Re: Compensation based on Percentage of total Internet sales.

I have tried and proven this to be effective when I initiated the offer.  I
built routines that figured all the sales from the site, and based my
percentage off of that - and was very successful!  If the client initiates
this kind of offer, I would have to agree with Jeff on this one, BE WARY!

Scott Piegdon
President
Network Maintenance Inc.
www.networkmaintenance.net


----- Original Message -----
From: Jeff Lash <jeff(at)jefflash.com>
To: <hwg-business(at)hwg.org>
Sent: Thursday, January 13, 2000 12:59 AM
Subject: Re: Compensation based on Percentage of total Internet sales.


> > Has any member here had a potential client suggest Compensation based on
a
> > percentage of total Internet sales, instead of the typical hourly rate
for
> > entire design?
>
> I would be very wary of something like this. My guess is that the client
is
> low on cash, and is inspired by the "e-commerce boom." For them, it's a
> win-win situation; if their sales are small, they don't have to pay you
much
> ... if their sales are huge, they pay you a pretty penny, but they'll have
> plenty of money and won't really care.
>
> Look at it from your perspective; if the company does well, you get paid
> well ... if the company does horribly, well, pardon my language, but
you're
> screwed. Now, you have to look at the company's prospects -- how likely
are
> they to succeed, how much do they stand to make, etc. The site could be
> beautiful, they could build great computers at reasonable prices, but if
> they don't promote the site, they might not get enough sales. So, your pay
> would be a result of many things -- their customer service (bad customer
> service may  = low sales volume), their marketing/advertising budget,
their
> sales capacity...
>
> I can't see a custom-built computer company jumping on the net and
> generating enough sales to make this deal worthwhile. With Dell, Gateway
et
> al. already dominating the custom-build computer market, what would make
me
> switch want to buy from this company? You also get into other logistical
> hang-ups: Are you paid based on total sales or profit or total revenue? If
> they also sell out of a storefront or mail-order, do you get a percentage
of
> those sales (assuming it's conceivable someone could have seen their web
> site and decided to buy from them, but not buy online)?
>
> If you think this client will be a big player, and you have enough
resources
> to pad yourself in case they fall flat on their face, you might want to
give
> it a try. If it were me, I'd work out some sort of variable payment
> scheme -- you get a normal hourly rate (possibly discounted), plus a share
> of equity in the company or a percentage of sales. Again, this is just me,
> and others may feel differently. Hell, if I was giving this advice a few
> years ago and your client was Amazon ... well, I'd look pretty stupid
then,
> wouldn't I...
>
> .jeff.
>
>
>

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