Looking for a commission only/joint-venture salesperson/marketer (technical product)

[creativetech]

Hi all.

I'm new here so I hope I've put this in the right place.

I'm an engineer and own a stake in a niche electronic product which is already on the market. I
started this joint venture with the agreement that I would design the product and then my existing joint venture partner would be responsible for selling it (i.e. my role at this point is just to perform tech support and fix any defects in the product).

So far we've generated a reasonable amount of interest and made some sales since the product went on the market 10 months ago. We also have an email list of ~300 people and have received around 60 inbound sales enquiries.

My existing joint venture partner's company manufactures the product. He is a well-known (as in 'moderately famous') name in the niche industry in which we operate.

The business is not performing to its full potential due (I believe) to (a) the lack of effort being put in to proactively building out sales and marketing and; (b) A possibility that we have not reached 'product-market fit' (which I would be motivated to address if a good case can be made that this is true).

I think we need somebody to effectively be the '3rd business partner'. I'm looking for somebody who can generate some sales (and perhaps help us work out why the inbound leads aren't converting) in exchange for roughly a third of the profits. The product is quite technical and so I'm envisaging somebody with experience in technical sales would be a good fit.

The sales process is somewhat high-touch. To date, an email chain of around 20 short messages has occurred before closing a sale. This can definitely be improved by building out marketing materials, documentation, videos etc. Of course, I don't do sales (why else would I be here?) and I'd imagine that an experienced salesperson would have their own ideas about what the process should be.

There is currently no effort being directed towards outbound sales at all, despite the fact that finding the potential buyers of the product is fairly straightforward.

A typical deployment of the product sells for around £4000 and the commission on that sale would be around £1000. The total addressable market is not huge but I'd guess that we could be selling 5 or so every month if somebody was putting in appropriately directed effort (we're currently making around 1 sale per month). Therefore this is not a business that will make you a millionaire.

On the other hand, there's a chance that it could be a pleasant little lifestyle business which produces the equivalent of a decent salary. Alternatively, I think it could make for a nice extra income stream for somebody who is already selling other products but has a bit of spare capacity.

In summary then:

I'm looking for somebody with experience in technical sales who is willing to risk some time to find out if our product has more potential than we're currently realising in return for a share of the profits if they're successful.

Please feel free to PM me if you're interested in finding out more.

If anybody has any other suggestions, I'm all ears!

Many thanks.

 

[antropy]

I'm looking for somebody with experience in technical sales who is willing to risk some time to find out if our product has more potential than we're currently realising in return for a share of the profits if they're successful.

So in other words you want someone to do some free research for you? Alex

 

[creativetech]

So in other words you want someone to do some free research for you?

Not at all.

I believe that the market exists but our business lacks a person whose job is to sell. I'm looking for somebody with that skill set who is willing to take entrepreneurial risk in exchange for good potential upside.

We have some sales despite having made little proactive effort to push this. I believe that there's potential for a lot more given appropriately directed effort from a skillful person.

If that sounds compelling to you, great - we should have a chat. If not, then fair enough.

 

[Clinton]

I believe that the market exists but our business lacks a person whose job is to sell.

Then pay for one.

But, wait, you don't want to take the risk of paying a salary, you want the person joining you to take the risk?

The business is not performing to its full potential

Every business is performing to its full potential (based on the resources, management smarts and money put into it). Saying otherwise is trying to place the blame elsewhere for lack of management competence.

 

[creativetech]

Thanks for your input Clinton.

you want the person joining you to take the risk?

Yes. That's exactly it. I'm looking for somebody who is happy with a moderately high risk, moderately high reward project. Kind of like a later stage investor. The product exists. We have some customers and testimonials. The concept has been proven. The enterprise is 'off the ground' so to speak but I don't have the capacity/appetite for more risk at this stage.

There's an opportunity and a risk/reward calculation here in the same way that there is for any other venture. If it's not a compelling proposition for anybody, then my inbox will be empty and we'll have to go back to the drawing board. This might mean sticking with the status quo and watching the sales trickle in or it might mean ramping up my own risk (if I feel able to do so at the time).

I'm not looking for 'something for nothing'. Rather, I'm looking for a mutually beneficial partnership where the risk is rewarded appropriately.

My thinking is that there's no harm in finding out if this is the sort of partnership people are likely to be interested in. Would you agree?

 

[NickGrogan]

How much equity are you offering?

the commission on that sale would be around £1000

How much is the actual profit on the sale?

 

[creativetech]

How much equity are you offering?

Good question. I hadn't thought about that as an option but would certainly be open to a conversation about it. The way the business is structured might make it tricky but there could be some arrangement that would work.

