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Brave New World

New Business % Cut

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Would really value some impartial HPC advice.

I work at an Advertising Agency (yes I know we are largely ego driven so and so’s but I haven’t got a big busted red head working under me)

One of my friends has an automated marketing programme that is a real industry-leading piece of software, enabling a lot of cross channel automation across a number of marketing and Sales channels.

I have got one of my suppliers very, very interested in this – they have a franchise base of 230 sites nationwide who potentially would all offer this service to their own high street customers. So this deal has got massive scale opportunities. At the moment my friend’s new company deals directly with SME’s, whereas these franchise sites would have the potential to do all the nitty gritty (design, customer liaison). He had originally set up a web marketing company at the age of 19 sold it out 10 years later to another ad agency from where he was inevitably released after 18 months. So this is really important to him and he has a great product but as yet 4 to 5 months in after successful testing he is still dealing with piecemeal briefs from SME’s.

Now if I could consult your commercial experience I would like to test if my ‘take’ from setting up the deal and potentially running it in the background (I would still have my day job so would be a tricky balance) would be ok.

I would want to take 10% of revenue made on the account. % GP is too hard to ascertain and because of it leads to suspicion! I see a % of revenue as the clearest way to take my rain making fee! Is the amount I ask for too low? I had thought 14% and then down to 12.5% but wouldn’t to get people’s feedback who might have had experience in this area before.

Any feedback would be welcome!

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I would want to take 10% of revenue made on the account. % GP is too hard to ascertain and because of it leads to suspicion! I see a % of revenue as the clearest way to take my rain making fee! Is the amount I ask for too low? I had thought 14% and then down to 12.5% but wouldn’t to get people’s feedback who might have had experience in this area before.

Any feedback would be welcome!

I'd say the price will be a function of the value you offer.

If your mate could never get this business without your help, you could charge as much as you want while what's left is still worth his while. If it was me 50% would be the upper limit (50:50 cut.. can't say fairer).

If your mate already knows who this company is, could win the business himself with some effort or has plenty of other offers lined up already then you are less valuable to him. Your cut would need to reflect that. Typically companies pay distributors around 15%-20% commission in my experience.

If your mate could EASILY get the business without you.. but you being there helps grease the wheels then asking more than 5 or 10% is perhaps being greedy.

Only you know how much he needs you.. you have to asses this, set your price accordingly and then take a gamble I'm afraid.

That's MHO.

From the brief detail you have given I'd say you are probably around the 15% mark..

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It has long been a good 'trick' in Hollywood to sign actors, writers, etc, to a percentage of a film's sales - the revenue - as opposed to the gross.

Plenty of newbie Hollywood writers have fallen for this in the past, walked out of an LA Studio clutching their contract which entitles them to X percent of the sales from the film script they have written... only to later discover that, in Hollywood parlance, no film makes any revenue, sales or profit - there is only gross.

In other words, lots of clever accountants make sure that virtually all Hollywood films never make a profit. They make vast sums in gross but the accountants allocate it to production, below the line production, above the line production, marketing, etc, etc.

I am not a lawyer or a solicitor or any kind of legal expert. I am just a sad, lonely person who spends too much time on the internet ranting off about stuff.

Get legal advice if in doubt.

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I am not a lawyer or a solicitor or any kind of legal expert. I am just a sad, lonely person who spends too much time on the internet ranting off about stuff.

Get legal advice if in doubt.

Very good point..

Rule number one in business.

Make sure you get paid!

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Thanks both for your feedback, really appreciate it as this is relatively uncharted territory for me.

I think 15% would be fair – I am getting him access to the biggest contract he has ever won, the key to this is the size of scale and the fact that he will not have to go chasing revenue with this being akin to a wholesale purchase, giving his product coverage in 230 high street locations. This is not something that he had thought about nor with the current business make up of his new company does he have anything as comparable in size of order value.

That said he is supplying the product and would supply the ongoing tech service to the potential new client.

I do offer him considerable scope of contact with potential other suppliers – a high street fashion retailer that has an online offering and also a big wholesale company who are pushing online ordering in a big way. Both routes I have yet to pitch to my clients but I offer him real commercial viability to get into big companies as opposed to your regional SME.

That said I do not want to take the piss and I think 15% for each ongoing year of revenue makes it worthwhile for both parties, especially as I have an existing relationship with this potential big win. I would offer the ongoing relationship management and look at ways of growing the revenue that perhaps he doesn’t have his side. For future business wins with other clients I would then work on a 5% kick back on revenue, with the potential (and something we have discussed) that I work on behalf of his company a few days a week once – that said that is a couple of years down the line!

I have also looked into getting a legal document drawn up for this so it is water tight and I don’t get jibbed off after a year!

Once again thanks for imparting your experience in this area, being a youngish whippersnapper on HPC it is most welcome.

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  • 284 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?


      • down 5% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%



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