Do all the work, get half the money
Due to my day job I am in contact with advertising agencies all the time. Recently one of these ad agencies proposed that we work together on offering website services to his television clients. Sounds nice because I hate selling 
But the problem arises in that he is not interested in commissions for referrals. He would rather work it as if his business was offering websites, and markup what I charge him for my services. In other words, he'd be the middle man. This also seems nice because I would love for somebody else to kiss clients' asses and best of all, handle the billing and payements.
So what's my problem, you ask? Well the markups he wants to charge seems too high to me. I know you all don't like talking money here (I'd be happy to talk particulars in PM) but at what point does his profitability begin to take advantage of my hard work? Lets say I charge $XYZ for a simple 5-page brochure-style website with or without him. He certainly should be allowed a markup for bringing in the new business, and some more markup if he is handling the billing. I think a 50% markup is pretty healthy but what if he's charging the client more than DOUBLE what I'm charging him? He's a good salesman but does that seem fair when I'm doing the vast majority of the work? I think my prices are about right for what the client would be getting but it just seems like I'd be getting taken advantage of. (If he weren't involved I'd still be charging about that much, although I'm not making any sales.)
Now how about overcharging for hosting services. In this case he'd be doing nothing at all except maybe the billing and he still wants to charge an extra $20 per month month on top of what I charge. We're only talking about simple little 5-page brochure-style websites so needless to say that even with my own reseller markup I wouldn't even charge a client $20 for that small of a site (maybe 20 at the max considering my responsibiliy to keep it runnning smoothly). So is it fair to me for him to make any profit at all for doing nothing (if he isn't doing the billing)?
openmind posted this at 09:18 — 24th January 2005.
He has: 945 posts
Joined: Aug 2001
I guess it depends on your moral views. If you are charging him what you would have charged the client direct and he is then marking it up, if he's able to sell it at that price I don't see what the problem would be...
Its not like you're losing out as you're getting the same money whether you go direct or through him...
Renegade posted this at 09:58 — 24th January 2005.
He has: 3,022 posts
Joined: Oct 2002
Well, I don't really see what is wrong here, it happens all the time.
Retail stores buy things from other companies/people, mark up the price and sell it off.
There are also companies out there (not going to name which ones) that sell other major brands seconds that they get really cheap. They just put their own labels on them and market it as their own.
Cheng Eu Chew - Renegade
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Busy posted this at 10:18 — 24th January 2005.
He has: 6,157 posts
Joined: May 2001
A friend of my mums phoned me tonight asking my view of something her and her family did ...
Long story short, three of them are paying out $12,300 for a web store for one year, $300 for invite, $6000 for account and the other $6000 for tution to run it I assume. Am missing some of the specs but it seems all they get for the money is a website with CC payment option.
So if you're wondering if x amount of dollars is to much, remember this story lol, they are nuts.
$ in NZ dollars but paid to an American company
Oh and one of the group hasn't paid the second $6000 as they dont know where to pay it to, but because hasnt paid it is getting late payment fees added.
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CptAwesome posted this at 14:34 — 24th January 2005.
He has: 370 posts
Joined: Dec 2004
Yeah, $20 seems too little for even a small effort, but I guess it depends on how long it takes you to do the page, but if the guy who is reselling your services thinks there is a larger amount to be had for what you're offering, maybe you should raise your price with him, so he isn't making all the money off of your back.
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fifeclub posted this at 14:50 — 24th January 2005.
He has: 688 posts
Joined: Feb 2001
Well the +$20 isn't for the website itself, it's his desired markup only on the monthly hosting charges. So lets say I make a website and we both get paid, and I host it for 5 years. In this case, 5 years after he already made his profit on the website itself, he's still cashing in on my hosting of the site, month after month, year after year (for which he isn't actually doing anything).
In general I have no problems with the notion of his marking up the sale and site development to a reasonable point, but the hosting issue seems the most wrong to me just because I don't think a commission should go on for all eternity.
Thanks for the advice from everybody. Gives me lots to think about.
Megan posted this at 14:39 — 24th January 2005.
She has: 11,282 posts
Joined: Jun 1999
Seems pretty unethical to me. I personally wouldn't be comfrotable with that AT ALL. I know corporations do it all the time but if my own work was involved I would definitely not feel comfortable.
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ridcully posted this at 21:02 — 31st January 2005.
They have: 23 posts
Joined: Dec 2004
Very much unethical, in my opinion.
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CptAwesome posted this at 14:57 — 24th January 2005.
He has: 370 posts
Joined: Dec 2004
Oh.... no, he shouldn't get money forever for it, a year, I could understand, since most hosting packages are sold on a yearly rate, and if the person has to pay that amount to you for 5 years, they are likely to jump ship before his referral money stops charging.
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CptAwesome posted this at 14:59 — 24th January 2005.
He has: 370 posts
Joined: Dec 2004
Hate double posting, but I was going to also mention, an analogy. My friend does general office work stuff, and was working with a temp/placement agency. They found her a job, and then the company that hired her, gave the company that found her the job a few thousand dollars, based on a percentage of her salary, but certainly not 50%!
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andy206uk posted this at 13:33 — 1st February 2005.
He has: 1,757 posts
Joined: Jul 2002
It may be unethical, but getting work from that kind of market isnt easy and usually involves meeting face to face with clients, travelling and lots of planning (I know because a friend of mine does websites for a large UK based production company).
At the end of the day... deal with him directly forget how much he's selling it on for, he's your client what he does on completion of the project is his business.
Andy
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ron.jones posted this at 16:03 — 10th March 2005.
He has: 4 posts
Joined: Mar 2005
In other words, he'd be the middle man. This also seems nice because I would love for somebody else to kiss clients' asses and best of all, handle the billing and payements.
In this arrangement, you are the wholesaler, he is the retailer. You've just opened a new channel for your product line. Do you want the additional revenue that channel provides you, or not?
If your regular rate for clients is $xyz, I would opine that your rate to a distributor (him) should be $xyz LESS n% which accounts for the fact that you don't have to invest in the marketing and sales associated with that channel.
If you want to increase revenue from the channel, perhaps you could license the update services, or change your billing structure to $xyz + n%.
All-in-all, it seems like a win/win
Ron Jones
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scholarship posted this at 22:14 — 29th March 2005.
They have: 2 posts
Joined: Mar 2005
you should really do a survery of those clients who buy the services
after you get some stats, you raise the pice to nearly that level for yourself, problem solved
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