I was approached by an advertising company’s rep who gave me a phone number for a contractor, I passed it to a friend who I consider him a potential sales person.
He contacted the contractor we setup a meeting all went OK we got the contract, he wanted 35% from the profit of the job which I considered it extreme I convinced him only 25% is more than enough and fair. ( also he wanted to get all details numbers for the true cost of the project to see how much is the project cost)
Now I read all over the forums about 10% commission of total sale project. Any way I have to pay him as we agreed (verbally).
Now the same contractor wanted us to build a second project, my 1st question is 10% of the total project is fair all he can do is mention my name to the contractor. He cannot do any design, drawing or site measure.
2nd question is what is the fair commission for the 2nd project from the same contractor??
First off, 25%? Give me a brake, and you agreed to it? If I read it right the "salesman" isn't doing design, site drawings or measurements, He only makes a phone call and sets up a meeting? I want to work for you.
A 2% referral fee might in order but not 25%. A good salesman who finds the client, measures and designs the project and collects the checks might be worth 10% of the project.
Profit figurers are arbitrary, it all depends on who loaded them and what was included. The only person who knows the "true cost" of a project is the one who paid for it.
If I were going to pay a salesman I'd use a percentage of the project totals. The amount paid would depend on what the salesman provided.
I don't know of anyone who pays on percentage of profit - the sales person has little control over how well you bid or run your jobs and the resultant net profit - if any. He or she has a lot of control over the sales price and most commissions are based on that. 10% is not unheard of for someone who does all the client contact including designs, legwork, handholding, etc. It would be pretty generous for just an introduction but on the other hand you wouldn't have the work if not for that and now it could be turning into a long term customer. Raise your price 11% (or better yet 15%) and keep him happy with 10% of the sale price, especially if he knows more contractors. If he's willing to accept a lower percentage of the sale price even better - it's guaranteed no matter how well you do on the job, and he can stay out of your books
I have enlisted the help of a salesman on and off for the last 15 years. At the beginning of our arrangement we agreed to a compensation structure of 5% for sales, 5% for design and 5% for project management. This proved helpful for those occasions when a builder or homeowner might find me directly, but I still wanted my salesman to perform the design. Over time I became dissatisfied with his performance as a project manager, but I was carefully able to retain his services as a salesman and designer. Currently, I only use him as a designer, and we have further negotiated that he will be compensated directly from the homeowners. Despite the ups and downs of our long term relationship, I always felt that the core percentages of our agreement were fair. Competency towards those tasks became the bigger issue as time went on. I hope that information is helpful.
David, chase and Larry, thanks all for contributing and shading light on what went wrong from the beginning. I apologize for the delayed response.
Like I said, he is a friend talented communicator, I spoke to him to retract it back to 10% of total project cost as you guys mentioned even though he is not familiar with wood working world. But he is motivated and willing to learn.
Now the second part of my post was about the same customer asking to build a second project, this is a gray area, should he get paid or not, with all respect, my opinion he should not, if this customer keep giving more project to my company, why he pick the phone and look for another client.
Another issue here, I got another cabinet guy got laid off, called me to work at my shop but he wanted to quit the dusty environment forever, wanted to do some sales since he know more. What is the fair percentage, and is it ok to have more than one sales man dipping on the same data base Blue book for example??
Thanks for the input.
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