9

First, let me tell that I'm a freelancer and don't belong/have a company and work on my own.

The context:

  1. I have a big client that asked me for a cost estimate for a big project.

  2. The project involves technical aspects that I don't master (nor want to, because of its size), but am really comfortable doing my part, so in this case I will have to get a technical parter (a company for sure, because of the dimension of the project).

  3. The project will go on after I finish my part, and the partner I suggest will remain on the project doing the maintenance.

  4. One important thing is that I don't want to (and can't) be the head of the project (because of the time I would spend on just one project, I wouldn't have time to other projects, and also because it would make me take all the responsibility from both my work and the partner's work (which I wouldn't mind, but the real problem is that all the payments, invoices and taxes would have to be supported by me, and not being a company is bad in this case)).

  5. This means that there will be two suppliers, me and the suggested partner, each doing their job, as a team, but invoicing separately and having split responsibilities. I've done countless projects with this method and works well, the only difference is that in this case I am getting the partner.

Finally the question:

Is it ok for me to ask/request a commission (maybe a percentage of their cost estimate) to the partner I'm suggesting? (my logic is that I'm giving them a big project).

I don't want to be (or sound) greedy and first I need to know if this is the correct thing to do, and what could be the normal rates/percentages, and how to protect me in case they want to stab me in the back (like stealing the project from me).

  • Thank you to everyone that replied! I wish I could approve all, in the end all gave good tips and I decided to do the following: 1. find out if the partner has a referral program, if not, at least agree the conditions of the collaboration (and future work), that means sort of a virtual commission in the form of work 2. get that in a contract 3. give the client the final word (4. maybe have the partner take the lead, this could be good for other projects in the future) – jackJoe Aug 18 '11 at 10:06
3

Commercially, I think there are two options available to do this (that would make it legal and protect you):

  • find out if the partner company you are thinking of has a referral fee program (this could be a fixed fee or a % of business, and normally it's a capped % and/or amount). If they do you will be able to find out how much they would be ready to pay out and may have a little manoeuvre for negotiation.

  • hire the partner company (they become a sub-contractor to you). This would be the most effective option financially (contracting agents who place resources can ask take as much as 15-20% of resources rate), however from what you say it doesn't seem to be something you'd be willing to take on. It means indeed taking responsibility not just for the delivery of the work but all the administration and liability around it.

In all cases, as soon as there is an exchange of money between you and another party, make sure there is a contract signed by both. This contract can include a clause around you retaining exclusivity for part of the work.

Finally, make sure your client is aware early on that you are looking at bringing a partner and get them to approve partner choice - this will help you build a stronger, trusting relationship with all parties as well as strengthening your position with your client.

  • the referral fee program is a nice idea and they may have that, thanks for that suggestion!. Hiring the partner isn't an option, as I said, I cannot (nor want to) support all the taxes of both me and the partner... The contract is also a great idea. Finally the client knows of my partner suggestion and I will definitely give them the final word. – jackJoe Aug 18 '11 at 9:30
2

Sounds like a kick-back. In the public sector, you would go to jail.

EDIT: If what you are suggesting does not cross the line (if you were in the public sector in the USA), take a look at appearances. How would your customer view it if they learned there was a monetary transaction that took place between you and this potential partner? If it were me, I'd ask is this partner really any good or did they provide the largest commission?

The way I see it, if there is a piece of the work you do not want or cannot do, recommend the other company to your customer and step aside. Let them work a deal between themselves. If you are worried about this company stabbing you in the back, my guess is if you are providing value to your customer and have a strong relationship as a trust advisor and partner, their attempts would make them look bad and would fall on deaf ears.

  • really? in what country? – jackJoe Aug 17 '11 at 10:58
  • USA. Strict rules around this. – David Espina Aug 17 '11 at 11:18
  • would hiring an individual and add a fee to his/her salary be illegal as well ? That's what temporary work agencies in some countries do. – Andre Holzner Aug 17 '11 at 16:30
  • No, not at all. But in that case the company is hiring the temp agency to find talent. The extra bump in wage is negotiated before-hand and is payment for services rendered. – David Espina Aug 17 '11 at 17:55
  • oh, and the payment is going from the customer to the agency, not the employee to agency. That's pretty important too. – David Espina Aug 17 '11 at 18:03
1

You can look at it from two perspectives:

  1. As a salesman you have a project (a big part of it actually) to sell to your technical partner. From this perspective asking for a commission would sound reasonable, as it's basically you who have something potentially valuable (project to build and to get money for) and are in power to make a decision who will be a partner.

  2. As a project manager you need a partner, and a proven one, otherwise you won't be able to complete the project. From this perspective your first focus would be looking for a trustworthy company to partner with you as your work won't be judged completely separately. In this case I would rather look for building win-win relationship and not maximizing my personal profit.

Personally, I would choose the second path although I know many people who would choose the first. You should probably consider whether you're going to build long-term relationship with your technical partner or you just don't care and prefer to suck them out if possible.

If you choose the salesman approach a common commission is about a small few per cent (less than 5%) of the services price. I mean if the part of the contract is hardware delivery hardware prices aren't counted as base to estimate commission. Otherwise in contracts where the value of hardware is like 2/3 of the whole and margin on hardware is close to non-existent wouldn't be very fair for vendors in terms of paying commissions to salesmen.

And one more thing: if you do consider your approach think about value, or lack of it, you deliver for your tech partner. If hypothetically tech partner was chosen by the client and you didn't even have a chance to earn any commission at all, would the game be different at all? Probably not.

  • loved the two perspectives! it makes things a little easier and made me think of it in a different way, thanks! – jackJoe Aug 18 '11 at 9:40
1

The way you protect yourself is by having a contract that prevents them from taking your customer, not by asking for a kickback. Maybe you'd like them to be the general contractor, and make yourself a subcontractor. In any event, if you can get to an agreement, the win for you is that you get to take on a project that is way too large for you to handle yourself, and you build credibility with a partner who might take you on for future projects.

  • At the end of the day, getting (and doing) the job is the win here, all extras (comission or otherwise) will be bonus really. Thanks for your answer! – jackJoe Aug 18 '11 at 9:45
1

I know someone who faced the same situation few years back. The solution they worked out was that he introduced partner company to the client. The partner company took the whole project and he worked his part for the partner company.

The commercial relation between him and his partner was:

  1. He got a fixed percentage (salesman approach) on the current project to bring the project to the company.
  2. Also, he made a contract that he will have a percentage (very minor) in all future projects between client and the company. This was the royalty for establishing a relationship between client and partner company. (This came really handy when there was a conflict between the partner company and client. At that time he played the role of mediator to resolve the conflict.)

Today he has good relation with both client and partner company.

I don't know the legal aspect of this arrangement in a particular country. But this relationship works well.

  • That's one nice option (as long as the partner agrees), I will consider this. Thanks for your help! – jackJoe Aug 18 '11 at 9:43

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