Discussion
My business is working at full speed but there is much more capacity in the market, probably only for 2-3 years, and no other supppliers at present.
I don't want to expand directly, but thought about allowing some of the people who I currently sub-contract work out to, to starting taking the surplus work directly and possibly sub-contracting it themselves, might work, rather than doing it through me where there is this bottle neck because of workload.
At present we have a 100% mark up on what we pay the contractors, so obviously they would then know what we charge and could then undercut my wider market if they wanted.
I was thinking about agreeing to pass on the surplus work to them in return for about 17% of the turnover, but wanted to protect my existing customer base either with a written agreement they would not work for them and that they would pay me my 17%, plus a % of any other turnover they generate indirectly. I would expect them to pay me my usual rates for consultancy on the product when they needed to train new staff or wanted technical opinion but would provide day-to-day support and advice as part of my cut.
Are such imposed conditiions legal and does the 17% cut sound fair, in light of the fact that I developed the product, trained them in its use and would be sourcing most of their business for them and providing technical back up?
They would find it very difficlut to get into the market without me, as it is very technical and I think the customer would lose confidence very quickly if they didn't see me about for them.
I don't want to expand directly, but thought about allowing some of the people who I currently sub-contract work out to, to starting taking the surplus work directly and possibly sub-contracting it themselves, might work, rather than doing it through me where there is this bottle neck because of workload.
At present we have a 100% mark up on what we pay the contractors, so obviously they would then know what we charge and could then undercut my wider market if they wanted.
I was thinking about agreeing to pass on the surplus work to them in return for about 17% of the turnover, but wanted to protect my existing customer base either with a written agreement they would not work for them and that they would pay me my 17%, plus a % of any other turnover they generate indirectly. I would expect them to pay me my usual rates for consultancy on the product when they needed to train new staff or wanted technical opinion but would provide day-to-day support and advice as part of my cut.
Are such imposed conditiions legal and does the 17% cut sound fair, in light of the fact that I developed the product, trained them in its use and would be sourcing most of their business for them and providing technical back up?
They would find it very difficlut to get into the market without me, as it is very technical and I think the customer would lose confidence very quickly if they didn't see me about for them.
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