One of my business partners and I were approached by a company coming into Canada to help them set up their business in the Canadian market. The owners were manufacturers of an offshore product that has done well in Europe, but has no real presence in Canada. They wanted help with all of their marketing for Canada and they wanted us to set up a distribution channel as well as manage it. When it got to contract negotiations, it became abundantly clear that they wanted us to do this for "free" and take a risk in their business in the hopes that the product will sell here in Canada. The idea was for us to give 4 days (8 days for both) each of our time for their business to help it get set-up and running. Once all of the work was done and "if" the product was one that would sell here, and "if" they could meet the obligations of the distributors here, and "if" they could deliver on time - we might get paid. The key here is also at any point in time after we had done the work, they could cancel the contract and not pay us. If you think it is uncommon, it is not and is one big mistake new business owners make. They believe they created the next greatest idea and that everyone should believe in it as they do and want to jump on board and help them when they have not put any skin in the game.
An idea or a product is worth absolutely nothing anywhere if you are not able to execute. Whether you are looking for others with skills that you do not possess or an investor for your business, you cannot expect others to risk their business in your idea, when you are not doing the majority of the work. If I had a nickel for every start-up who wanted to provide equity for work they were not able to perform on their own, or wanted us to find investors for them when they had not invested any money of their own in the business - I would be a millionaire today. The funniest part of this is they usually want to maintain 90% of the company and they only have the "idea" and everyone has the skill and the money. One of the key ingredients to a successful business is the team you put together, but it is very important that if you ask others to invest their time or funds in your business that you can truly look yourself in the mirror and say you have done the same.
If someone came to you and said I have this idea that is worth millions but in order to make it a reality,but I need money and skills to pay for a business plan, a patent lawyer, people to go out and market and sell the product, a supply chain and I want you to give me money or provide skills for free because I am the one with the idea - would you believe that was a reasonable request? The answer is no, so before you want others to believe in you and your idea, you need to be realistic about what your idea or product is worth without help or funding from others.
Before you ask other people with skills and money to work for "free" or take all of the risk in your business, ask yourself if the shoe was on the other foot would you do the same. There is also the old saying - you pay nothing - you get nothing. The manufacturer told us the reason they were doing this is because they had been burned in the past by sales people and now they wanted others to take the risk. What this says is they did not know how to hire the right sales people and did not vet them and most likely wanted to pay them in peanuts instead of money and then wonder why they did not get the sales they needed. They then determined they need help with setting up everything in the country, approach people with 50 years experience between them and want them now to take the risks for their prior mistakes without any risk to themselves.
If you are starting a business and lack all of the skills of funding to get it going, look for people that can act as business advisors and sit on your board. There are organizations that are funded in Canada by the government in the provinces that can help you get a start with some free services to let you know what you don't know and can also help provide a reality check. Contact the Ministry of Economic Development within your province to find out what is available. These organizations will not let you present to investors until you have everything in place. Before investors will usually talk to you, the idea must be real such as prototype at minimum, patents must be under way or in place if applicable, you usually have to either have sales or signed contracts with customers, there needs to be proof that you have invested your time and money in the venture yourself or through family and friends, and that you have the skills either yourself or on your team to execute your business plan. In order to get to this point, you are not going to get there by getting inexperienced people to do work for free. If you do not have the skills to execute, you need to be ready to either pay for the service or give up a larger piece of your business. Having a 100% of nothing is nothing - having 10% or $1M is $100,000
RK Fischer & Associates