. I don't know what his deadline is for me yet but there's no reason for you to wait for it, anyone who wishes is free to approach him directly. If partnership with me won't work for you, or you simply feel you'd be better off doing this yourself, don't let me stand in your way.
Nigel, the idea of...
> building/driving and owning one before making any further business and financial commitment
...does not appeal to me because, to me, the whole point of licensing the Exocet is that it's ready now and could be in production here by the end of this year. I think that's important to get the jump on the spring and summer markets. That's what makes it worth paying a licensing fee, that's what makes it worth paying retail for a sample Exocet, that's what makes the Exocet more valuable than what Stuart suggested as "have a go with your mates and spend say $20k building a prototype". I think I've got skilled and talented "mates" on this forum but we sure can't have a clean-slate kit ready for production by Christmas. I like Chris's car better, and if I made my own I expect I'd like it better still, but Stuart's car is ready for production right now.
So I don't think we're at an impasse. Stuart has made his position clear, and for me to meet his terms, and still have enough left over to pursue the US market, I need a partner. And I'm not looking for a silent partner; I'm looking for a partner with some business sense, who can review Stuart's proposal and determine if it's worth our investment.
And Nigel, if you're right that...
> I’d like to see MEV make available a limited quantity, of say
8~10 kits or say a months supply of Exocets kits to the North American (NA) Market.
...the NA market already wants 8~10 Exocets a month, then maybe we don't need marketing at all.