Selling Web Design Services - What Are Fair Finder's Fees / Commissions?

[lerxtjr]

I’ve found that you just can’t be too precise with commission rates for referrals. One referrer might just talk to someone in passing and send them to you while another person might act as a broker through the entire sales cycle offering to create a proposal, follow-up and close the deal.

For some of my programs, I can offer a flat rate of payment instead of a percentage for any new deal that comes my way. For others, I need to get all the way through the sales process, get the money in hand, and then factor what I can afford to pay the referrer.

The best way I’ve found to come with a payment structure is to not offer one at all, but suggest that I’ll make the referrer happy by the time the deal is done, based on how the project goes. That seems to work.

[zamiranjum]

Thats A Fraud Website…be Aware Of That.

[aplusmedia]

It will depend on what you charge too, and that your referrer is happy about it too.

in general, I would say a 20% would be reasonable

[micmol]

@Sagewing

My only advice is that if you really have someone who is bringing you business (which you admitted you don’t enjoy) then pay them well and treat them fairly. A lot of techies think that they the tech/production is the ‘hard part’ and sales should just take their commission and be happy. But it’s quite the opposite - finding a rain-maker who will bring you business is good as gold. Strike a great deal for that person, and do everything you can to keep them on!

This is the best piece of advise by miles.

Too many people in this thread have it the wrong way around.

Ask yourself this … Would you pay her 80% commission and you work for 20%?

[adesignrsa]

How I handle this type of arrangement:

Finders Fee - 10%
The “salesperson” finds the client and refers them to us. We take over from there and pay the finder in line with client payments. The finder can effectively walk away from the deal, and wait for their money.

Channel Partner - 20%
The “partner” finds the client, sits in on all meetings, and handles all paperwork including being responsible for paying us on our schedule (not the client’s). Of course, we require completely open and direct communication and this type of agreement effectively makes the partner our client (financially).

The former option is suitable to people “out in the field”, but not technically able to deal with the client sufficiently to justify their involvement (hinderance). The latter option should only be offered to companies/individuals that are capable of meeting the prerequisites of being that involved.

I’d say in your situation, you could provide something in between, and as things grow (or not) you can re-assess the situation. I’d assume she wouldn’t want to take on the burden of having to pay you even when the client hasn’t, and on the flip side, I’m sure she would prefer to nurture the client relationship and be more involved to do so, if she’s looking at this as something long term.

Well, thats my opinion, hope it helps.

[gigapromoters]

@njwebwiz

I run a one person web design company. Although I’m more comfortable than most techies talking to potential clients, I prefer to stay behind the scenes doing the actual web design and building. I got a call today from a friend’s wife who comes from a sales and marketing background. She “gets” the benefit of having a web site and seems full of energy. She loves sales and has a lot of contacts. So it sounds like there’s a good synergy between us - she can find clients for me and do the initial assessment and pitch, then I can take over the project planning, design, and building work.

She understands that I can’t hire actual employees (yet) and is willing to work for some kind of finder’s fee and/or commission. So I need to find out what’s a fair arrangement. I should mention that I don’t bill my web clients by the hour. Instead, I do some calculations of the time required, multiply by my non-disclosed hourly rate, then provide a project fee to the client. I’m thinking that paying her some percentage of the project fee would be reasonable since the bigger the job she brings in, the more she’s compensated.

Does anyone have experience with this kind of arrangement, either on the “paying someone to bring in clients” side or the “getting paid to bring in clients” side? What’s a good way to do this that makes everyone happy?

Thanks!

We’ve been doing this from 3 years - with a standard 10-25% commission, we get good response from the people who can bring in clients.

[njwebwiz]

@joebert

Why would you pay a percentage for a simple referral ?

You shouldn’t be talking to the client about money at all. Work with the client and get details about the project, sure. But once you get your numbers together you should pass them along to her and see what she can do with them.

(I’m the original poster.) First, it’s a not a “simple referral”. She has to actually get me the work; just telling someone to call me isn’t going to cut it. She will only get a commission if I get the job and get paid by the client.

Second, I’ve been wondering whether I have her do the fee discussion or if I keep that under my belt and handle it myself. On one hand, I hate that stuff because I’m afraid if I set my fees too high the client will say no and if I set them too low I’m leaving money on the table. But on the other hand, information is power, and if my “associate” knows how I calculate fees, what’s to stop her from referring people to other designers who might work cheaper?

[njwebwiz]

@noletrain

My suggestion is to let her speak to the potential customers, and if they’re interested you’ill quote your price only to her. She can then create a proposal for the potential customer which is marked up as high as she thinks she can sell it for (they never see your price).

