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Advice On Commission Rate Or Referral Fees

 
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Old 03-03-2018, 01:51 PM   #1
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Advice On Commission Rate Or Referral Fees


Hi all, I'm looking for advice on what an appropriate rate is to charge (either by commission or a referral fee) for "almost-closed" sales. I'll define that in a moment.

Without going into too much detail, I have access to a constant supply of leads for people that need minor remodeling work done in the very near future, ie., completion within 30 days. Most of the jobs involve bathrooms, kitchens, and doorways. Typical job price is probably $10-$15k.

I would pre-screen every client, visit the site, take pictures, give a general estimate range to confirm that they are willing to spend the funds needed to cover the cost of the job. Afterwards, I would go to one or two of the contractors that I know fit well with this type of work, email pictures and a full description of the work, and ask them to provide a formal bid. It would be up to them if they want to visit the site, or if my pictures and description were sufficient. If they wanted to just give me a bid, and have me go back to close the sale, that would work as well.

Basically, I'd be a salesman not on the contractor's payroll. I don't want to work for someone else, rather, I'd be the marketing engine for contractors that like to do these kinds of jobs, get something that looks more like an order than a crap "lead", and get paid for it. This would be my full time job, and I'd probably have a dozen contractors I can trust that I'm sending deals to. I say a dozen, because some guys like doing cabinets and countertops, some don't, some just do electrical, etc. I'd find a good mix of guys that are good at what they do and charge appropriately. I'm NOT going to compete against myself sending the lead to 5 contractors and let them fight it out. But if I need an electrician and a countertop/cabinet guy, it might be two different guys that I have bid THEIR pieces of the job.

So... as a contractor, what would you be willing to pay for that? You'd get a text from me to check your email with pictures of the site, a description of the project, confirmation that the client is OK with the general price range of the project, and a confirmed need that they need this work performed within the next 30 days. What is that worth on a 10-15k bath/kitchen/doorway project?
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Old 03-03-2018, 02:40 PM   #2
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Re: Advice On Commission Rate Or Referral Fees


Quote:
Originally Posted by dovehunter View Post
Hi all, I'm looking for advice on what an appropriate rate is to charge (either by commission or a referral fee) for "almost-closed" sales. I'll define that in a moment.

Without going into too much detail, I have access to a constant supply of leads for people that need minor remodeling work done in the very near future, ie., completion within 30 days. Most of the jobs involve bathrooms, kitchens, and doorways. Typical job price is probably $10-$15k.

I would pre-screen every client, visit the site, take pictures, give a general estimate range to confirm that they are willing to spend the funds needed to cover the cost of the job. Afterwards, I would go to one or two of the contractors that I know fit well with this type of work, email pictures and a full description of the work, and ask them to provide a formal bid. It would be up to them if they want to visit the site, or if my pictures and description were sufficient. If they wanted to just give me a bid, and have me go back to close the sale, that would work as well.

Basically, I'd be a salesman not on the contractor's payroll. I don't want to work for someone else, rather, I'd be the marketing engine for contractors that like to do these kinds of jobs, get something that looks more like an order than a crap "lead", and get paid for it. This would be my full time job, and I'd probably have a dozen contractors I can trust that I'm sending deals to. I say a dozen, because some guys like doing cabinets and countertops, some don't, some just do electrical, etc. I'd find a good mix of guys that are good at what they do and charge appropriately. I'm NOT going to compete against myself sending the lead to 5 contractors and let them fight it out. But if I need an electrician and a countertop/cabinet guy, it might be two different guys that I have bid THEIR pieces of the job.

So... as a contractor, what would you be willing to pay for that? You'd get a text from me to check your email with pictures of the site, a description of the project, confirmation that the client is OK with the general price range of the project, and a confirmed need that they need this work performed within the next 30 days. What is that worth on a 10-15k bath/kitchen/doorway project?
If you're not going to compete against yourself with 5 different guys who do the same thing, sounds like you're looking to be an independent rep...

While it once was a lucrative field for the right person, with the levels of responsibility and insurances nowadays, it makes it a harder row...

Basically, you're qualifying subs and acquiring customers for them... you're a few steps away from being a GC where you can set your own prices, as opposed to negotiating with all the subs for a referral/commission rate... think a little bigger and write your own ticket...

