Negotiation of increased commission
Discussion
Apologies for this being a little vague, but hopefully all makes sense without highlighting the industry.
The company I work for wanted to branch out in a new market to them and enlisted the service of an outside consultancy to support this. The new venture is selling a new product/service which has several revenue streams.
The consultancy, let's call them Abacus, advised my employer that they should hire someone with a certain set of experience to run this service; They hired me. For their on-going support, Abacus receive a fee worth 10% of the gross revenue this service brings in. As part of my contract, I receive a 2% commission on part of this figure (although I am directly responsible for achieving all parts of it).
Over the last 6 months, my employer has questioned the value they get from Abacus, all the while being the party who don't let Abacus take control of situations. When a project requires work, Abacus do not get the chance to be involved as my employer turn directly to me for my input, and we solve matters in-house. They have therefore started the wheels to remove Abacus entirely.
I don't take issue with this, and I am happy to be of help, but my role in the organisation has been stretched. This is an entirely manageable workload and now I am familiar with the particular methods my employer uses, I am comfortable with it. But I am doing the work that they previously paid someone 10% to do, and now they pay me 2%.
I would like to negotiate an increase to my commission on two factors. Firstly that I am taking over a great share of the 'effort' from Abacus; Secondly that I am producing multiple streams of revenue, but only being rewarded for one.
Key items to note are that I am happy in my role and don't wish to jump ship or upset people - But I also want to see progress for myself, and be rewarded for it. I also don't expect my share to spike up to 10% - I would ideally like 5%, but would probably settle with 4% as a reasonable uplift.
1) Am I being unreasonable, or is there merit to my thought process?
2) If you consider the above to be reasonable, how would you go about negotiating such a change? At an annual review? Some other time?
The company I work for wanted to branch out in a new market to them and enlisted the service of an outside consultancy to support this. The new venture is selling a new product/service which has several revenue streams.
The consultancy, let's call them Abacus, advised my employer that they should hire someone with a certain set of experience to run this service; They hired me. For their on-going support, Abacus receive a fee worth 10% of the gross revenue this service brings in. As part of my contract, I receive a 2% commission on part of this figure (although I am directly responsible for achieving all parts of it).
Over the last 6 months, my employer has questioned the value they get from Abacus, all the while being the party who don't let Abacus take control of situations. When a project requires work, Abacus do not get the chance to be involved as my employer turn directly to me for my input, and we solve matters in-house. They have therefore started the wheels to remove Abacus entirely.
I don't take issue with this, and I am happy to be of help, but my role in the organisation has been stretched. This is an entirely manageable workload and now I am familiar with the particular methods my employer uses, I am comfortable with it. But I am doing the work that they previously paid someone 10% to do, and now they pay me 2%.
I would like to negotiate an increase to my commission on two factors. Firstly that I am taking over a great share of the 'effort' from Abacus; Secondly that I am producing multiple streams of revenue, but only being rewarded for one.
Key items to note are that I am happy in my role and don't wish to jump ship or upset people - But I also want to see progress for myself, and be rewarded for it. I also don't expect my share to spike up to 10% - I would ideally like 5%, but would probably settle with 4% as a reasonable uplift.
1) Am I being unreasonable, or is there merit to my thought process?
2) If you consider the above to be reasonable, how would you go about negotiating such a change? At an annual review? Some other time?
Without knowing the details of the contract (i.e. did Abacus get a consulting fee or swap their fee for a % of revenue (and any cap) and what they have invested into the business model...
Many outcome based contracts start out with this, and then one party feels that it has become unbalanced (buyers are happy to place the risk with the consultant up front but then if it goes big they get buyers remorse).
Your management may want to renegotiate, but you would need to understand the full picture.
Many outcome based contracts start out with this, and then one party feels that it has become unbalanced (buyers are happy to place the risk with the consultant up front but then if it goes big they get buyers remorse).
Your management may want to renegotiate, but you would need to understand the full picture.
Vaud said:
Without knowing the details of the contract (i.e. did Abacus get a consulting fee or swap their fee for a % of revenue (and any cap) and what they have invested into the business model...
Many outcome based contracts start out with this, and then one party feels that it has become unbalanced (buyers are happy to place the risk with the consultant up front but then if it goes big they get buyers remorse).