This gives her more incentive because she’s not capped out by commission in the 10-20% range.

Hmmm, interesting idea. But I see two dangers:

1. If she marks up my price so high that the prospect walks, I end up looking bad. And if she then tries to lower her bid and/or negotiate, it also makes me look weak. You never know who talks to whom, and I don’t want to develop a reputation as “pricey” (or desperate).

2. If she’s ultimately setting the fee at some level above my fee, I might “lose touch” with what the market will bear, and then not be able to accurately price my services in the future.

Thoughts on ways to avoid these potential dangers?

[njwebwiz]

As the original poster, I want to thank all of you for your comments and suggestions. I just want to be clear about a few things…

> The woman in question is fairly tech-savvy, and from speaking with her, I’m confident I can educate her enough about web design to get me the right type of client (industry, company size, web dev budget, web site goals, etc.) as well as upsell additional services.

> I’m not willing to pay her to just tell people to call me. She needs to sell. If and when I land a client via her efforts, and actually get $$$ from that client, she’s entitled to whatever commission we agree upon.

> I’m on the fence about how much of my normal process I ask her to do. Typically, I meet with a prospect for an hour or two to determine his needs and goals. I then spend another hour or two writing a proposal, which explains what I’ll do, how it meets the needs & goals, and what my fee will be. If the prospect accepts the proposal, I’ve now got a client. I think I can train this woman to do the first part, but not the second part. But I might want to train her enough to review the proposal and fees with the client; that in-person meeting could be more effective than the way I do it myself.

> Depending on the size of the job, and the nature of the client (i.e. hand-holding requirements), I could potential tag this woman as my “client relationship manager” and have her do some stuff after the sale is made. Of course, we’d have to negotiate a separate compensation for this.

> I agree with those of you who suggested “trial runs”. I’m sure after 3-6 months I’ll know how well she can bring in clients and what their “quality” is.

> This might be overkill, but I’m wondering about “tiering” her commission, to provide an incentive for bringing in bigger clients. For example, for jobs that bill at $1K-$5K, her commission would be x% but for jobs that bill at $5K-10K, her commission would be x+5%. Thoughts?

In the middle of reading the responses to my original post, I received an e-mail from the woman. It contained an Independent Contractor agreement (her husband is an attorney) and her compensation proposal. I was going to suggest we both sign an IC, and that I send her a 1099 at the end of the year (I’m an LLC and want to keep everything completely legal and Kosher with the IRS). So I’m glad she beat me to it.

She’s asking for $50/hour to prepare and execute a marketing plan for me. This is something we discussed and that I need. The rate doesn’t sound too bad, if she’s good at it, but I’d probably want to spell out exactly what she’d do, as well as cap it at some number of hours.

As far as her commission for bringing in clients, she asked for 30%. I suppose I was thinking that closer to 10% was fair, so I was a little shocked at her number. But this could just be her first dart on the board, expecting me to come in very low, and then having us meet in the middle. I am a techie, and naturally see my work as the “important” and hard and time-consuming part (with no disrespect aimed at salespeople, who I’m sure see things the opposite way!). While I’d prefer to keep a higher percentage of the fee, if she really does bring me clients that I otherwise would not have had, then 70% of whatever is better than 0%, right?

I’m considering suggesting we do a 10-15% commission (exact number to be agreed upon) for the first 3-4 months, with the promise (legal, in writing) to bump it to ~20% if certain stated goals are met. Thoughts?

Thanks again everyone - your comments are very helpful!

[Shyflower]

@njwebwiz

> This might be overkill, but I’m wondering about “tiering” her commission, to provide an incentive for bringing in bigger clients. For example, for jobs that bill at $1K-$5K, her commission would be x% but for jobs that bill at $5K-10K, her commission would be x+5%. Thoughts?

If you were paying a flat fee, a tier system might make sense, but she sounds like she’s smart enough to know that bigger jobs mean more money for her as well as for you.

@njwebwiz

I’m considering suggesting we do a 10-15% commission (exact number to be agreed upon) for the first 3-4 months, with the promise (legal, in writing) to bump it to ~20% if certain stated goals are met. Thoughts?

Thanks again everyone - your comments are very helpful!

I think the number you decide on depends on how much she contributes. I’d pay a higher percentage if she did all the grunt work (first meeting, sales presentation, etc) and a lower percentage if she just has them contact you.
Thirty percent is too much, IMO, I think I’d stick to your guns at 10 to 15 and maybe up it to 20 if things work out through a “trial period”.

From you post, it really appears as if you have the situation well in hand. Good luck!

[zorigo]

I have sort of a related question. I have a great workload, but would love to hand off a lot of the sales stuff on someone else. How do people go about finding someone like this?