Finders fee 2

[ATRAIN82]

I am starting an consulting firm with a partner. We are trying to determine the appropriate way to reward bringing in the work. We will both be bringing in work and performing the work. What is typical reward for partner that brings in a project. 10% of the project fee?

 

[photoengineer]

If two people are bringing in work, I would forgo finders fees for the first year. I'd split the profit 50/50 and consider the sales work a necessary evil to get the opportunity to perform some work. After a year, you'll have a feel for what an appropriate revenue sharing agreement might be.

Should you get repeat business, it gets messy on who would get the finders fee for the 2nd, 3rd, 4th time they hire you. Does the person who initially brought them in get 10% for every repeat client or is it a one time only deal?

I've heard that businesses usually lose money the first year, so I wouldn't be paying any partner 10% off the top until the firm made some money!

The arrangement you are describing above sounds ethical, but I'll also mention that giving kickbacks to outside people (architects, building inspectors, etc) may or may not be ethical depending on who is paying the job and the disclosure you provide. But your arrangement seems ok.

 

[ajack1]

That sounds a very flawed concept to me ATRAIN82.

I assume you are both going to be 50% shareholders in the company? If so all that matters is how the company does.

One of you might bring in more work but you will both have to do the work, you will also need to perform many tasks that do not bring in direct revenue, bookkeeping, IT, etc. Do you pay one of you “extra” to do that as well?

If you both go in thinking what is best for me and not what is best for the company I think you will find it causes a lot of problems and will also mean the company doesn’t last long. If you want to go down the what is best for me road form two separate companies.

 

[casseopeia]

I second ajack1's advice. You should be compensated according to your shares. There are many tasks that must be performed to benefit the company. Maybe one is better at bringing in new work but not so good at employee relations. Maybe one of you is a dynamo at completing the work and getting the deliverable out the door but can't talk to Clients or ask for new work. All tasks related to the functioning of the company must be viewed as valuable. Just the question alone makes me think a partnership is not for you.

"If you are going to walk on thin ice, you might as well dance!"

 

[looslib]

I have to agree with cass and Ajack1, too. You need to look at the partnership first, like a marriage, it is not always about how does what individually, but how you work together.
One thing that wasn't mentioned or asked is this a full-time business or a part-time moonlighting business? If it is a part-time effort, do your current employers know about your new business and are you sure there is no conflict.


"Wildfires are dangerous, hard to control, and economically catastrophic."

Ben Loosli

 

[photoengineer]

"One thing that wasn't mentioned or asked is this a full-time business or a part-time moonlighting business? If it is a part-time effort, do your current employers know about your new business and are you sure there is no conflict."

What does that have to do with the OP's question?

 

[zdas04]

I have to say that the OP's original question was scary. The partnership form of business is a clear recipe for disaster anyway, but if you start this "I brought in more work so I should get a finders fee" nonsense then you are well and truly doomed. Sole Proprietorship works well. Many variations of corporation work well. Partnerships rarely work at all for more than a few months. And then you want to add a grasping "finders fee" on top of a risky organization? You are past risky and deeply into pre-bankruptcy.

I think you should look at incorporating or splitting the blankets while you still like each other.

David

 

[ATRAIN82]

Thank you all for the information. I am most interested in general structures of partnerships and how level of effort is rewarded. I brought up the finders fee because of I was under the impression that type of structure was typical (based on a conversation with an architect I know). I am pretty open and flexible and prefer thing as simple as possible.

 

[brandoncdg]

I would do an even split of the profit. And if there is any reason you need to save money: plotter, software, license fees, etc., take a certain percentage and put that into the companies bank account.

At times you will both feel as though the other is doing more or less work. Some clients will like one of you over the other as well. You have to have complete trust in your partner(s) to get anywhere with your consulting firm.

CDG, Civil Engineering specializing in Hillside Grading in the Los Angeles area

http://www.CivilDevelopmentGroup.com