Tell me more ×
Answers OnStartups is a question and answer site for entrepreneurs looking to start or run a new business. It's 100% free, no registration required.
up vote 1 down vote favorite

I have a Media Integration project. I was under the impression we would provide the finder on a 50k job with 3% so were my partners. It was a verbal agreement and we are going to honor it. My question is if the job is going to cost us 30k to do and we have 20k left what is my finders fee? 3% of the whole project (50k) / 3% of the cost of the job (30k) or 3% of the profit (20k)?

share|improve this question
2  
Are you trying to justify paying less than 3%? What would YOU expect if you were the "finder" and someone told you there was a finders' fee? – TimJ♦ Jan 20 '11 at 21:04
I am trying to identify what is standard he wants 5% and we had a verbal agreement of 3% I am not opposed to providing 5% but mainly I am trying to identify where I apply the %. Is it of the overall job, the cost of the job or the profit we make off of the job? – Patrick Jan 20 '11 at 21:14
I have never heard of finders' fee based on supplier's cost or just profit. – TimJ♦ Jan 20 '11 at 21:18

2 Answers

up vote 4 down vote

You profit is anything you say it is. You can calculate it in a myriad of ways, which could result in a profit of $0 on every sale. Your finder has no idea what your profit margin is. It's what you tell him or her.

The only thing your finder knows is the percentage you promised him and the cost of the job. I have never heard of finders fees based on anything other than total job cost. If they were going to be based on "profit", you should have defined exactly how profit is calcualted to your finder before they found you a job.

share|improve this answer
Thank you your answer is clear and exactly what I wanted to know. – Patrick Jan 20 '11 at 21:48
Also the finder knew us indirectly told the client we could do the job even though he didn't know or check with us first to see if we were able then later came to us and said can you do this..? If so then you could have a job here. Never mentioned a fee until later once we had spent 6 months working the job and another 4 to close and finalize. – Patrick Jan 20 '11 at 21:51
Ah, that information is not in the original question. Still think it is worth giving him the fee. You should formalize it with him though so you can build the cost into your proposals/contracts. And you should have a discussion - to explain that you appreciate his effort(s) and how you will be working with him with the fees. – TimJ♦ Jan 20 '11 at 22:10
1  
Yes, there were a lot of wrinkles that weren't clear from the original question. Asking for a fee months after the fact is pretty fishy. I think your best move now is to pay the percentage based on gross, chalk the whole thing up to experience and have a system in place for next time. – Brandon King Jan 20 '11 at 22:37
2  
I would have changed my answer if those new facts had been presented. If there was no formal deal before the sale, and they asked for a fee well after the sale, I would have negotiated a lower rate than the 3%. Maybe half of it. With the promise of 3% on future deals with proper notice. – Gary E♦ Jan 21 '11 at 1:05
up vote 2 down vote

I think the finder can reasonably expect his percentage to be based on the gross amount. So, 3% of $50K. He has no control over your expenses, after all.

Why does the finder suddenly want 5% if everybody agreed to 3% in the first place?

Tim's comment is spot on. Here's another way to look at it: Is your personal integrity worth the few hundred bucks you might gain by shorting the guy with clever accounting tricks?

share|improve this answer
NO accounting tricks. Just simply looking for a simple answer. Legally we are not obligated to provide anything and we just want to be fair. In order to do so I was looking for some insight to this process. – Patrick Jan 20 '11 at 21:54

Your Answer

 
discard

By posting your answer, you agree to the privacy policy and terms of service.