Q for Private Business Owners- intro fees
Discussion
I'm trying to work out what peoples opinions and perhaps ethics/morals are in regard to the following Q.
If I offered you a customer for a 5% commission if you completed a deal, would you accept? Assuming of course you dont have the ability to access this customer yourself, and that you are able to negotitate your own terms with the customer. Effectively an introduction fee, leading to a sale, would you pay 5% revenue??
As sort of part 2 to this question... Would you be prepared to compete against another company for this one customer. On your own terms, for your own prices. Both companies however would still on completition agree to a 5% commission?
I ask, partly cause in the past I have put people together, who would never normally have got together, and I'm interested in peoples thoughts, as the business owner, or as an observer. If I created a business out of this, what are your thoughts then? 5% about right?
Im interested in any thoughts around this, so feel free to hit some very random tangents!!
If I offered you a customer for a 5% commission if you completed a deal, would you accept? Assuming of course you dont have the ability to access this customer yourself, and that you are able to negotitate your own terms with the customer. Effectively an introduction fee, leading to a sale, would you pay 5% revenue??
As sort of part 2 to this question... Would you be prepared to compete against another company for this one customer. On your own terms, for your own prices. Both companies however would still on completition agree to a 5% commission?
I ask, partly cause in the past I have put people together, who would never normally have got together, and I'm interested in peoples thoughts, as the business owner, or as an observer. If I created a business out of this, what are your thoughts then? 5% about right?
Im interested in any thoughts around this, so feel free to hit some very random tangents!!
Without knowing the details its hard to answer that one. Value of deal? Nature of industry? If its between 1-3 million and IT related I can offer some suggestions.... (not all of which would be valid mind you) 
p.s. been dealing with same tonight
p.s. been dealing with same tonight
Edited by M3ax on Wednesday 20th June 22:29
Charging a commission, or fee, for such a service seems perfectly reasonable.
To pay five pounds from every hundred pounds worth of sale is nothing. People ask for discounts that amount to far more than 5% and in any case, there's always time to massage the figures before discounting / paying commission.
To pay five pounds from every hundred pounds worth of sale is nothing. People ask for discounts that amount to far more than 5% and in any case, there's always time to massage the figures before discounting / paying commission.
It's hard to answer without knowing the margins in whatever industry you're talking about. The principle is sound and widely used but 5% of revenue for just an intro would be steep in our game. Not keen on the overtly competitive angle, there's enough competition around without supposed business partners artificially introducing it so they can hedge their bets. Just back the right horse in the first place on a deal by deal basis and keep everyone happy.
Glassman said:
Charging a commission, or fee, for such a service seems perfectly reasonable.
To pay five pounds from every hundred pounds worth of sale is nothing. People ask for discounts that amount to far more than 5% and in any case, there's always time to massage the figures before discounting / paying commission.
I don't disagree. However, what are you selling? what is the market? High volume/low margins? Low volume/high margins? Car parts? Or weapons? (ok - maybe a bit extreme .To pay five pounds from every hundred pounds worth of sale is nothing. People ask for discounts that amount to far more than 5% and in any case, there's always time to massage the figures before discounting / paying commission.
I am dealing with this issue right now hence my interest in this thread. I think I have it sorted. If i can help it will be my payback for all the good advice I've had over the years on PH
E&OE
where's my coffee?
To be honest, I wasnt hoping to look in just the one industry. I was thinking more generally. Is there a better of way charging than based on a % of revenue?
If you had to be drawn on %'s.... You reckon deal worth < £50k = 5%, <100k = 4%, <300k = 3%. >300k = 1%/0.5%?
If both parties competing for the transaction were aware of this fee, wouldnt it be irrelvant, as the price would simply be higher?
My father once introduced a couple to a boat dealer who subsequently sold the £1m yacht to them. Zip commission, but our fault for not agreeing terms before hand! Different from business deals I guess, but even so!
If you could generate enough business, would you be prepared to pay a fee for every new client, and simply stop advertising?
If you had to be drawn on %'s.... You reckon deal worth < £50k = 5%, <100k = 4%, <300k = 3%. >300k = 1%/0.5%?
If both parties competing for the transaction were aware of this fee, wouldnt it be irrelvant, as the price would simply be higher?
My father once introduced a couple to a boat dealer who subsequently sold the £1m yacht to them. Zip commission, but our fault for not agreeing terms before hand! Different from business deals I guess, but even so!
If you could generate enough business, would you be prepared to pay a fee for every new client, and simply stop advertising?
It's perfectly acceptable to expect a commission, provided that the terms are agreed in advance.
I have paid commissions to people that didn't even expect or ask for one - it's a measure of appreciation, an incentive for that person to introduce more business, and a clear signal that you are a decent business.