How much is the actual profit on the sale?

Broad strokes for the sake of a simple illustration:

- Cost to manufacture widget: £1000
- Fee paid by my partner to licence IP from me: £1000
- Sale price: £4000

In this hypothetical situation, my partner (the manufacturer) makes £2k. However, he also pays commission/sells at a wholesale price to a dealer/sales agent. In the case where a sale is not direct, my partner would effectively pay £1000 in commission.

That makes the final split of the profit: £1k to me, £1k to my partner, £1k to whoever sold it. Of course my partner has the option of making a greater share of the profit by pushing direct sales.

Whether the sales are direct or not, I make the same amount in licence fees. I have a strong incentive to find somebody else who is willing to take some risk as my partner is not proactively growing direct sales. He is, however, open to paying commission to third parties for indirect sales.

I hope that explanation makes sense.

 

[NickGrogan]

So there are 3 companies involved?

Your company owns the IP - currently charges £1k
Your "partners" company manufactures - currently charges £1k, also gets £1k "profit share"

The third company sells, makes £2k profit, pays £1K to sales agent.

Which company would the agent work for/get equity in?

The value is probably in the IP, possibly in the manufacture, depending on the agreements.

What does company 3 own?

 

[Darren_Ssc]

My thinking is that there's no harm in finding out if this is the sort of partnership people are likely to be interested in.

There is no harm although you have to expect a bit of flack, some of it well-meaning, some less-so.

I work on a performance-related basis for a couple of clients and it works reasonably well.
However, finding people to do the same for you isn't going to be easy; that isn't to say you shouldn't keep looking.

If I could offer one suggestion though, try be a bit less vague about this product of yours.

 

[creativetech]

OK, I obviously didn't explain clearly. Sorry about that.

The business is a joint venture between 2 companies, call them IPCo (owned by me) and ManufactureCo (owned by the other party). ManufactureCo wanted to make a widget but did not have the technical skills to design it. I agreed that IPCo would design the widget and licence a crucial part of the IP to ManufactureCo such that the product can be manufactured.

ManufactureCo sells the product. It costs it £1k to buy the parts. It also must pay £1k to IPCo for the IP which makes the widget work. This leaves £4k - £1k - £1k = £2k in gross profit. Of course the cost to generate the sale also comes out of ManufactureCo's portion.

The agent would work for ManufactureCo in the same way that existing intermediaries do. The deal would either be that the agent can buy at a wholesale price (in the case of my example above, £3000) and sell at retail (£4000). An alternative arrangement would be that the agent gets a commission from ManufactureCo when a sale completes.

The only way I can see to make the equity option work is for an entirely new company to be incorporated and all assets including IPCo's IP to be transferred in to the new company and appropriate shareholdings to be agreed upon. I don't know whether or not the owner of ManufactureCo would be open to that or not.

In theory, my job (i.e. designing the product) has largely been done and I can now sit on the beach and enjoy the rewards However, ManufactureCo has been less proactive than I'd hoped and we're basically just relying on odd enquiries off the back of the initial buzz we generated.

There are no cold calls. There is no email outreach (despite the existence of a mailing list). There is no content creation apart from the odd video. The product is making us both some money already. However, it seems likely that a lot of potential sales are being left on the table due to the lack of proactivity.

I know that my JV partner would be much happier with, say, 5 x £1k every month than 1 x £2k but this does not seem to be enough of an incentive to make him try to build the sales channels out to make it possible. I'm in a difficult position because I can't directly influence my partner to allocate resources differently (a definite downside to this business structure).

The value is probably in the IP, possibly in the manufacture, depending on the agreements.

The value is definitely in the IP. Manufacture could easily be outsourced (possibly Far East if volumes permitted). The IP licence agreement contains an exclusivity clause: IPCo can only sell to ManufactureCo so long as ManufactureCo hits certain purchase quotas. If the quotas are missed, the licence becomes non-exclusive.

 

[creativetech]

There is no harm although you have to expect a bit of flack, some of it well-meaning, some less-so.

I work on a performance-related basis for a couple of clients and it works reasonably well.
However, finding people to do the same for you isn't going to be easy; that isn't to say you shouldn't keep looking.

If I could offer one suggestion though, try be a bit less vague about this product of yours.

Thanks for this Darren: it's a really constructive bit of feedback. The 'vagueness' is necessary as I've not discussed this with the existing JV partner (see above posts) yet.

I'd like to find out if such a salesperson exists first so I can pitch it to the JV partner as a realistic arrangement with a real person who I've spoken to rather than just a 'we should try and find a salesperson' concept.

