Finder's fee for connecting unsigned band to financial backer/manager
November 7, 2010 3:44 PM Subscribe
One client of mine, a wealthy entrepreneur, recently expressed interest in being connected with another client, a local band with tons of potential. Now that I've connected them, he's investing a lot of money into their next album and tour. So where does my cut come in?
I've never done this before, so I'm trying to find good precedent.
At one point in the initial conversation, he volunteered the idea of paying for the connection, to which I agreed, but we never formalized anything. The next day I introduced them, and now it looks like he's going to be their manager, and will be paying for the production and distribution of their next album, and setting up/finding a small international tour, for starters.
This is all fantastic news, obviously. But I'm wondering how I should go about claiming a finder's fee.
Maybe it's too late, maybe I should have formalized something before I made the introduction?
I've always been in charge of online media for the band (web, social video, etc) and will likely not be stopping anytime soon. I'm doing the same type of work for the aforementioned entrepreneur and a couple of his businesses. So perhaps I should approach both parties and formalize my role as some kind of producer, and through that process use the fact that I connected them as leverage for a reasonable commission of some kind.
Or maybe there's a strong precedent for claiming my finder's fee, in which case, what type of fee or percentage cut should I look at asking?
I've been friends with the local band long before they were a client, so I'm not trying to dampen the success of this new arrangement for them in any way, and ultimately, I'll walk away without anything it means risking or tarnishing the deal.
Just want to make sure that I'm claiming what's mine, if any whatsoever, in this situation, as this is somewhat new territory for me.
I've never done this before, so I'm trying to find good precedent.
At one point in the initial conversation, he volunteered the idea of paying for the connection, to which I agreed, but we never formalized anything. The next day I introduced them, and now it looks like he's going to be their manager, and will be paying for the production and distribution of their next album, and setting up/finding a small international tour, for starters.
This is all fantastic news, obviously. But I'm wondering how I should go about claiming a finder's fee.
Maybe it's too late, maybe I should have formalized something before I made the introduction?
I've always been in charge of online media for the band (web, social video, etc) and will likely not be stopping anytime soon. I'm doing the same type of work for the aforementioned entrepreneur and a couple of his businesses. So perhaps I should approach both parties and formalize my role as some kind of producer, and through that process use the fact that I connected them as leverage for a reasonable commission of some kind.
Or maybe there's a strong precedent for claiming my finder's fee, in which case, what type of fee or percentage cut should I look at asking?
I've been friends with the local band long before they were a client, so I'm not trying to dampen the success of this new arrangement for them in any way, and ultimately, I'll walk away without anything it means risking or tarnishing the deal.
Just want to make sure that I'm claiming what's mine, if any whatsoever, in this situation, as this is somewhat new territory for me.
I personally don't think you are entitled to anything. You did no work except make an introduction. I don't have any insight into your particular domain (music) but generally in business introductions are free.
Personally if I was either of the two parties involved and you attempted to claim such a thing I'd likely pay you and immediately quit using your services.
posted by bitdamaged at 4:26 PM on November 7, 2010 [2 favorites]
Personally if I was either of the two parties involved and you attempted to claim such a thing I'd likely pay you and immediately quit using your services.
posted by bitdamaged at 4:26 PM on November 7, 2010 [2 favorites]
"...but we never formalized anything."
This is your answer.. you had no agreement... if he offers, fine, if not, a lesson learned.
posted by HuronBob at 4:29 PM on November 7, 2010 [1 favorite]
This is your answer.. you had no agreement... if he offers, fine, if not, a lesson learned.
posted by HuronBob at 4:29 PM on November 7, 2010 [1 favorite]
Making connections is intrinsically good. It's not something you should charge money for. I mean, there is really no reason why your entrepreneur friend couldn't have just picked up the phone or whatever and directly contacted the band himself. In terms of business development, if anyone owes you any money, it would be the band, rather than the entrepreneur.
However, from my point of view, making connections is part of building trust, building relationships, and building community. What you may get out of it is perhaps more work related to any sort of cash investment the entrepreneur makes in the band.