Your management may want to renegotiate, but you would need to understand the full picture.
They only get a 10% fee. They have not made any capital investment of their own into the service. I have a broad understanding of the contract and how it works, so am happy to answer questions if it helps people reach a decision.Many outcome based contracts start out with this, and then one party feels that it has become unbalanced (buyers are happy to place the risk with the consultant up front but then if it goes big they get buyers remorse).
Your management may want to renegotiate, but you would need to understand the full picture.
romeogolf said:
They only get a 10% fee. They have not made any capital investment of their own into the service. I have a broad understanding of the contract and how it works, so am happy to answer questions if it helps people reach a decision.
Did they get an upfront fee, or did they do the consulting work and are now recovering that fee through the revenue share?Drumroll said:
Can't really answer this. Only you know all the facts. 2% commission on what sort of value? how was the commission aspect of the job "sold" to you at interview? Do other people in the company get commission? If so what is that value (£) compared to you? I could go on.
I mean this gets into a conversation about what I'm being paid... Abacus receive 10% on a figure about 10% higher than the figure I get 2% on, if that's what you're asking?The commission was sold as part and parcel of the employment; There's a firm element of sales/commercial management to the role and the commission is paid in respect of that.
One other employee is in a similar boat to me, but discussion with that person have shown that Abacus were doing a lot more to support this person than they were me - most likely as my ability is higher (which I don't mean to sound big-headed about) and so they 'got away' with giving me less advice. I assume they receive a similar commission for their department - But ultimately this is like asking for a raise and wondering whether a colleague is also going to get one. Their pay isn't really of my concern.
Vaud said:
romeogolf said:
They only get a 10% fee. They have not made any capital investment of their own into the service. I have a broad understanding of the contract and how it works, so am happy to answer questions if it helps people reach a decision.
Did they get an upfront fee, or did they do the consulting work and are now recovering that fee through the revenue share?romeogolf said:
Vaud said:
romeogolf said:
They only get a 10% fee. They have not made any capital investment of their own into the service. I have a broad understanding of the contract and how it works, so am happy to answer questions if it helps people reach a decision.
Did they get an upfront fee, or did they do the consulting work and are now recovering that fee through the revenue share?And to your point: "Over the last 6 months, my employer has questioned the value they get from Abacus, all the while being the party who don't let Abacus take control of situations. When a project requires work, Abacus do not get the chance to be involved as my employer turn directly to me for my input, and we solve matters in-house. They have therefore started the wheels to remove Abacus entirely."
Where are Abacus not meeting their contract terms? Sounds like buyers remorse to me. They are recovering their costs in lieu of consulting fees.
Would need to be very careful in a negotiation.
This is about clearly stating your worth to the business, now and in the future. I would request a meeting to discuss your remuneration package and prepare a statement/overview of your performance to be made available to your employers (not Abacus!) prior to the meeting. This overview should include:
1) Details of your role and responsibility at the inception of this new venture. Include all sales and financial MI.
2) Detail how your role and responsibilities have increased/changed during this time. Show how your input has lead to an increase in sales and income. Explain how this has meant Abacus is now redundant and what the actual savings (in real money as well as %) to the business are. Show what income you are generating from the other business streams that you are not being paid for. Any other supporting evidence to support what you have done in this period.
3) This is the important bit. Detail what you are going to do to make this venture a continued and increasing success going forward. How are you going to save costs, improve systems/efficiencies, generate more income from different areas.
This should make you pretty invaluable in negotiations going forward. I would also suggest asking for a % of the total value generated, not bits of different income streams.
Good luck!
1) Details of your role and responsibility at the inception of this new venture. Include all sales and financial MI.
2) Detail how your role and responsibilities have increased/changed during this time. Show how your input has lead to an increase in sales and income. Explain how this has meant Abacus is now redundant and what the actual savings (in real money as well as %) to the business are. Show what income you are generating from the other business streams that you are not being paid for. Any other supporting evidence to support what you have done in this period.
3) This is the important bit. Detail what you are going to do to make this venture a continued and increasing success going forward. How are you going to save costs, improve systems/efficiencies, generate more income from different areas.
This should make you pretty invaluable in negotiations going forward. I would also suggest asking for a % of the total value generated, not bits of different income streams.
