A while ago a woman called Karen Sala made allegations that actor Keanu Reeves was the father of at least one of her four kids. Sala was claiming monthly child support of $150,000 and monthly spousal support of $3 million.
I would say that’s a tad too steep.
Well, it turned out, Reeves is not the father of any of her kids, and it seems she was after some quick buck.
It’s just sad that people can come out of the woodwork and try to ride on the coat tails of successful people who’ve become successful as a result of years and years of dedicated hard work and sacrifice in other areas of their lives.
I’ve seen similar situations in business development in a number of IT companies.
Company stagnates as a result of incompetent management, and then wants to hire experienced commission-only salespeople with extensive connections to advance the company to the next level of success on a no cost and no risk basis.Well, no cost and no risk for the company because it dumps all risk and costs on the salespeople.
Basically, the company tries to ride the coat tails of these successful salespeople without making any commitment to and investment in the sought-after improvement.
Imagine this situation…
Joe salesperson is hired on straight commission because coward executives don’t have the guts and balls to shoulder their responsibility and want to dump it all on the salesperson.
Nevertheless, the Joe produces rather well.
Knowing his commission percentage and being a pretty sharp guy, Joe knows what he’s supposed to be paid for certain deals.
And at the beginning, on his smaller “warm-up” deals Joe’s getting his money as expected.
Then the value of the deals starts going up. His manager and the company’s executives are ecstatic. They are rubbing their palms in anticipation of obscenely high year-end bonuses.
Then Joe starts noticing that his calculations on his commissions don’t add up.
He puts pencil to the paper, makes some calculations and then talks to his manager.
The manager tells Joe that there is no way the company would pay him his normal 15% commission on such high sales because Joe could earn more money than the top executives, and that would be bad for the company’s image.
Joe tries to defend his position by saying that he also brings in more revenue than the executives.
No avail.
Management has already decided to halve Joe’s commission on large deals to avoid rebellion from the executives and other – mainly non-performing – salespeople.
So, this is the new rule of Joe’s socialistic organisation: Capitalise income generation and dump the responsibility on one person, and socialise income distribution among non-producers. Or as Ayn Rand put it in Atlas Shrugged…
“Take it from the producers and give it to the needy.”
Joe is a producer whose hard work is expected to subsidise the incompetent managers and executives.
So, what can Joe do at this point?
- He can certainly put up with the new rules of the socialist dictatorship and work twice as hard as before to earn the same income.
- He can don his hat, leave for the competition and take his clients with him. It’s a common and rightful practice among commissioned salespeople. But the competition may have similar retarded rules as his current employer
- He can quit his company and become an independent business development broker for the IT industry.
Operating In Broker Mode
Now Joe is an independent business developer. Now he can land his own clients to generate business for. And this approach requires a slightly different approach.
So, Joe needs a Memorandum of Understanding, a subcontractor agreement with a few stipulations…
1. I (Broker – Joe) generate sales leads and close sales. I negotiate and price projects. Then when everything is lined up, I Issue a request for proposal to you and nine of your competitors. Then I hire the most qualified company, may or may not be you, as my subcontractor, to perform the work as per my instructions.
2. You (Subcontractor) work as and identify yourself as my subcontractor
3. You will do no promotion for your business at any time, and stay clear from…
a. …handing out your business cards or any of your promotional materials
b. …verbally promoting your own business
4. You perform the work according my instructions, and do not agree to any altered, modified, or new conditions with the client. Any change request from the client must come to me
for decision.
5. Your payment is a competitive pre-agreed flat fee. The client pays me and I pay you. You agree that the work is completed in high quality and will be inspected.
6. All work created and all the relevant materials are my property.
7. You cannot call this company as your client.
8. All communications both with the client and me are confidential and subject to the non-disclosure agreement you have signed.
9. You conduct your operation with professionalism and integrity and meet the work requirements above. Failure to do so in the client’s or my opinion results in the instant termination of the contract and the cancellation of payment.
10. The client’s name stays out of database, and you have no right to market additional services to this client. All negotiation takes place between the client and me.
I know this approach seem a bit harsh, but I put up 100% of the money, work and expertise, and take 100% risk to land the client, so I have the right to dictate certain terms. Using the words of Andrew Pears, the founder of Pears Soap, London, UK, once said…
“Any fool can make soap, but it takes a genius to sell it.”
What percentage do you charge as a broker?
A business has only two aspects: 1) Acquiring clients in search of solutions and 2) providing the solutions.
And since you take 100% risk, you might as well aim at 50% commission. Even if not 50%, keep it t least 30% of the gross revenue you generate.
I know, some people find the 50% too high, but this is the other side of the coin.
You’re working on achieving something that the company’s well-paid top dogs have failed to achieve.
Some fine points between you and your client
- Declining percentages: Some clients may insist that in your first year of your help you get 100%, next year 80% and after 60% of your commission. Reject it. The result of your help is the smallest in year #1 and then keeps increasing. And since you’ve created the results, no one has the right to steal your percentage. Protect it like a junkyard dog.
- Measuring results: The method of measuring results must be pre-agreed. Every month you receive your payment with the accountant’s copy of the sales report for the previous month. This must be the same sales report that is used to report revenue to the tax authorities. And you have the right to spot-check it at any time.
- Receiving payments: Demand payment on previous month’s revenue up to the 5th of the next month. Don’t let payments drag on. And stipulate the fine for late payments. Keep the fines rather hefty.
- Ownership of wealth creation: Since this is not a normal consulting gig that includes skill sharing with clients to pass on the performance capability, you have the right to keep the performance capability to yourself. If the client cuts you off, the performance instantly stops. Keep all login information to yourself.
- Solving disputes: Forget about the legal stuff. I’ve been sued twice. Once I won and once I lost. The client admitted that it was his fault that the project failed but still took me to court to recover his investment. All right. My fault. I accepted an arsehole as a client. If you can’t solve a problem, instead of the law, use something much more powerful: The media.
So, this is it. For business development, having an employee position is necessarily the only way to go. Many business developers have some entrepreneurial spirit in them, so they can venture out and become business development brokers.
What do you think?