I run a web development company myself in India. Recently i received an offer from a hosting company in USA, their offer is we do their design free of cost and in return they will send us all customers seeking web design services to us.
Now, if we do their site and not get paid and nor get any work through them, then its a total loss for us. Whereas, the other company has nothing to loose.
So i thought the only way, i could protect my interest is signing some kind of agreement with them, which specifies that they provide web design customers by doing local ads & online marketing.
Now should i do this? If yes, then what are the key points i should mention in the contract.
I shall look ahead to your advice.
I don't think you can protect your interests as long as you let them keep the ball on their side of the court. You've had a lot of good advice in this thread. Tired, but true-- at the end of the day you will need to make your own decisions.
Thanks for your views. I really appreciate it.
Yes, they seem to be a start up sort of company, so actually 90% chances are they will fail. The only reason, i was considering this because, they are willing to take one ready made design, so all we have to do is code it. So at max we will invest 1-2 days time.
If the gamble pays off, then its fine, otherwise we just have to forget it as one bad experience.
Regarding your 2nd suggestion, about "I would consider putting in a limit for how much the referrals can amount to, and then you should e.g. start paying a percentage of the revenue to them, or provide some other goodies. " i quite like it.
If they really wanted to offer you something of value, then IMO they would be offering something like free or discounted hosting for your site until their bill with you was paid in full. Or they might offer free advertising on their web hosting site for your web design site, again until their bill was paid in full.
Yes, they are agreeing to provide free hosting to us.
They had posted a thread in one of the forums, to which i responded. So this lead is not from any referral.
I am aware of the risks, according to you what are the possible ways, i can protect my interests.
This is the oldest trick in the "How to Start a New Business on the Cheap" book ... find someone that will provide what you need up front at no cost and offer them something in the future that may or may not happen.
Does that mean it is a guaranteed scam and they wouldn't send you clients? No ... but whether it's on purpose or simply that they don't end up receiving much business to pass along, the odds of you receiving the amount you would have received or more are slim.
As it has already been mentioned, if you are interested in exchanges like this, make sure there is some sort of equal arrangement. If they are a host as Linda said, I would think that offering you free hosting would be a simple way to pay you back for part of the design, or perhaps working out a half and half agreement where you would at least receive some income from the project.
I would also inquire with them on how they found you to start with. This could shed some light on whether they are serious or not. If they just randomly did a search for designers and contacted you with no referrals or anything to go on, offering you this "excellent" deal to send you all this business ... seems odd that a serious business would want to form an agreement with someone they don't even know anything about. Doesn't seem like a good business model to me. If they came from a referral, then perhaps I'd give it more thought. But a random company that found me and offered to send me all of their design business even though they've never worked with me (especially if they claim they will be marketing the web design side for me).
Also, I wouldn't ever consider forming a partnership / arrangement like this without working with the company first anyway. Who knows how well you would work together, what sort of communication you would have with them. They may be horrible at selling to the client or have too high expectations or late to send payment, etc. I would tell them that you would be willing to work with them on the next client they receive and see how the process goes. If it works well, then you can discuss an arrangement for their website. Most likely they will claim they can't do anything until their site is up (which any good business can still find clients without a new / fancy website), so there are even more red flags to show up.
Pretty much one of those "if it sounds to good to be true, it probably is". Another option I've had proposed to me is setting up an e-commerce site for free and I would receive a portion of the profits from every order placed. It always sounds like a GREAT way to make easy money ... but there really isn't "easy money" out there.
Of course that's just my philosophy on it. To each their own.
Just a note: The bottom link in your signature isn't working right now.
However, I did take a look at your top link and your web design portfolio. Why would you even consider entering an agreement to provide free web design? From what I saw in your portfolio, you certainly don't need their "promise" of future referrals.
On reading your post, my first thought was that the hosting company is out to get something for nothing. Personally, I would walk away from this one.
If they really wanted to offer you something of value, then IMO they would be offering something like free or discounted hosting for your site until their bill with you was paid in full. Or they might offer free advertising on their web hosting site for your web design site, again until their bill was paid in full. Or they might offer to promote your web design as a value-added feature for their site. Such as this service offered by Bluehost.
Don't start this on the basis of a promise. If they want a free design, then make them offer something concrete and if you do, start on the right track by following Pacifier's advice.
First of all you should assess what kind of people and company this is. E.g. are they just starting out, or do they already have a solid customer base. Are they trustworthy. What kind of business have they done before etc.
Second I would make the contract more focused on result, rather than the means they use. You could say that by date x their referals shall have brought in revenue in amount of atleast y, and if not, they should pay you z for the design.
If they're just starting out, the odds is that they will not make it (most companies fail). Without a really massive upside, I would hesitate to make any kind of agreement where you provide value today, and they provide value some time in the future. Even if you have a contract, it's a gamble, with the odds against you. Because most likely they'll either be dead or in trouble. So the payoff must cover that risk.
Also, since you're located in different countries, there is an extra risk that they will just screw you, with you having little practical means of enforcing the contract. Which makes the assessment even more important.
Finally, for how long will they send customers to you? I would consider putting in a limit for how much the referrals can amount to, and then you should e.g. start paying a percentage of the revenue to them, or provide some other goodies. Their memory of the "pain" of not having a website will be long gone in the future. And their motivation for keep sending you customers will rapidly decline. Be proactive. Keep them happy with the agreement.
Just a quick tip from me, perhaps have something in the contract to have a "This website was produced by <your brand here>" in the page - like in the bottom right hand side. If their willing to promote your business elsewhere then they should be willing to go along with it and it's a nice way to get an unobtrusive (key being don't make it too in their face) link which could help promote your site - whether or not their decide to send customers your way. If you're doing the work for free and retain copyright for the work, it might be a nice small way to perhaps at least give you credit where credit's due
Take it from me, an agreement with a company in the US doesn't make it a sure thing. It takes some doing to enforce such an agreement, and usually it would cost more to actually sue than is worthwhile.
Try to develop the relationship to the point where you are feeling fairly confident and trust the partner. If you can't do that, I'd skip it unless you are in the mood to take the risk.