Commission and Percentage
April 2009I’m talking with a larger interior contractor about selling for them on a commission basis while keeping my smaller drywall company focused on residential and light commercial work. What percentage do you think I should ask for, and would it be on the sale price or gross profit?
I wouldn’t pay any more than 10 to 15% of the gross profits. Nowadays there’s not much room to play, since we’re taking jobs with very little bottom line just to keep employees busy and doors opened!!!
—Alan Castro, President, Advanced Specialty Const. Inc., Fort Walton Beach, Florida
What guarantee does the contractor you’re estimating for have that you won’t bid the smaller, more profitable jobs for your own company?
—Tom Blood, President, Long Beach Acoustics, Long Beach, California
[Ask for] 8% on sale price. Otherwise, why waste your time?
Gross profit at 1% if it is a new contractor that the company does not work for, and 1/2% if it is an in-house client.
This is a most interesting proposition. Certainly everyone is looking for more sales in this downturn economy, and any help they can get should be welcome. And you probably have contacts that they don’t. And if they can get you on a commission basis, that spares them the overhead of a salaried salesman. If you don’t get any jobs, they don’t have to pay anything?
On the other hand, you may do well enough, and like the sales enough, that you can can your own business and become a full-timer for them.
As for fee, that depends on your experience, salesmanship, knowledge of the business, and how much you think you can command. Remember the story about the law school graduate who went into business, hung his shingle and waited … and waited for that first customer. None came. So he went to his law school mentor and asked what to do. The old man said he should double his rates. So the young lawyer did and immediately booked his schedule. Who wants a cheap lawyer???
—Rob Aird, President, Robert A. Aird, Inc., Frederick, MD
Dude, If you are that ambitious, how about growing your own company? Trying to run your company and work for someone else won’t work. Instead of working for the competition, be the competition. What happens if you sell a job and it doesn’t make money? Do you get paid? Grow your own business or make the change. I know this didn’t answer the question, but I had to stick in my 2 cents.
—Tim Martin, Owner, All TM Construction Services, Spring, Texas
It always depends. How big is the job?! For me, 30% on the sale price!
DO NOT DO IT. Concentrate on your own business.