What % of profit should I be asking for?

[jonoc73]

My company has been building an e-commerce website (Not online yet) for a company that currently have a bricks and motar business. I will detail the areas we are working with the company.

• Build two e-commerce websites including a cms backend with sales reporting and payment gateways etc. Both sites will use the single backend.

• One site will sell one brand of products only - This is around 150 products at present and my company will input them all.

• The other will sell an endless qty currently about 700, again which we will input.

• Host the sites on server and host all assets from a super fast content delivery network. This includes standard backup and maintenance.

• When new ranges and items are available will enter all info, images and payment details into system.

• A good amount of SEO for all the ranges with a well built standards compliant site from the offset.

Now as you can imagine the cost of this sort of site is quickly spiralling. I have suggested instead of a one off high payment I take a % of their profits. Everything can be tracked online and we can put in place strict contracts. The company really liked this idea as my company will actively get involved and promote the products.

So my first question is how much would be a suitable %? The ranges they sell are high quality and have already proven successful on other sites.

What about if my company deals with everything involved with the e-commerce site? (Except where their staff will deal with blogs, detailed enquiries about products and news items).

Should I put in place some minimum amount to take in year 1 if the company isn't successful - we still get paid for the work?

The company is keen for me to work with them as we have proved ourselves so far.

Any help in this matter would be great,

Thanks Jono

 

If you are meeting all the costs ,then 50% of the net profits.

Earl

 

[deniser]

If you are doing all that, do you need them, once you can see what is selling well, what's to stop you doing the business in its entirety?

 

If you are doing all that, do you need them, once you can see what is selling well, what's to stop you doing the business in its entirety?

quite but it does save having to pack and dispatch.

Earl

 

[TotallySport]

How are you marketing it? without that any % could be tiny

it all depends on how much is expected in generate, I would want a percentage of turnover not profit, otherwise your not guaranteed to make a penny and you might have to weight a year before you get any money.

I would want around 25% of turnover moving down to 5% after turning over x amount

 

How are you marketing it? without that any % could be tiny

it all depends on how much is expected in generate, I would want a percentage of turnover not profit, otherwise your not guaranteed to make a penny and you might have to weight a year before you get any money.

I would want around 25% of turnover moving down to 5% after turning over x amount

Only a fool is going to give you a percentage of turnover.

and why the sliding scale.?

Earl

 

[captaincloser]

How come a price was not set for your services to start with ?

This looks like a convoluted spam posting-why do we need to know any of the details . Looks like someone showing off here...

Otherwise this is a simple case of 'How do I get paid for a job where no order with a price was placed'...

OMG !

 

[JamieM]

It depends how much your work is valued at and what the business projections are. Just treat it as a normal investment.

 

[jonoc73]

Thanks for being so positive captaincloser!

No spam, just in a difficult situation. Why was this not set before the project started? Well quite simply it has grown hugely as the company has understood what was possible. I have tried to keep up and re-quoted at eac key stage, but as my post said the cost are going up and up for them.

I wouldn't want to take the business off this customer. They are a good company and I'm not in the business of ripping people off. I would just like to work 'with' them and everyone is happy. Anyway, they sell a number of products already in their bricks n mortar business. They have built up very good relationships with suppliers - some costing over £5k to sell their stuff in the first place.

All the items are dispatched from the suppliers.

I was planning to recommend a certain % goes solely on online marketing, Google Ads, banners that sort of thing. I have good seo skills in my company and will plan to use that to the max too.

Hope that answers some of the questions.
Thanks Jono
(Non spammer!)

 

I wouldn't want to take the business off this customer. They are a good company and I'm not in the business of ripping people off. I would just like to work 'with' them and everyone is happy. Anyway, they sell a number of products already in their bricks n mortar business. They have built up very good relationships with suppliers - some costing over £5k to sell their stuff in the first place.

All the items are dispatched from the suppliers.

You are not taking business off them you are providing additional business.

"They have built up very good relationships with suppliers - some costing over £5k to sell their stuff in the first place."

don't understand this line.?:|

Not quite sure how you term them customers if they are not paying you.?

AS for ripping off.you can not be serious.

Earl

 

[jonoc73]

Hi Earl,

Some of the suppliers are quite exclusive and they require high account charges to set up and sell their products - ie £5k for one of them.

ok, I understand they are not technically customers as they aren't paying but we originally started out with the idea of doing a job for them and being paid - it's only this past week it has spiraled.

Sorry - I think I may have miss-understood the above post. I would love my company to look after these websites and all their orders - I originally read it as to take the company and their suppliers and customers and do it myself without them - which i wouldn't want to do.