Thanks again for the thoughtful comment.

 

[AllUpHere]

It's not a sales person you need, it's a strategic marketing plan.

 

[creativetech]

It's not a sales person you need, it's a strategic marketing plan.

Would you care to expand upon that AllUpHere?

 

[AllUpHere]

Would you care to expand upon that AllUpHere?

Yes, sorry, that wasn't particularly helpful was it. I'll reply in more detail later.

 

[saythisinstead.co.uk]

Message me. I'll give you 30 mins on the phone. I'll, at the very least, give you some direction and some ideas as to how you can move forward. It'll cost you zip.

 

[Aurelius]

It's difficult to provide an informed opinion as you don't explain what you're actually selling?

 

[Chris Ashdown]

Can you offer a guaranteed minimum amount each month

What marketing will you be doing

Will you be giving me first class leads

 

[creativetech]

It's difficult to provide an informed opinion as you don't explain what you're actually selling?

Thanks for the response Aurelius.

If you drop me a PM, I'll give you some more details.

 

[creativetech]

Can you offer a guaranteed minimum amount each month

No. This would be 100% commission. If you make the sales, you get the commission.

What marketing will you be doing.

This is something that I'd have to agree with my existing JV partner (see posts above). Perhaps it would be worth a discussion to see what you would require? For example, perhaps you'd be interested but only if we improved the website and made some explainer videos.

Will you be giving me first class leads

I imagine that we would give you access to the mailing list (everybody on there has at least requested a price list) and a list of inbound enquiries which didn't initially convert. Besides that, I'm looking for somebody who could 'make it happen' (i.e. all the way from initial lead gen to closing). I know where to look for the potential buyers (it's pretty formulaic to find them) so I'd imagine that it would be a case of building out a list of target businesses and cold approaching them in the first instance. But then I'm not a salesperson so I'd imagine that your strategy is likely to be a bit cleverer than mine

 

[Chris Ashdown]

Ok understood, But how do I support my wife and 10 kids until the first say 5 sales, I assume the sales will take some time or is it something i can have a single meeting , get the money and off to the next client

 

[The Byre]

I have received several pitches like this one many times and every time I get interested and tell those involved what it will take to get stuck in and get the ball rolling, they run away.

You are very likely to need a redesign. You are guaranteed to need much more money for marketing. You are also guaranteed to have to do oodles more work, invest time and energy into this widget. You will have to attend trade fairs around the World, Las Vegas, Berlin, Amsterdam, Hannover, whatever, but you will have to go there.

(And don't tell me that is the marking guy's job - it's yours because YOU designed it! The punters and potential customers and dealers expect the guy who designed the widget to be there!)

Emmerson's great quote about building a better mousetrap and the World beats a pathway to your door is just crap. I had to learn that lesson the hard way!

Also, your marginal build costs have to be far lower than you imagine. About one-fifth of RRP is the maximum. The mass-market auto industry works with that and less!

Many of those searching for an investor or marketing guru are really looking for a fairy godmother who is going to solve all their problems. Life just ain't like that!

 

[Status Tracker]

We're kind of in the same position and did have someone lined up for commission only sales. They seemed really keen at first but we're a few months in and they have literally done nothing!
Obviously this is fine on one hand as it's commission only so hasn't cost us anything but it has made me realise that finding someone to jump on board and take the risk with us is a bit of a pipe dream.

I guess they don't have the motivation without the guarantee of money, which I can understand.

 

[Mr D]

No. This would be 100% commission. If you make the sales, you get the commission.



This is something that I'd have to agree with my existing JV partner (see posts above). Perhaps it would be worth a discussion to see what you would require? For example, perhaps you'd be interested but only if we improved the website and made some explainer videos.



I imagine that we would give you access to the mailing list (everybody on there has at least requested a price list) and a list of inbound enquiries which didn't initially convert. Besides that, I'm looking for somebody who could 'make it happen' (i.e. all the way from initial lead gen to closing). I know where to look for the potential buyers (it's pretty formulaic to find them) so I'd imagine that it would be a case of building out a list of target businesses and cold approaching them in the first instance. But then I'm not a salesperson so I'd imagine that your strategy is likely to be a bit cleverer than mine

So effectively you want someone to be self employed?

Not sure the commission would be worth it. Depends on time taken of course and resources used.
A half hour meeting with someone a mile away resulting in a grand commission would be good.
55 hours of meetings, calls, driving, booking hotels, meals out etc in a week for no commission would be a bad thing.