Or, you could think of it as an exchange of social capital. Your entrepreneur friend asked you to expend some of your social capital by facilitating an intro. Your entrepreneur friend now owes you social capital. However, it's not a quid pro quo transaction. All this means is that in the future you have the right to hit him up for a favour of some sort - perhaps an introduction.
But introductions are overrated. Anyone can pick up the phone. The real question is, who shouldered the most risk in the transaction? Who did the most legwork setting up the agreement or contract?
As well, did your band client ever ask you for this assistance? Another key piece of building community (and making money from bus dev) is giving people what they want, not what you think they need.
In this case, you connected the dots, and it worked out. Matchmaking is not always this easy.
posted by KokuRyu at 4:43 PM on November 7, 2010
However, from my point of view, making connections is part of building trust, building relationships, and building community. What you may get out of it is perhaps more work related to any sort of cash investment the entrepreneur makes in the band.
Or, you could think of it as an exchange of social capital. Your entrepreneur friend asked you to expend some of your social capital by facilitating an intro. Your entrepreneur friend now owes you social capital. However, it's not a quid pro quo transaction. All this means is that in the future you have the right to hit him up for a favour of some sort - perhaps an introduction.
But introductions are overrated. Anyone can pick up the phone. The real question is, who shouldered the most risk in the transaction? Who did the most legwork setting up the agreement or contract?
As well, did your band client ever ask you for this assistance? Another key piece of building community (and making money from bus dev) is giving people what they want, not what you think they need.
In this case, you connected the dots, and it worked out. Matchmaking is not always this easy.
posted by KokuRyu at 4:43 PM on November 7, 2010
Making connections is intrinsically good. It's not something you should charge money for.
But in this case, the finance guy opened the subject and made the offer. So, fair game.
Balls in your court. Ask him what he had in mind. If he's a guy, he will remember the conversation and make an offer. If he's not a guy, he won't.
At which point, you have to ask yourself if you can work with not a guy. Or can afford to lose his other business.
For what it's worth, finders fees in general range from a low of .5 percent to a high of as much as 10 percent. 1 percent is not uncommon. I'd assume figured against a known amount he is putting into the business. But that's an assumption only and I know nothing about your business.
If music is a big part of your business life, check out musiclegalcontracts.com. The sample form might give you a better answer.
Then again, it might not.
posted by IndigoJones at 5:07 PM on November 7, 2010
But in this case, the finance guy opened the subject and made the offer. So, fair game.
Balls in your court. Ask him what he had in mind. If he's a guy, he will remember the conversation and make an offer. If he's not a guy, he won't.
At which point, you have to ask yourself if you can work with not a guy. Or can afford to lose his other business.
For what it's worth, finders fees in general range from a low of .5 percent to a high of as much as 10 percent. 1 percent is not uncommon. I'd assume figured against a known amount he is putting into the business. But that's an assumption only and I know nothing about your business.
If music is a big part of your business life, check out musiclegalcontracts.com. The sample form might give you a better answer.
Then again, it might not.
posted by IndigoJones at 5:07 PM on November 7, 2010
This is your answer.. you had no agreement...
You don't necessarily need to formalize an agreement to have a binding contract. However, there aren't enough details here to give a legal answer one way or the other, and if the OP wants a legal answer, he'll need to talk to a lawyer. It'll be a short visit. However, I think KokoRyu's advice is best, pragmatically.
posted by smorange at 5:26 PM on November 7, 2010
You don't necessarily need to formalize an agreement to have a binding contract. However, there aren't enough details here to give a legal answer one way or the other, and if the OP wants a legal answer, he'll need to talk to a lawyer. It'll be a short visit. However, I think KokoRyu's advice is best, pragmatically.
posted by smorange at 5:26 PM on November 7, 2010
In this case the risks (losing two paying clients and friends) seem to greatly outweigh the rewards (an unclear amount of money that could only be gained through uncertain legal action).