Good luck!
Vaud said:
romeogolf said:
Vaud said:
romeogolf said:
They only get a 10% fee. They have not made any capital investment of their own into the service. I have a broad understanding of the contract and how it works, so am happy to answer questions if it helps people reach a decision.
Did they get an upfront fee, or did they do the consulting work and are now recovering that fee through the revenue share?And to your point: "Over the last 6 months, my employer has questioned the value they get from Abacus, all the while being the party who don't let Abacus take control of situations. When a project requires work, Abacus do not get the chance to be involved as my employer turn directly to me for my input, and we solve matters in-house. They have therefore started the wheels to remove Abacus entirely."
Where are Abacus not meeting their contract terms? Sounds like buyers remorse to me. They are recovering their costs in lieu of consulting fees.
Would need to be very careful in a negotiation.
OP: No, you are not being unreasonable. But I do rather suspect some tricky times ahead between your employer and Abacus and this may affect the outcome of any negotiation you enter into.
Based on what you have said, if I were the boss of Abacus, I would be looking to puncture those wheels quite robustly.
romeogolf said:
Vaud said:
romeogolf said:
They only get a 10% fee. They have not made any capital investment of their own into the service. I have a broad understanding of the contract and how it works, so am happy to answer questions if it helps people reach a decision.
Did they get an upfront fee, or did they do the consulting work and are now recovering that fee through the revenue share?To answer your question - I would renegotiate (but preferably when Abacus were out of the picture)
Countdown said:
Why doesn't your Employer let the contract run its' course and expire naturally? that way it doesn't necessarily burn its bridges with Abacus if things don't go to plan.
To answer your question - I would renegotiate (but preferably when Abacus were out of the picture)
Indeed, otherwise the OP is just asking the company to further erode margins.To answer your question - I would renegotiate (but preferably when Abacus were out of the picture)
For renegotiation - checking on performance clauses / right to terminate / etc
Bigger question is why the execs aren't pushing for more value from Abacus... maybe implementing some form of monthly / quarterly business review could unlock some more value for the balance of the contract.
OP - feel free to PM me, I have some experience in this area (partnerships/consulting/contracting), happy to provide some thoughts... August is my quiet month
Vaud said:
Then why would they renegotiate? They have a contract.
And to your point: "Over the last 6 months, my employer has questioned the value they get from Abacus, all the while being the party who don't let Abacus take control of situations. When a project requires work, Abacus do not get the chance to be involved as my employer turn directly to me for my input, and we solve matters in-house. They have therefore started the wheels to remove Abacus entirely."
Where are Abacus not meeting their contract terms? Sounds like buyers remorse to me. They are recovering their costs in lieu of consulting fees.
Would need to be very careful in a negotiation.
Which renegotiation do you refer to? Me with my employer? They don't need to renegotiate in the same way they don't need to give me a payrise each year, but that doesn't mean I can't request a negotiation. Or have I misunderstood your question?And to your point: "Over the last 6 months, my employer has questioned the value they get from Abacus, all the while being the party who don't let Abacus take control of situations. When a project requires work, Abacus do not get the chance to be involved as my employer turn directly to me for my input, and we solve matters in-house. They have therefore started the wheels to remove Abacus entirely."
Where are Abacus not meeting their contract terms? Sounds like buyers remorse to me. They are recovering their costs in lieu of consulting fees.
Would need to be very careful in a negotiation.
Abacus is meeting any terms they're meant to, but only so far as they're being allowed. The issue isn't with Abacus underperforming as much as my employer becoming aware that they can do the same work themselves/with me.
Edited by romeogolf on Thursday 15th August 15:12
Countdown said:
Why doesn't your Employer let the contract run its' course and expire naturally? that way it doesn't necessarily burn its bridges with Abacus if things don't go to plan.
To answer your question - I would renegotiate (but preferably when Abacus were out of the picture)
It is, really. The contract is ending next year and they're opting not to renew it. To do that, though, they need to make certain provisions now to 'untie' us from the parts of the service in which Abacus have a larger involvement (essentially by ensuring I am doing everything required).To answer your question - I would renegotiate (but preferably when Abacus were out of the picture)
And I absolutely would wait for things with Abacus to be final before any discussion. I'm just... preparing.
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