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Old 03-03-2018, 03:11 PM   #3
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Re: Advice On Commission Rate Or Referral Fees


Quote:
Originally Posted by dovehunter View Post
Hi all, I'm looking for advice on what an appropriate rate is to charge (either by commission or a referral fee) for "almost-closed" sales. I'll define that in a moment.

Without going into too much detail, I have access to a constant supply of leads for people that need minor remodeling work done in the very near future, ie., completion within 30 days. Most of the jobs involve bathrooms, kitchens, and doorways. Typical job price is probably $10-$15k.

I would pre-screen every client, visit the site, take pictures, give a general estimate range to confirm that they are willing to spend the funds needed to cover the cost of the job. Afterwards, I would go to one or two of the contractors that I know fit well with this type of work, email pictures and a full description of the work, and ask them to provide a formal bid. It would be up to them if they want to visit the site, or if my pictures and description were sufficient. If they wanted to just give me a bid, and have me go back to close the sale, that would work as well.

Basically, I'd be a salesman not on the contractor's payroll. I don't want to work for someone else, rather, I'd be the marketing engine for contractors that like to do these kinds of jobs, get something that looks more like an order than a crap "lead", and get paid for it. This would be my full time job, and I'd probably have a dozen contractors I can trust that I'm sending deals to. I say a dozen, because some guys like doing cabinets and countertops, some don't, some just do electrical, etc. I'd find a good mix of guys that are good at what they do and charge appropriately. I'm NOT going to compete against myself sending the lead to 5 contractors and let them fight it out. But if I need an electrician and a countertop/cabinet guy, it might be two different guys that I have bid THEIR pieces of the job.

So... as a contractor, what would you be willing to pay for that? You'd get a text from me to check your email with pictures of the site, a description of the project, confirmation that the client is OK with the general price range of the project, and a confirmed need that they need this work performed within the next 30 days. What is that worth on a 10-15k bath/kitchen/doorway project?
Somewhere between 50 to 150$.

You're doing lead gen and will be competing home advisor, thumbtack, houzz and the like.

Sent from my SM-N950U using Tapatalk
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Old 03-03-2018, 03:15 PM   #4
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Re: Advice On Commission Rate Or Referral Fees


So the original business plan actually *was* to be my own GC and think a little bigger and write my own ticket. But the reality is that my background is business/finance/marketing and not construction. And what I bring to the table is really, really, solid leads because of my lead sources. These are people that need the work done soon, not someone that is "thinking about it" and may or may not have the money.

So I'm torn... I'm pretty darn handy and grew up in a family that had a habit of building their own houses, second stories, and whatnot. But at the same time, I have zero experience of doing that professionally. (although I've done a ton of small job myself. I was nailing shingles when I was 10 years old, and did most of the small electrical and plumbing on my last remodel.)

My thought was that if I just act as the "marketing arm" referring these almost-closed leads to contractors, and then back it up with both pre- and post- follow up, that would add a lot of value to both the client and the contractor. That way I can end up "feeding" a ton of contractors across the city as long as I get a slice of the pie, and they don't have to pay silly money for bad leads from a web site, or pay a salesman for their car, and salary, etc...

You said that was "once a lucrative field", etc.. What changed?
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Old 03-03-2018, 03:37 PM   #5
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Re: Advice On Commission Rate Or Referral Fees


Sparehair,
So first -- I'm really curious, and I'm encouraging discussion, not trying to shut you down --
That said, you would equate a job request like this with a defined budget, site photos, a defined near-term need, and agreement with the project cost with a tip from Home Advisor, et al?

I guess I had assumed (and we all know what ASS-U-ME-d) stands for that someone would pay more for pretty much closed leads than stuff form Angie's List. But this is why I'm asking the question.

If it's 1% on the job, it doesn't work. At all. Not if I'm doing all the front-end work of pre-qualifying, giving basic estimates, and essentially giving a work order to someone. And frankly, if that is the case, I wonder why any of the guys on this site hire salespeople, because they are making at least 10x the 1% and they still have to deal with all kinds of personnel stuff, salaries, company car, etc.

