Are you selling a product or service? do you have a base salary or benefits as well? I placed Sales Executives with mid-size and Fortune 500 corporations and some offer a bonus instead of commissions. However, the base salary range from 50K to 150K plus full company benefits.
In my world commissions are fixed by the purveyor and filed with the State. Advisers can charge a fee for consultation which they must disclose in the process so percentage of "profits" is precluded by regulation.
its all about how much a product sells and what is the price of the product that you are selling .
Generally its 3-10% depending upon the selling frequency of the product , and the price of the product .
Go for Countries like Pakistan , Bangladesh and India , they have extreme power shortages and they are the countries where solar equipments sells the most , as combined these 3 countries population is approx 45% of total worlds population .
Hope i was of some help .
You can always get me back on destinsol.com
Normally you should ask for 3%-5% of the sales do not ask for a percentage based on profits other wise it should be between 30-40%. Profits are very variable so that customers like to play with.
Its not that way , It depends on the project expected sales , Bigger the projects size gives you bigger sales which leads to higher commission , at the same time their must be range of percentage as standard rate . not a big deal .
If open to re-negotiation I would ask for a larger monthly base you both would be comfortable with and then performance-based bonuses based on achievement of gross revenue goals. In my opinion, makes it cleaner. Depending on your confidence you can negotiate a relatively short initial period of performance for the initial contract and specify that terms are to be renegotiated at that time.
Dear Eric Foster,
The General Truth we know is that Mexico is the country with the world's third largest solar potential. The country's gross solar potential is estimated at 5kWh/m2 daily, which corresponds to 50 times national electricity generation.
How ever, given this and the hypothesis you put above its pretty hard to put expert guess unless you provide share of the companies of other countries,gross market and the shadow price of the sector.
In General i would its very hard to get scientific and expert guess with the above information.
Setting up something new, the look from those trying to get this project up and running will see 50% as possibly a stumbling block. I suggest 35%, this should keep all parties at the table.
I think 50% is too much, unless you invested the capital too.
30% if you believe there is no one can replace you.
10-15% is reasonable.
Remember as you are working on limited info and it is hard to arrive at a true estimate. No sales = No commission. What is the cost, what is the competitive situation, What market share is available.... what add on's are available. Asking and receiving are separate things. What are the industry standards?
Good luck and much success.
Hey Eric, whenever I enter into a contract with any small or large business to consult with them or do business with them in any fashion, my Company requires a Financial Statement of Profit and Losses so I can determine if they can afford my services. Then, during the phase of us getting to know each other, which I fondly declare to be the "kissing" phase of our business relationship; we then discuss the next level of that which is the money. How is my Company to be paid and when which is negotiated similar to a Pre-nuptial Agreement. Once the terms are agreed upon then, we can "sleep' together in business. Because your question is so vague, my gut response is that the reason you do not know how to get your price point down for your services, is because you do not know what they can or cannot afford. Once you understand that, then you can further up your negotiations to result in an agreement to be paid. As for the 50% profit idea, are you a cash investor on this project? Usually those high percentages are utilized when an Owner needs huge amounts of Capital and even then those high percentages are streamlined downward once the money is paid back. So with all frankness, it's great to have high expectations on receiving income, but, you have to have a vested interest to get that much in just about any deal in business. Even 30% is high in this case. You may want to consider an annual fee or a project fee to be paid to your company with you as the consultant, paid 50% up front and 50% upon completion or, 50% up front with monthly increments with a 10% holdback upon completion should you fail to complete a task. You may want to also consider putting into your contract a clause as to whom is paying travel expenses, per diem expenses, rental car and housing expenses during the term of your gig. These are great suggestions for any business who wants the tax write offs for their business; which is an incentive to have you consider for your contract. That way "those" expenses do not eat at your income that you need to pay your bills and your business expenses as well. I wish you success.
This question is out of my league, Eric....there are many factors, but congratulations getting a small retainer!
I would normally do 7.5%-25% dependent on the value of the transaction and the milestones involved
I agree not enough information. Typically sales commissions are not based on profitability (I assume they gave you a price list, price range or actually provided) but percentage of sales. Percentages depend on many factors some of which you listed. 10-25% are standard range. You should be reimbursed for certain out of pocket costs including travel and engineering studies. If not your percentage should be higher.
I'd ask to see the margins on each of the products you would be selling. And based on those margins you can have a realistic conversation.
I'd also recommend being comped on sales - not margin - because you control the revenue, not the cost. You need to understand the margin so that you aren't asking for 20% on a 25% margin job.
I'd also want to understand the tail (service, etc...).
Start the barrel of trust. Then as you deposit credibility, integrity, and value, the barrel will bust and you will get more than you asked for. Asking for percentage only creates a suspicion on the books. How are you going to verify the contractual numbers unless you are also handling that portion.
I would say, focus on how much you need to make that year and then reverse engineer on what cash velocity rate you need from this source. Also asking for percentages sends a wrong message early on that you are judging how much they should make. If you are comfortable with these factors and are in high demand, then start low, deliver and then ask for a stretch bonus.
I would go with low commission, high bonus and decent billing rates if they can also engage you in your services.
Make sure all expenses are met regardless of results.
Eric, Great question. What I do is take current profit and use % the increase as a multiplier. So If I have a base salary of $100 and profits increase 25% then I get $125. It is important to have a reasonable base. Also you can do the same for sales since you might not have control of pricing or costs. Or both. That would give you $150 which is a reasonable bonus all based on performance. Remember it's a multiplier of your base salary, not a fixed portion of the profit. Just and Idea. Good luck
I agree with the first comment as there is not enough information. I can say this 50% of the profits is out of the question as I believe the norm is around 30% of the net profit margin.
A number of comments:
1) Commissions based on "profit" versus "revenue" are pretty dangerous unless you control Delivery as well as Sales. If you don't, there are a lot of ways the profits can and will move: I will guarantee that the tax accountants will have more control over where profits are booked than you will... especially in international trade.
2) Are you covering the office expenses? Travel? Legal?!
3) Have you factored in time to money, especially for a startup/missionary situation? Does the retainer compensate you enough that you will take "normal" commissions versus risk-adjusted commissions?
4) Are commissions paid at contract signing, at invoice, or when cash is received? See "time to money" above.
5) Are you doing all lead gen as well as sales? Do you have a Marketing and/or BD budget to cover this?
6) Standard questions: what's the average deal size? Time to a deal?
Given all of that, I can see this as anywhere from 10% of revenue (very large deals on warm leads with all expenses paid so all you do is close) to 50% (distributor/rep that is taking significant risk and expense). I knw that does not help much, but the true answer is "it depends."