I also agree with KokoRyu - there is a kind of connection karma that comes out of helping people find each other. Personally its my favorite thing to do and I'd never charge money since it is easy enough for people to pick up the phone on their own. But since it is YOU that made the connection, you essentially vouch for the other party, which means that your opinion and judgement is respected. Those kinds of things always come back around. And if your clients do well together then you will be very well positioned to make more money long term compared to a very limited windfall now.
posted by infinitefloatingbrains at 5:36 PM on November 7, 2010
I also agree with KokoRyu - there is a kind of connection karma that comes out of helping people find each other. Personally its my favorite thing to do and I'd never charge money since it is easy enough for people to pick up the phone on their own. But since it is YOU that made the connection, you essentially vouch for the other party, which means that your opinion and judgement is respected. Those kinds of things always come back around. And if your clients do well together then you will be very well positioned to make more money long term compared to a very limited windfall now.
posted by infinitefloatingbrains at 5:36 PM on November 7, 2010
I'm thinking a rising tide raises all boats. If your rich friend makes your band friends better off, won't you be making more money off them?
I wouldn't ask for a finder's fee. As was stated above, social capital comes in handy.
posted by St. Alia of the Bunnies at 5:38 PM on November 7, 2010
I wouldn't ask for a finder's fee. As was stated above, social capital comes in handy.
posted by St. Alia of the Bunnies at 5:38 PM on November 7, 2010
Maybe it's too late, maybe I should have formalized something before I made the introduction?
Be patient. If it's a successful venture, when the time comes and your guy wants to pursue other successful ventures, he'll have your number.
Karma is a wheel.
posted by mhoye at 5:58 PM on November 7, 2010
Be patient. If it's a successful venture, when the time comes and your guy wants to pursue other successful ventures, he'll have your number.
Karma is a wheel.
posted by mhoye at 5:58 PM on November 7, 2010
I don't know why the entrepreneur should be the only one to pay you--he's still taking a risk. The band is the party that is immediately profiting by your introduction--maybe they should give you a raise for the online work you're already doing. Or perhaps you could work out some sort of producer/social media guru credit on all their recordings.
The guy offered to pay you for the introduction, and I think even if you didn't name a sum, he should follow through. But the band's also getting something out of the deal, and I hope they thank you in a tangible form as well.
posted by Ideefixe at 6:02 PM on November 7, 2010
The guy offered to pay you for the introduction, and I think even if you didn't name a sum, he should follow through. But the band's also getting something out of the deal, and I hope they thank you in a tangible form as well.
posted by Ideefixe at 6:02 PM on November 7, 2010
A fairly common figure is 15% of the first year's earnings.
I would ask for it, not demand it. I disagree with those who say you should leave it alone. There is nothing binding or legally enforceable, but a finder's fee is common and accepted.
posted by megatherium at 6:24 PM on November 7, 2010
I would ask for it, not demand it. I disagree with those who say you should leave it alone. There is nothing binding or legally enforceable, but a finder's fee is common and accepted.
posted by megatherium at 6:24 PM on November 7, 2010
Sorry, I missed the part where the entrepreneur guy offered to pay you a finder's fee.
I guess you are within your rights to follow-up on the promise of the cut, but I still think it would be unwise. I've worked for industry associations for the past 6 or 7 years. Part of the job description is making connections.
Often someone will phone me up or whatever, and ask if I know of anyone looking for their services. I'll say, "sure, talk to so-and-so". Occasionally, these folks will ask me "do you want any money for this?" and I'll say no, not only because it's part of my job and because I believe it helps build community, but also because, at the end of the day, I've done very little to add value to the transaction.
Usually the people offering me a cut are just unaware of the mechanics and etiquette of "networking". Not everyone gets it, which is fine and to be expected.
I think you should acknowledge that you were offered a cut. But in the same acknowledgement, turn it down: "I know you offered me a cut, but I've thought about it and it's just not worth it. I didn't do much: there was no risk on my part, I put in very little effort, and I'm happy if things work out. Hopefully your new partnership will result in some work coming my way."
posted by KokuRyu at 7:28 PM on November 7, 2010
I guess you are within your rights to follow-up on the promise of the cut, but I still think it would be unwise. I've worked for industry associations for the past 6 or 7 years. Part of the job description is making connections.