I have paid commissions to people that didn't even expect or ask for one - it's a measure of appreciation, an incentive for that person to introduce more business, and a clear signal that you are a decent business.
LewisTintin said:
I'm trying to work out what peoples opinions and perhaps ethics/morals are in regard to the following Q.
If I offered you a customer for a 5% commission if you completed a deal, would you accept? Assuming of course you dont have the ability to access this customer yourself, and that you are able to negotitate your own terms with the customer. Effectively an introduction fee, leading to a sale, would you pay 5% revenue??
As sort of part 2 to this question... Would you be prepared to compete against another company for this one customer. On your own terms, for your own prices. Both companies however would still on completition agree to a 5% commission?
I ask, partly cause in the past I have put people together, who would never normally have got together, and I'm interested in peoples thoughts, as the business owner, or as an observer. If I created a business out of this, what are your thoughts then? 5% about right?
Im interested in any thoughts around this, so feel free to hit some very random tangents!!
Yes to the first bit, but would walk away on the second.If I offered you a customer for a 5% commission if you completed a deal, would you accept? Assuming of course you dont have the ability to access this customer yourself, and that you are able to negotitate your own terms with the customer. Effectively an introduction fee, leading to a sale, would you pay 5% revenue??
As sort of part 2 to this question... Would you be prepared to compete against another company for this one customer. On your own terms, for your own prices. Both companies however would still on completition agree to a 5% commission?
I ask, partly cause in the past I have put people together, who would never normally have got together, and I'm interested in peoples thoughts, as the business owner, or as an observer. If I created a business out of this, what are your thoughts then? 5% about right?
Im interested in any thoughts around this, so feel free to hit some very random tangents!!
Happy to pay someone a cut of comm or revenue if they actively intro a client, however, as soon as that person starts working with other parties then it's no longer the same deal.
Ultimately, it depends on the industry you are in as to what is generally accepted and what is frowned on.
Introduction fees are perfectly OK. In my industry (IT) it would be perfectly normal to pay someone an introduction fee of their intro led to business.
A fee of up to 5% would be normal...but would be capped at a few grand. An intro is just that - it isn't putting a deal together or selling - all that gets done by someone else.
BTW: We PAY introduction fees for introductions that lead to a worthwhile sale. 5% up to 100K or so. So if anyone knows someone in real need of an HR/T&A/Timesheets/Hols/Sickness all singing all dancing self service HR and Time and Resources system who won't pony up the loot to buy SAP or Peoplesoft then please do put them in touch...
A fee of up to 5% would be normal...but would be capped at a few grand. An intro is just that - it isn't putting a deal together or selling - all that gets done by someone else.
BTW: We PAY introduction fees for introductions that lead to a worthwhile sale. 5% up to 100K or so. So if anyone knows someone in real need of an HR/T&A/Timesheets/Hols/Sickness all singing all dancing self service HR and Time and Resources system who won't pony up the loot to buy SAP or Peoplesoft then please do put them in touch...
Horse_Apple said:
LewisTintin said:
I'm trying to work out what peoples opinions and perhaps ethics/morals are in regard to the following Q.
If I offered you a customer for a 5% commission if you completed a deal, would you accept? Assuming of course you dont have the ability to access this customer yourself, and that you are able to negotitate your own terms with the customer. Effectively an introduction fee, leading to a sale, would you pay 5% revenue??
As sort of part 2 to this question... Would you be prepared to compete against another company for this one customer. On your own terms, for your own prices. Both companies however would still on completition agree to a 5% commission?
I ask, partly cause in the past I have put people together, who would never normally have got together, and I'm interested in peoples thoughts, as the business owner, or as an observer. If I created a business out of this, what are your thoughts then? 5% about right?
Im interested in any thoughts around this, so feel free to hit some very random tangents!!
Yes to the first bit, but would walk away on the second.If I offered you a customer for a 5% commission if you completed a deal, would you accept? Assuming of course you dont have the ability to access this customer yourself, and that you are able to negotitate your own terms with the customer. Effectively an introduction fee, leading to a sale, would you pay 5% revenue??
As sort of part 2 to this question... Would you be prepared to compete against another company for this one customer. On your own terms, for your own prices. Both companies however would still on completition agree to a 5% commission?
I ask, partly cause in the past I have put people together, who would never normally have got together, and I'm interested in peoples thoughts, as the business owner, or as an observer. If I created a business out of this, what are your thoughts then? 5% about right?
Im interested in any thoughts around this, so feel free to hit some very random tangents!!
Happy to pay someone a cut of comm or revenue if they actively intro a client, however, as soon as that person starts working with other parties then it's no longer the same deal.
Ultimately, it depends on the industry you are in as to what is generally accepted and what is frowned on.
LewisTintin said:
Why wouldn't you compete for the business?