Jono

 

[CaterTrade]

I am doing exactly what you are proposing to do but I have negociated a percentage of the turnover. In that case, product prices can be set to factor in my percentage and nobody loses out and things are much easier to work out when it comes to pay day. One thing you'll have to watch is 'over the phone' trade as you wont have any record of the transaction. I'm ok in that respect as I have a man on the inside recording all the 'offline' transactions. This time next year we'll be miwyonaires!

 

[jonoc73]

CaterTrade, Thanks for the positive fibe!

I'm not all that concerned about the over counter trade as some of the new ranges, they are planning to only sell online. Anyway as you say it will be very difficult to police. Plus they could well say the website had nothing to do with the sale and why should i take a % of it.

I must stress they are not only in it for themselves, they need my companies skills and ideas too and have already said they will disclose all accounts etc.

CaterTrade would you be willing to say what % you agreed in a PM maybe as I understand you wouldn't want everyone to see it?

It's a very exciting and very different idea to deal with a client like this but am looking forward to it. Just need to get an idea of others thoughts on the last bit of the puzzle - the %!!!

Thanks Jono

 

[CaterTrade]

You have a PM.

 

[Paul Kelly ICHYB]

Simple, charge them x% of turnover - they can build the x% into thier costs.

It is not rocket science, just simple cost of sales!

if you sell on ebay or Amzon, you now the costs before you star out. If you manage their website and have covered al costs, it need not be any different!

 

Simple, charge them x% of turnover - they can build the x% into thier costs.

It is not rocket science, just simple cost of sales!

As said before only a fool would offer a percentage of turnover.

as said so many times.

Turnover is vanity,profit is sanity.

Earl

 

[limessl]

I'm amazed you appear to have got quite a way down the line and not actually contractually agreed how much you'll be getting from it.

 

[CaterTrade]

Only a fool would accept profit as payment for a managing an ecommerce site. What happens in a price war? Does the web designer just get next to nothing while the backing company rides the storm with their other incomes supporting them?

 

[jonoc73]

I'm amazed you appear to have got quite a way down the line and not actually contractually agreed how much you'll be getting from it.

This has all shifted in the past few days. The site has not gone live yet and is actually still being built - designs and look completed and signed off - just coding now. Until Friday last week we were just building them an e-commerce site - all quotes had been agreed etc. They were going to add their own products but as the qty rockets they have themselves had a re-think.

The change was due to the company securing a number of big suppliers.

Jono

 

Only a fool would accept profit as payment for a managing an ecommerce site. What happens in a price war? Does the web designer just get next to nothing while the backing company rides the storm with their other incomes supporting them?

well I must be a pretty big fool as I run a few sites on profit share.

But then I am not a web designer ,just a poor old SEM.

Best to steer clear of projects that involve wars.

Earl

 

[CaterTrade]

Well ok not a fool , but from the website manager's point of view, a percent turnover is better to ask for. Whether it's accepted is another thing entirely.

 

[MASSEY]

Well ok not a fool , but from the website manager's point of view, a percent turnover is better to ask for. Whether it's accepted is another thing entirely.

Its not though is it.

I could turn over 1 million but in reality my profit could be 100k.

% of profit is by far the better way to do it.

 

[CaterTrade]

Ok but if every product has a different profit margin and that margin changes per payment method (eg credit cards are 3%, debits are 1%) then it's much more difficult to work out the profit when sharing it out. It's far easier to say product a sold at b so I get c rather than product a sold for b but the profit was c minus 3% for the credit card (on this occasion) which works out at d.

In my case there are 30 different suppliers, 30 different discounts off list price, lots of different carriage charges, etc etc. It's just easier to work out if I get paid in % turnover as profits are so changable. As long as the sale price has enough profit margin to cover me, the card charges and provide a healthy profit then what's the problem?

 

[TotallySport]

if I was paying someone to maintain my website, build it, advertise it, and do all the work and they offered me a percentage net profit deal, I would make sure the was no net profit, or very little, woohooo for me.

As the designer putting in all the work, I would want to make sure I got a good return, the site is unlikely to make serious money in the first year, but the costs at start up will be much higher, as the site stabilises the work will go down and the turn over rise, hense the sliding scale.

 

[Paul Kelly ICHYB]

Earl,

I do agree with you, but there are tens of thousands of fools who sell on Amazon who offer a % of turnover!

On the client/retailer side, offering % of t/o is not the best. On the developer/"shopkeeper" side, it is the easiest way for them to calculate the rewards!

As a developer, working on profit share can be difficult, as, unless the agreement is open book, the client may not declare all costs correctly i.e. overload them to reduce profit!