Often someone will phone me up or whatever, and ask if I know of anyone looking for their services. I'll say, "sure, talk to so-and-so". Occasionally, these folks will ask me "do you want any money for this?" and I'll say no, not only because it's part of my job and because I believe it helps build community, but also because, at the end of the day, I've done very little to add value to the transaction.
Usually the people offering me a cut are just unaware of the mechanics and etiquette of "networking". Not everyone gets it, which is fine and to be expected.
I think you should acknowledge that you were offered a cut. But in the same acknowledgement, turn it down: "I know you offered me a cut, but I've thought about it and it's just not worth it. I didn't do much: there was no risk on my part, I put in very little effort, and I'm happy if things work out. Hopefully your new partnership will result in some work coming my way."
posted by KokuRyu at 7:28 PM on November 7, 2010
I should say that I do work with a web marketing company. We have a commission structure worked out for any sales I bring in through my rather extensive network. But we worked it out up front, I have performance targets, and I also have to work hard to make sales, not only doing the research and phoning up people, but also in closing.
It's a lot more work than just connecting the dots.
posted by KokuRyu at 7:30 PM on November 7, 2010
It's a lot more work than just connecting the dots.
posted by KokuRyu at 7:30 PM on November 7, 2010
If he had asked you to go out and find him a band to invest in, you'd be due a pretty decent fee. But it doesn't sound like that's what happened. If the circumstances are more that he already liked the band and you just facilitated a meeting that could just as easily have happened any number of other ways - walking up to the band after a gig, for example - then I think the right thing to do is to put it in the favor bank. Both the money guy and the band will owe you one, and that's not a bad position to be in.
posted by spilon at 8:11 PM on November 7, 2010
posted by spilon at 8:11 PM on November 7, 2010
There is no honorable and scalable business model which will let you make money out of pure play introductions. However, it is often possible to do it indirectly and for that reason there are membership clubs which introduce investors to investment opportunities. Other companies such as chartered accountants, lawyers, web designers etc do the introduction for free in order to generate more business and goodwill.
Generally:
-Finders fees are fixed fees irrespective of amount invested or money generated as a result of the investment (the 'finder' does nothing more than an introduction and carries no risk)
-Brokerage fees are a percentage of amount invested. Almost always paid for by the party that receives the money (unless there is a glut of investors chasing deals)
In your specific case where it is a grey area as you do not have a contract with either party I think the best move would be to try and convert it into goodwill from both parties.
From the outside it may seem unfair that an investor makes 'millions' out of your introduction but where the 'millions' come from is the risk taken by the investor which the introducer rarely takes.
As a warning trying to get 15% for someones earnings for making an introduction is not business it is predatory!
posted by london302 at 2:33 AM on November 8, 2010
Generally:
-Finders fees are fixed fees irrespective of amount invested or money generated as a result of the investment (the 'finder' does nothing more than an introduction and carries no risk)
-Brokerage fees are a percentage of amount invested. Almost always paid for by the party that receives the money (unless there is a glut of investors chasing deals)
In your specific case where it is a grey area as you do not have a contract with either party I think the best move would be to try and convert it into goodwill from both parties.
From the outside it may seem unfair that an investor makes 'millions' out of your introduction but where the 'millions' come from is the risk taken by the investor which the introducer rarely takes.
As a warning trying to get 15% for someones earnings for making an introduction is not business it is predatory!
posted by london302 at 2:33 AM on November 8, 2010
A fairly common figure is 15% of the first year's earnings.
Fairly common in what context?
posted by mediareport at 4:11 AM on November 8, 2010
Fairly common in what context?
posted by mediareport at 4:11 AM on November 8, 2010
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But, really, speak with an entertainment lawyer about this situation.
posted by dfriedman at 3:52 PM on November 7, 2010