What would it be worth to you to receive a steady stream of new customers with little or no effort on your part? Would you be willing to pay 10% of the revenue they generate? 20%? 50%? Or do you believe that you can’t afford to pay anything?
During a recent discussion, I was surprised that people said they could not afford to ‘give up’ 20% in commissions to reach new customers. If you have more work than you can handle, that might make sense. However, most of the people who take this position do so because they think it is ‘not fair’ that someone else would get a percentage of the money they believe is theirs. My question is: Would you rather have 100% of nothing, or a smaller percentage of something?
I have taught courses at several places where my compensation was a revenue share. Typically, I received 50% or less–often much less–of the fees the students paid. Many instructors think this is unfair. After all, if they are presenting the course, shouldn’t they get the bulk of the money paid by students?
Break down what is actually involved in making the course happen, and it makes more sense. The sponsor provides a place to present the course, lists it in their catalog and does other marketing (a big expense), takes registrations (including absorbing credit card fees) and handles student questions and issues. I could do these tasks, but they take time and money. Plus, I don’t enjoy them. I prefer to use my resources on the part I enjoy most and do best–presenting a great course.
Instead of worrying about someone else also making money from ‘my’ course, I look for ways to increase the income I generate, including publicizing the class to attract more students, providing a required or optional text for an additional fee, and keeping in touch with students after the course so that they can become long-term customers.
When offered a commission or revenue-sharing arrangement, consider the following:
Do you have more of the product than you are currently selling, or the ability to create more? Do you have time to provide additional services?
Will your pricing accommodate paying a percentage of revenue to someone who will refer clients to you? If not, maybe your rates are set too low.
What does it currently cost you (in time and money) to get a client? If you spend little money but lots of time, don’t forget the value of that time. Wouldn’t it be better to increase your billable hours, even if you only net 80% of your regular rate for those additional hours?
What else will you get from the relationship? Perhaps you will gain visibility from the referrer’s web site, newsletter or catalog. The clients referred to you may become repeat customers who do business with you for years to come (and depending on your arrangement, you may only pay commissions on the deal referred directly to you, not repeat business).
Don’t overlook the value of having partners to help you grow your business.