 

[jonoc73]

Earl,

As a developer, working on profit share can be difficult, as, unless the agreement is open book, the client may not declare all costs correctly i.e. overload them to reduce profit!

The agreement will be open book and I will have complete control over all sales and see in various admin panels what has come in and out, sold/not sold etc.

Thanks for all your advice guys, really pleased I joined this forum.

Jono

 

[TotallySport]

The agreement will be open book and I will have complete control over all sales and see in various admin panels what has come in and out, sold/not sold etc.

Thanks for all your advice guys, really pleased I joined this forum.

Jono

You might be able to see all the sales, but are you going to be able to see all the expenses, like purchases of packing materials, purchasing adverts in magazines, wages, rent and rates etc.

It might actually be easier taking a percentage in the business, but your doing 50% of the work so you should get 50% of the business.

 

[Paul Kelly ICHYB]

Jono,

I think you misunderstand the term open book - you will need to know their cost price and additional operating costs to work out the gross price.

The issue is they could add all sorts of costs on - admin (a lovely, generic term), marketing, sales etc

 

As a developer, working on profit share can be difficult, as, unless the agreement is open book, the client may not declare all costs correctly i.e. overload them to reduce profit!

Working with people who are dishonest is not a good idea.

Chosing who you work with is probably as important as the product being sold in a profit share situation.

Earl

 

[Chris Ashdown]

Thousands of salemen and women and agents work on commission based upon turnover it's simple to administrate, profit is only controled by the MD and easily fixed to zero

If someone is on 15% of turnover and you sell items worth £1000 you get paid £150.00 what can be simpler, the company owner knows 15% goes to you just like he knows 11% goes to NI and so on

If its done on profit try this

Company makes profit of £20,000 pre tax after paying Directors £35,000 salary

Company makes profit of £100 pre tax after paying Directors ££54,900 salary

You have no control over what wage they take, profit could just as easily been taken up by advertising, entertainment or many other things

 

Thousands of salemen and women and agents work on commission based upon turnover it's simple to administrate, profit is only controled by the MD and easily fixed to zero

If someone is on 15% of turnover and you sell items worth £1000 you get paid £150.00 what can be simpler, the company owner knows 15% goes to you just like he knows 11% goes to NI and so on

If its done on profit try this

Company makes profit of £20,000 pre tax after paying Directors £35,000 salary

Company makes profit of £100 pre tax after paying Directors ££54,900 salary

You have no control over what wage they take, profit could just as easily been taken up by advertising, entertainment or many other things

Do you always make things so complicated.?

There is no way anyone is going for a deal like that.

How and what and who they pay is nothing to do with profit share .

Earl

 

[Chris Ashdown]

Here Goes

Profit can be what you want to make it within grounds, which I tried to show you through a simple situation if the director / shareholder took a salary of £35000 the company made a profit if he upped his salary then the company made no profit. and there are a number of ways you can do that

So if as you suggest the designer takes payment on profit that is net profit he can work his but off for nothing, if he does it on commission of turnover he is sure to get his money

Where you get the idea from that nobody works only on commission from I dont know, but there are thousands of freelance agents around the country who do or who earn a tiny salary and the rest on commission all based on turnover

If you go small salary and commission you get a smaller commission rate than those who dont have the salary side but get a bigger %

 

[CaterTrade]

There is no way anyone is going for a deal like that.

What Chris is saying is exactly how I am working, so people do go for deals like that. I was also contacted by another company wanting to work the same way. Loads of freelance companies work on turnover commission just to simplify things.

Stick to your guns by all means but have some ammo.

 

What Chris is saying is exactly how I am working, so people do go for deals like that. I was also contacted by another company wanting to work the same way. Loads of freelance companies work on turnover commission just to simplify things.

Stick to your guns by all means but have some ammo.

I can only assume you are on a very small percentage.?

Earl

 

[Chris Ashdown]

Earl

how much would you pay someone for selling £1000 of your goods and also consider the end customer may be very happy with the service and order say £5000 each month for the next 5 years is 10-20%of that turnover not worth giving for the outcome, remember whilst some industries generally only make 30-40% markup others make a couple of hundred % markup.

 

Earl

how much would you pay someone for selling £1000 of your goods and also consider the end customer may be very happy with the service and order say £5000 each month for the next 5 years is 10-20%of that turnover not worth giving for the outcome, remember whilst some industries generally only make 30-40% markup others make a couple of hundred % markup.

No idea I only work on a 50/50 share of net profits from sales.

Have done so for many years and never had an unhappy partner yet.

Earl

 

[CaterTrade]

Lets just all agree that perhaps there's no right of wrong and people will do it the way that works for them.