If I'm doing all that work, I think I need roughly 10% of the job. Trying to figure out if that's in the range. You don't pay my car, my time, my salary, nothing. But I deliver you leads that are already semi-closed. They've agreed to the budget, they have the funds, and they need to have this done in the next 30 days.
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Old 03-03-2018, 07:45 PM   #6
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Re: Advice On Commission Rate Or Referral Fees


Quote:
Originally Posted by dovehunter View Post
Sparehair,
So first -- I'm really curious, and I'm encouraging discussion, not trying to shut you down --
That said, you would equate a job request like this with a defined budget, site photos, a defined near-term need, and agreement with the project cost with a tip from Home Advisor, et al?

I guess I had assumed (and we all know what ASS-U-ME-d) stands for that someone would pay more for pretty much closed leads than stuff form Angie's List. But this is why I'm asking the question.

If it's 1% on the job, it doesn't work. At all. Not if I'm doing all the front-end work of pre-qualifying, giving basic estimates, and essentially giving a work order to someone. And frankly, if that is the case, I wonder why any of the guys on this site hire salespeople, because they are making at least 10x the 1% and they still have to deal with all kinds of personnel stuff, salaries, company car, etc.

If I'm doing all that work, I think I need roughly 10% of the job. Trying to figure out if that's in the range. You don't pay my car, my time, my salary, nothing. But I deliver you leads that are already semi-closed. They've agreed to the budget, they have the funds, and they need to have this done in the next 30 days.
There's a great big gaping hole here... how are you determining what the project will cost for multiple companies before handing it off to a list of contractors?

Last edited by KAP; 03-03-2018 at 08:35 PM.
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Old 03-03-2018, 08:06 PM   #7
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Re: Advice On Commission Rate Or Referral Fees


Quote:
Originally Posted by dovehunter View Post
So the original business plan actually *was* to be my own GC and think a little bigger and write my own ticket. But the reality is that my background is business/finance/marketing and not construction. And what I bring to the table is really, really, solid leads because of my lead sources. These are people that need the work done soon, not someone that is "thinking about it" and may or may not have the money.

So I'm torn... I'm pretty darn handy and grew up in a family that had a habit of building their own houses, second stories, and whatnot. But at the same time, I have zero experience of doing that professionally. (although I've done a ton of small job myself. I was nailing shingles when I was 10 years old, and did most of the small electrical and plumbing on my last remodel.)

My thought was that if I just act as the "marketing arm" referring these almost-closed leads to contractors, and then back it up with both pre- and post- follow up, that would add a lot of value to both the client and the contractor. That way I can end up "feeding" a ton of contractors across the city as long as I get a slice of the pie, and they don't have to pay silly money for bad leads from a web site, or pay a salesman for their car, and salary, etc...
Unless you're taking on responsibility of the project, an almost-closed lead isn't a closed lead/sale and there's still a lot more still to do to close it that I don't think you're taking into consideration...

From a customers perspective, they're going to spend a lot of time with you to get it to the point where you can even refer it as you suggest, only to come to the realization that they have to go through it a lot more times with multiple contractors (gotta' meet to confirm details, sign contract, drawings, permits, etc.)... how do you view that as an advantage to the customer?

If you're going to get the leads, meet with the leads, get pictures, do both pre- and post- follow-up, what is your reason for not just GC'ing it since your background is business/finance/marketing? Many GC's / builders don't lift a hammer but learn to manage the projects...


Quote:
Originally Posted by dovehunter View Post
You said that was "once a lucrative field", etc.. What changed?

Quote:
Originally Posted by KAP View Post
While it once was a lucrative field for the right person, with the levels of responsibility and insurances nowadays, it makes it a harder row...
Think of it this way... if the job goes south... who's responsible? And on who's dime?

The difference between what you're proposing to earn a commission or a referral fee and a salesperson who works for a company is liability and responsibility...

Nowadays, you would most likely need liability/business insurances, as well as an agreement or contract disclosing the nature of your relationship with the contractors, all of which comes at a cost that you need to recoup, thereby necessitating increasing what you charge for your service...

I hope you're not getting the impression that I'm telling you not follow your dreams, but based solely on what you've posted, you have a concept, but there seems to be some larger issues you haven't taken into consideration...
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Old 03-03-2018, 09:25 PM   #8
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Re: Advice On Commission Rate Or Referral Fees


This thread is marketing research by a Service Provider, which we do not allow here.

Sorry; thread closed.

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