 

[Mr D]

We're kind of in the same position and did have someone lined up for commission only sales. They seemed really keen at first but we're a few months in and they have literally done nothing!
Obviously this is fine on one hand as it's commission only so hasn't cost us anything but it has made me realise that finding someone to jump on board and take the risk with us is a bit of a pipe dream.

I guess they don't have the motivation without the guarantee of money, which I can understand.

Last guy that wanted me on commission only basis ran out of the room when I suggested 35% commission up front on confirmation of agreement with clients. Can't think what he was running from...

Can just imagine, a 7 year deal for £750k with 35% payment by company to me up front when clients signs...
Though admittedly more common £1k to £5k one year deals in that industry... and all deals take months to get to dotted line.

 

[Chris Ashdown]

What used to happen in the pre 1970's period, was that freelance salesmen worked for a bunch of separate companies, when they visited a town they firstly tried to sell the item that had the best commission and then worked down the line

So shop 1, may be a workwear shop and try selling waterproof jackets , shop 2 maybe a garage selling a gismo etc so you filled up the week in the town fully with just b&B costs

Nowadays they expect you to sell one product and earn peanuts, doing the job that would cost them about £100,000 for a employee with a car and fuel & hotel expenses

There are a few commission salespeople around but most have been in the industry for most of their lives, know their patch and potential customers and have first class leads from the companies they work for

 

[Mark T Jones]

First you need to be absolutely clear on whether you are looking for an employee to work on a commission-only basis - in which case you will have to guarantee them minimum wage and usual employee rights, or a self-employed person, in which case you will have to satisfy HMRC that they are genuinely self-employed, which limits your ability to dictate when/how they work.

Commission only can work very well in certain sectors (including mine) and there are some very good commission-based agents out there. You will be able to tell fairly quickly who they are as they will ask you challenging questions and effectively interview you as to why they should be involved with your product.

On the other hand, there are a lot of dreamers who will swallow your B/S and sales pitch, give it an ineffectual crack for a few weeks before drifting off.

The big challenge for you will be finding the right people on the right terms

 

[Aurelius]

Thanks for the response Aurelius.

If you drop me a PM, I'll give you some more details.

Sorry, what I meant was that you are asking advice about getting a commission only sales rep' but you haven't given any specifics. It's difficult for anyone to reply in a concrete way without knowing what you were selling. For example I could be an expert in selling technology for the oil exploration business and that could be what your tech is, but if you don't mention that I could just pass it by.

 

[Aurelius]

I started out as a commission only sales rep' but got tired of companies trying to rip me off and so just set up a company providing the service I was originally selling for other firms. I then subcontracted to a couple of the firms I was originally selling on behalf of, until I started to pick up my own staff.

Commission only can work well (after all everyone who sets up their own company is essentially a commission only sales rep' for their own firm) but the offer has got to be amazing.

The commission needs to be high enough to offset the work being done for free until a sale is made. If you're on 30 day payment terms you could be expecting a sales rep' to work for 2 - 3 months before they see a return.

I was looking for a commission only sales rep' recently and was my offer:

50% profit share for all business, repeat business, recommendations from original business.

 

[Mr D]

I was looking for a commission only sales rep' recently and was my offer:

50% profit share for all business, repeat business, recommendations from original business.

Not bad - but hopefully any potential rep would want to see what the profit is.

 

[creativetech]

Thanks to everyone for some really useful input.

Commission only can work very well in certain sectors

This is the real question I'm trying to answer here: is this idea a starter or not? Perhaps not given the total commission made per unit sold.

Not sure the commission would be worth it. Depends on time taken of course and resources used.
A half hour meeting with someone a mile away resulting in a grand commission would be good.
55 hours of meetings, calls, driving, booking hotels, meals out etc in a week for no commission would be a bad thing.

In this case, I'd imagine (based upon how long it's taken my partner to convert the leads we've had) that you'd definitely be looking at 10hrs+ on average to make a sale which would result in £1k commission.

 

[Chris Ashdown]

But how long did they spend on getting the leads and what % of the 10Hrs actually resulted in a sale

My thinking is that if you don't have enough money to pay a salesperson full time then you underfunded before you start unless you do all sales yourself.

 

[MBE2017]

Commission only works very well, if the company works it right.Even in the same industry, same product two firms can have completely different results.

Ten hours plus per sale is slightly vague, your problem as I see it is the length of time before payment, few people wish to work two months before payment. I always found recruitment easy, since I would show my previous two months wage slips, paid weekly. I would even sub guys, ie pay £500 per week in advance if I thought they were worth it from my own pocket.

I think you might have to provide an initial buffer to encourage someone to try.