Business Owners - Advice please
Discussion
I'm trying to get a feel for the market at the moment for a new business I'm planning on starting. I've worked in sales for over 14 years(mainly IT related) and following a take over of the last company I started up I am coming to the end of the 2 years that i was contracted to carry on in my position.
I am looking at starting up my own sales/marketing business with more emphasis on the sales side. I plan on putting my money where my mouth is and going at it commission only but on a high rate. If you owned a business would you use an external person working purely on a no results no payment basis? I'm looking at focusing more on startups/smaller companies looking to grow etc and just need some general feedback before I take the plunge!
I am looking at starting up my own sales/marketing business with more emphasis on the sales side. I plan on putting my money where my mouth is and going at it commission only but on a high rate. If you owned a business would you use an external person working purely on a no results no payment basis? I'm looking at focusing more on startups/smaller companies looking to grow etc and just need some general feedback before I take the plunge!
No sale no fee work is a huge plus for small risk averse software companies. We are even the kind of firm who could use you. Sadly we already have in place a solution - so we aren't a prospect for you at the moment - but in the future you never know...good luck.
The percentage of sale value you get will depend very much on how "oven-ready" the sale is. If its - I've got an interested bloke, come demo to him - its not going to be so much. If its - "here's your share chaps, now come do the install" it will be a lot more.
Also - you will get a MUCH smaller percentage of service oriented work (less than 10%) versus product sale...for obvious reasons.
The percentage of sale value you get will depend very much on how "oven-ready" the sale is. If its - I've got an interested bloke, come demo to him - its not going to be so much. If its - "here's your share chaps, now come do the install" it will be a lot more.
Also - you will get a MUCH smaller percentage of service oriented work (less than 10%) versus product sale...for obvious reasons.
thanks for the replies - I guess one of my main concerns is how to avoid the stitch up as well. I would envisage doing a fair amount of project work based on 3 months etc and I would be worried about contacts I bought into the company who purchase after those 3 months and not seeing a penny out of it etc. I prefer to do my business on a trust relationship but there are so many others who don't!
Trust. Its so much easier to trust someone when you have a contract in place! 
I would go for registered prospects. Included in the prospect definition would be Company, Contact, Expiry date - say one year, Product or Service. If you are trying to sell multiple products/services each one that is a realistic prospect to be registered. That way when the service guys go in, the client loves 'em and buys something else off 'em you both know where you stand (i.e. its in black and white as to whether or not you registered as trying to sell it).
Again - it all depends on how far down the road of the sale you want to take it. We, for example, pay "Introduction Fees" when introduced to someone who might be interested to whom we subsequently make a sale. That fee is going to be between 5% and 10% - but the sales guy won't have been involved other than the first intro. This sort of thing is good for relationships where you are really there selling something else but spot a need - gravy, basically.
If you are prospecting specifically you are going to want a (MUCH) higher percentage.
If you take over all marketing and sales, prospecting and do all the initial demos your work could be worth as much as 50% of licence and 20% of services...etc
This stuff you simply *must* have either in a contract or, at the very least, a binding letter of intent.
I would go for registered prospects. Included in the prospect definition would be Company, Contact, Expiry date - say one year, Product or Service. If you are trying to sell multiple products/services each one that is a realistic prospect to be registered. That way when the service guys go in, the client loves 'em and buys something else off 'em you both know where you stand (i.e. its in black and white as to whether or not you registered as trying to sell it).
Again - it all depends on how far down the road of the sale you want to take it. We, for example, pay "Introduction Fees" when introduced to someone who might be interested to whom we subsequently make a sale. That fee is going to be between 5% and 10% - but the sales guy won't have been involved other than the first intro. This sort of thing is good for relationships where you are really there selling something else but spot a need - gravy, basically.
If you are prospecting specifically you are going to want a (MUCH) higher percentage.
If you take over all marketing and sales, prospecting and do all the initial demos your work could be worth as much as 50% of licence and 20% of services...etc
This stuff you simply *must* have either in a contract or, at the very least, a binding letter of intent.
true- i am probably going to go more into the services side of things- 20% I wouldn't do it. I get 25% commission now and that's on top of a 40k base. I generally make around the 25k profit mark a month and that's a combimation of product and service although currently I work in the education sector with very long term relationships so my margins on IT products are unheard of in the corporate sector.
I was thinking more along the lines of focusing on start up companies asking for at least 50% for anything i do within the time span i work for them. Basically helping them to generate as much business as possible then leaving them on their own to take the repeat business.
I was thinking more along the lines of focusing on start up companies asking for at least 50% for anything i do within the time span i work for them. Basically helping them to generate as much business as possible then leaving them on their own to take the repeat business.
paul001 said:
true- i am probably going to go more into the services side of things- 20% I wouldn't do it. I get 25% commission now and that's on top of a 40k base. I generally make around the 25k profit mark a month and that's a combimation of product and service although currently I work in the education sector with very long term relationships so my margins on IT products are unheard of in the corporate sector.
