Sunday. Ended up being a fairly distracted day. Focusing lots of mental energy on the German deal and it’s ultimate value.
On one hand it’s a very interesting and challenging project and restores has been created with this type of scenario on mind. however the nagging issue for me is the fact that I would be using someone else brand and also their supply chain. From the outsider point of view, the value creation in this case would be that of service provider.
So, with these constraint and exit of any sort becomes very difficult and definitly would not yield a 20x return. So, 2nd consideration is then opportunity cost of spending 12 months on one large project, albeit strategic, and giving up 10 or 20 smaller projects instead. the 10 to 20 smaller projects would be significantly easier to do, and spread the risk across 20 projects.
So, the essence of this is that the German deal needs to be able to stand on it’s own two feet. So, this would mean developing a new brand, carrying that brand into Europe. There would still be the risk of a single supplier but with the risk of branding removed, I would feel much more comfortable with the value proposition. For example, if the supply became inefficient and too costly then at least there would be an option for additional suppliers.
Perhaps one way to do this would be to lease the brand for a period of 5 years, with the strategy of moving this brand into a RedStores brand. We would still be subject go supply side risk, but in a way, this new venture could be much more easy to divest if need be. The win for the dlm group would be that they would get 5 years of strong brand promotion, and at the tail, supply part. If the e side of business got flipped they would not only cash out but also (if wfficinf) continue to supply.
So, the key to this deal is brand ownership. Ownership of brand would mitigate the risk on the supply side. In fact, with this strategy, I think it would be very easy to raise solid funding if need be. In this deal in don’t think 3rd party funding will be necessary but assessing the ability to raise funding using an MOU is a good basis of the test of the deal.
Having said all this, I feel my day was distracted processing this huge volume of info, and it didn’t let me focus my full energy on Alex. Although we did manage to go for a nice walk today and also managed to put together Alex’s chores an allowance chart. We also played nerf darts, which was very nice, BUT instill found myself not able to detach from the business side.
Now it’s almost 1am, was up at 5am this morning, so a bit tired. will be good to sleep on this. Bottom line is that the businesses are meant for each other – if you have that – then the rest can be solved with creative deal structures.
It wasn’t actually till in wrote this blog till i realized how much comfort I got from the thought of controlling the brand. Brand ownership is the game changer of thoughts for me.
Tomorrow packed day, corporate restructuring paperwork need to move, prep for my Ecommerce presentation, accounting check, money movements, etc. Where is the simple life?