Olivia Martin Advisory memo Decision Call · USD 180
The partnership is working. The revenue share is what is wrong.
60 minute call, 11 November. Reviewed and signed off by Olivia Martin on 13 November.
You asked whether to end the Halvorsen partnership. It produces 28 percent of your new customers and loses you money on every one, which sounds like a reason to end it and is actually a reason to fix the terms you agreed in 2024 when you had no leverage.
At a 40 percent revenue share for the customer's lifetime, Halvorsen customers contribute 11 percent less than a direct customer over three years despite costing you nothing to acquire. The structure is wrong, not the partnership: a lifetime share on a subscription product is a permanent tax on a one-off service. A 40 percent first-year share with nothing afterwards would be worth more to you and, on their own economics, is likely acceptable to them.
The question
What was asked, and what was reviewed
As you put it: "They bring us a third of our customers and I think we are losing money on them. Do we get out?"
| Reviewed | Source |
|---|---|
| The partnership agreement, 2024 | Supplied |
| Revenue by acquisition source, 30 months | Supplied |
| Retention by source | Supplied. Clause 2 |
| Support cost by source | Supplied |
| Your direct acquisition cost | Supplied |
| Halvorsen's public positioning and pricing | Public |
| What Halvorsen gets out of it | Inferred. See clause 4 |
The numbers
A Halvorsen customer against a direct one
| Halvorsen customer | Direct customer | |
|---|---|---|
| Acquisition cost to you | Zero | USD 310 |
| Revenue share paid | 40 percent, forever | None |
| Average tenure | 41 months | 29 months |
| Support cost per year | Lower | Higher |
| Year one contribution | Higher | Lower, after acquisition cost |
| Year two contribution | About equal | About equal |
| Year three onward | Much lower | Much higher |
| Three year total | 11 percent lower | Baseline |
The tenure figure is the interesting one. Halvorsen customers stay 12 months longer than direct ones, which normally makes a channel more valuable and here makes it less, because every extra month is a month of paying 40 percent.
Options
Three routes
End it
Loses 28 percent of new customers with nothing replacing them, and your direct channel is not currently capable of absorbing that. It also ends well only if you handle the existing shared customers carefully. This is the worst of the three.
Renegotiate to a first-year share
40 percent of year one, nothing after. On your numbers that makes a Halvorsen customer worth 23 percent more than a direct one over three years, and it is a structure partners in their position usually prefer, because it front-loads their cash.
Leave it and grow direct
Treat Halvorsen as a fixed cost of a channel that works and spend the effort on direct acquisition instead. Reasonable if you think renegotiating risks the relationship, and it leaves a permanent 11 percent on the table.
Uncertain
What I do not know
| Unresolved | Why it matters |
|---|---|
| What Halvorsen's economics actually are | My read on why they would accept is inference from their pricing and size, not knowledge |
| Whether the agreement can be varied | I read the commercial terms, not the amendment or termination clauses. Your solicitor should |
| Whether the relationship can take the conversation | You know this and I do not |
| Whether existing customers would transfer to new terms | Usually they stay on the old ones. That changes the value of the deal and needs to be part of the ask |
Next
What to do
- Have your solicitor read the amendment and termination clauses before you raise anything. Ten minutes of reading changes how you open the conversation.
- Decide what you want for the existing cohort. Asking to move 30 months of customers onto new terms is a much bigger ask than new customers only, and conflating them is how this stalls.
- Open it as a structure conversation, not a rate conversation. You are not asking them to take less; you are proposing they take more, sooner.
- Have the year one number ready at 45 percent and the walk-away at 40 for new customers only.
- Whatever is agreed, put a review date in it. The 2024 terms had none, which is why you are here.