I was thinking more along the lines of focusing on start up companies asking for at least 50% for anything i do within the time span i work for them. Basically helping them to generate as much business as possible then leaving them on their own to take the repeat business.
I was thinking more along the lines of focusing on start up companies asking for at least 50% for anything i do within the time span i work for them. Basically helping them to generate as much business as possible then leaving them on their own to take the repeat business.
No reason why you wouldnt' win some business. Your 50% idea is absolutely fine if its a software company who has developed their own product - half each basically. This is fair enough as you will be doing a LOT of work for your 50%. Its also practicable for an ISV to do this as the cost of sales is minimal - even if the R&D is horrendously expensive. You aren't going to get 50% of services (if you do - well done!) I'd have thought. The cost of sales is that much higher for the service provider...I'm amazed you get 25%!
Still - you probably know your business. Good luck!
bear in mind i get 25% of the profit though, not turnover. so if i sell one of my tech guys out to a customer i generally charge the customer £350-£400 per day and have a fixed system cost of £200 per day so i get 25% of the mark up i make. That's what i would expect to achieve in terms of doing this on my own. Product is always awkward, software much easier and i have vast experience of software sales.
Just need that extra push and bite the bullett to go at it alone!
Just need that extra push and bite the bullett to go at it alone!
paul001 said:
bear in mind i get 25% of the profit though, not turnover. so if i sell one of my tech guys out to a customer i generally charge the customer £350-£400 per day and have a fixed system cost of £200 per day so i get 25% of the mark up i make. That's what i would expect to achieve in terms of doing this on my own. Product is always awkward, software much easier and i have vast experience of software sales.
Just need that extra push and bite the bullett to go at it alone!
Just need that extra push and bite the bullett to go at it alone!
Intresting idea. It might be an attractive proposition to my company. If you decide to go ahead PM me.
vex said:
I agree with Don,
Software houses would be your only real market where the COS is minimal once the software is built. I doubt any other markets could not support that percentage share.
Software houses would be your only real market where the COS is minimal once the software is built. I doubt any other markets could not support that percentage share.
but what i am doing is taking a 50% share of their GP so if i sell, for arguments sake any product that cost £100 for £200 then I would take £50 - the company takes the other £50. So they are getting £50 for doing... well er nothing!
In terms of a startup business- i could provide them with 3 months of sales - charge 50%-60% (of their profit) for those 3 months- they don't make much money initially - but it's a startup, costs them nothing to have me doing it for them then they get left with a load of customers afterwards that they have to pay 0% commission on repeat business.
We have no sales resource at all, and would love a purely results-based sales function. I have always been of the opinion that people should put their money where their mouth is. Was talking to a recruitment company the other day that were practically "guaranteeing" someone would fit with us. When I asked whether or not that guarantee would be put in writing, with a full refund if it didn't work out... well you can guess what the response was like.
So yes, especially when starting out, I think purely results-based is a good way to get business.
So yes, especially when starting out, I think purely results-based is a good way to get business.
Taking 50% of profit rather than sale value is a very different thing. Frankly I'd be very interested! The issue is that, as an ISV, one can either take the view that a software sale is 100% profit (as you've already built the damn stuff) or that a proportion of the R&D must be recouped - whereupon you have an argument/agreement about cost of the sale again.
Service work - 50% of *profit* is a reasonable deal I'd have thought. But again - the cost to the supplier needs to be agreed.
Personally I'd plan on percentages based on sale value for your agreements. The cost of delivering the service/product is something you don't want to get into an argument about with your clients. Just get 'em to agree on a reasonable rate based on sale value.
Service work - 50% of *profit* is a reasonable deal I'd have thought. But again - the cost to the supplier needs to be agreed.
Personally I'd plan on percentages based on sale value for your agreements. The cost of delivering the service/product is something you don't want to get into an argument about with your clients. Just get 'em to agree on a reasonable rate based on sale value.
paul001 said:
vex- that's right up my street - I could even point you in the way of installers if you're ever short!
Seriously I'll pm you - but 1000 houses, all wanting that, is that common? I don't know the domestic market for AV as well as i know the corporate and education sectors.
Seriously I'll pm you - but 1000 houses, all wanting that, is that common? I don't know the domestic market for AV as well as i know the corporate and education sectors.
Bear in mind the UK builds somewhere close to 175000 new homes each year and we have systems starting at £200.00 for hardware or about £700 installed.
Our current popular system is about £2000 hardware and £3500 - £4000 installed for music, tv, telephone, tv and data.
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