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  1. #1
    SitePoint Guru phanie12.geo's Avatar
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    Hello All and Happy New Year.

    I have a question. I had a very successful e-commerce site w/ a unique idea that I recently sold for a good sum. I recently recieved some interest from an "on-looker" about being a consultant to him while he sets up a similar (but not exact) e-commerce site.

    Basically, I need to hear your opinions about the smartest way to go about this business relationship. I told him that basically the information I would provide to him would be foundation/set-up/initial promotion knowledge and after I got him up and running, he probably would not need me anymore. So I thought a one-time, up front fee would cover it (I also would like advice on how to determine that fee..I have an amount in my head as to what I think it is worth, but I would like your opinions also.) We did not discuss an amount yet.

    His idea is to give me an ongoing percentage of the business. I would have access to all information on the site so that I could verifay all numbers.

    What do you think? Thanks in advance. I love these forums b/c I can always turn to you in situations like these.

    Stephanie


  2. #2
    Serial Publisher silver trophy aspen's Avatar
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    So he doesn't want you to do any work? Only for you to tell him how to do said work, or who to hire etc etc.

    I think in such a situation, where he's going to be asking you alot of questions over a long period of time. That his idea is the best. That is to give you a percentage of any profits made...forever. (Remember that forever, this could be some nice residual income if it works out).

    A lump sum is usually used when you're providing a one time, one lump, service. You're not doing that. You're on board to advise him in getting his site rolling. Thats a pretty open ended agreement and with no quantitative measures on the work you'll find it hard to think of a nice quantitative sum to charge.

    So...

    Open Ended Work = Open Ended Charge.

    I would go with the percent.

    Chris Beasley - I publish content and ecommerce sites.
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  3. #3
    SitePoint Guru phanie12.geo's Avatar
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    Thanks Chris.

    Ok, that makes a lot of sense, but it just seems too open-ended. I could be doing a lot more work than I anticipated ( the reason I sold the site)....or a lot less than he anticiapted. What if, in his opinion, the amount of information that I give him ends up not warrenting the percentage that I will be paid. And what should that percentage be?

    Also, does anyone know of a good contract I could get for this.

    Thanks again, Chris!

    Stephanie


  4. #4
    SitePoint Guru phanie12.geo's Avatar
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    Should I move this to another area to try and get more replies to it?

    Thank you,
    Stephanie

  5. #5
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    I believe most consultants get paid based on an hourly fee, but this is changing somewhat. Except that you aren't investing any money, you sound like you will be doing what a lot of venture capitalists/angel investors do. Many times their advice, expertise and experience are more important to the success of the companies they back than the money they offer. If you know of anyone in this line, you might consider talking to some of them for advice on how to bill and about contracts.

    I would base my decision as to whether to accept a lump sum up front, bill hourly or accept a percentage of profits based on the profit potential you think the site has. I mean, you could end up offering hours of advice but if he doesn't take it, isn't committed or there isn't a good market potential, the company could easily go bust and if you had accepted the percentage of profit idea as payment, all your work could be for naught.

    You might try presenting him with a lump sum amount or hourly wage that you think is fair and then negotiate in a percentage of the business. For instance (and I am just pulling these numbers out of thin air), if you thought $10,000.00 was fair as a lump sum, and he offers 5% of the business profits, you might try to negotiate so that you get $5,000.00 lump sum and 3% profits.

    Just some ideas from someone with absolutely NO business background. Good luck!

  6. #6
    SitePoint Guru phanie12.geo's Avatar
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    Actually that was kind of what I had in mind. I would like someone with a background in this to back me up on it or any other opinions. THanks for what I've gotten so far.

    Stephanie

  7. #7
    ********* Addict jaiem's Avatar
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    Being paid by the hour is a tricky thing. First, many people don't trust you to say how many hours you worked on something especially if they aren't there to actually see you doing it. Secondly, the IRS considers hourly people employees and not consultants.

    IMO it would best to make a guestimate of how many hours this will take, apply a rate and quote that as a flat price. Then include that time beyond that is at such-and-such rate.
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  8. #8
    SitePoint Guru phanie12.geo's Avatar
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    Say I was to charge $5,000 upfront for all the information to get the company started, consulting for upto one month. Then I would charge a fee for an "As needed" consultation fee. Does that sound reasonable and professional?

    Any ideas on what that "as needed" fee could be?

  9. #9
    Your Lord and Master, Foamy gold trophy Hierophant's Avatar
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    Personally that is what I would do if I didn't want a permenent Stake in the company. As far as an on-need fee you would need to charge hourly.

    So in keeping with your original $5000 fee your hourly fee would be $31.25 (5000/160 work hours) which is really at the low end of the consultancy scale. Depending on how much you want to continue working on the project and your expenses you could roll that up or down.
    Wayne Luke
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  10. #10
    SitePoint Guru phanie12.geo's Avatar
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    Thanks for your input Wayn. Where did you get the 160 hours from?

    Would $50 an hour sound reasonable for the afterward "as needed" consulting and is it reasonable to put a time limit (such as one month) on the initial set-up consulting?

    Someone else has just recently contacted wanting me to do another website consulting along the same lines. This is strange to me b/c it is not something that I foresaw happening with my foray into the World of Business on the Internet.

    Stephanie

  11. #11
    Your Lord and Master, Foamy gold trophy Hierophant's Avatar
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    A normal American work week is 40 hours and the average month has 4 weeks.. 4 X 40 is 160 hours worked in a month.

    $50 dollars is reasonable and the time limit is also reasonable. For the first month you are basically given him a reduced rate in two ways. First the hourly rate is lower and second if you go over 40 hours in a week, there is no overtime compensation.
    Wayne Luke
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  12. #12
    SitePoint Guru phanie12.geo's Avatar
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    Sounds good to me. I think I will go with that. I will let you know what happens

    Stephanie


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