Would you not be willing to put in an offer, and rely on reputation and quality you offer to hold through over the price? Isn't this the same as quoting on a job anyway? Does it make any difference if another party see's you quote?
I compete for business. Not an introduction. I expect anyone introducing me to be doing so exclusively. This is partly because an introduction is also a recommendation of a sort.Would you not be willing to put in an offer, and rely on reputation and quality you offer to hold through over the price? Isn't this the same as quoting on a job anyway? Does it make any difference if another party see's you quote?
Being listed by a consultant as one of a number of potential suppliers isn't an introduction - it's more like advertising and would attract a significantly lower fee as its value is so much less...
Some of the work we do is just this (broking deals) - as we seem to have accumulated large amounts of contacts over the years (shame not to use them)
We charge up to 20% ongoing (obviously this depends, for example on the industry, the value you are bringing, whether it is purely an intro or you account manage afterwards etc...)
As to playing customer off against customer, would never do that.
We charge up to 20% ongoing (obviously this depends, for example on the industry, the value you are bringing, whether it is purely an intro or you account manage afterwards etc...)
As to playing customer off against customer, would never do that.
LewisTintin said:
Why wouldn't you compete for the business?
Would you not be willing to put in an offer, and rely on reputation and quality you offer to hold through over the price? Isn't this the same as quoting on a job anyway? Does it make any difference if another party see's you quote?
Well it does in the IT industry and many others. The problem with competitive quotations is that people will cut the quote to the bone in the expectation that they can pad the job out with variations after they have got the job. The supplier will stick rigrously to the contract and charge through the nose for any work falling outside of the contract. Would you not be willing to put in an offer, and rely on reputation and quality you offer to hold through over the price? Isn't this the same as quoting on a job anyway? Does it make any difference if another party see's you quote?
This leads to the situation where a company who quoted in an honest fashion and allowed for some flexibility in deliverables losing out to a company who cut their quote to the bone and then overcharged the client for every minor variation. At the end the client finds out that they would have been better off going for the honest quote.
LewisTintin said:
Why wouldn't you compete for the business?
Would you not be willing to put in an offer, and rely on reputation and quality you offer to hold through over the price? Isn't this the same as quoting on a job anyway? Does it make any difference if another party see's you quote?
Hi, Would you not be willing to put in an offer, and rely on reputation and quality you offer to hold through over the price? Isn't this the same as quoting on a job anyway? Does it make any difference if another party see's you quote?
Compete for biz all day long and happy to do so. However, if someone wants to give me a lead and also pass it on to others then it isn't wort as much so we'll pay much, much less.
The more involved the introducer is then the higher the payout.
If you look at most financial websites they are basically introduction portals. You'd pay them a tiny fixed fee for the lead. However, an entity which soley works with you to bring in business is much more like an agent and will recieve a much larger upfront fee and if they are involved in ongoing maintenance of the client then they'll get an ongoing share of the revenue.
Different payout structures for different types of introductions.
Let me get this straight. Company A is competing for company B's Business, Company C has no idea of company B but Company A will tell them about B and will let C compete for 5% commission iF C wins ?
A has no idea of C's pricing and if C wins the bid A will know what C was charging. 5% is cheap for that sort of information. Also B might be pissed off to know that A is getting profit for doing nothing, and might not want to do business with A or C again.
Risks you take !
I'd agree to 5% commission if you win the contract, OVERPRICE it so you don't win, get a contact in the company and NEXT time go from there.
A has no idea of C's pricing and if C wins the bid A will know what C was charging. 5% is cheap for that sort of information. Also B might be pissed off to know that A is getting profit for doing nothing, and might not want to do business with A or C again.
Risks you take !
I'd agree to 5% commission if you win the contract, OVERPRICE it so you don't win, get a contact in the company and NEXT time go from there.
LewisTintin said:
Why wouldn't you compete for the business?
Would you not be willing to put in an offer, and rely on reputation and quality you offer to hold through over the price?
But this arrangement only works in your favour and is hardly going to make your business partners happy. If you want to maximise your chances of getting paid and keeping your business relationships alive at the same time then pre-qualify the customer and pass the lead only to whichever one of your partners is most likely to win the deal.Would you not be willing to put in an offer, and rely on reputation and quality you offer to hold through over the price?
LewisTintin said:
Isn't this the same as quoting on a job anyway?
Not really, it becomes more like tendering to a colder prospect rather than working a warm exclusive lead.LewisTintin said:
Does it make any difference if another party see's you quote?
If a competitor sees a quote they can bid without any cost of sale. You may have taken a great deal of time to bring the conversation to a point where a firm quotation can be submitted.My overall take is if you have the relationship with the end customer to be introducing suppliers then it's far better to use the relationship to influence the sale in your supplier's favour than to introduce multiple suppliers. The more involved you are in the sale the more commission you could expect/demand too.
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