Sales commission on found work and subsequent projects?

July 21, 2008 7:20 AM

I am an independent tech contractor, about to pass some work onto my client, where I would be a part of the project's development team. What commission structure is typical?

I am not a salesman, but I have found a project for the company I contract with. More projects could possibly follow if this one goes well. The company I contract with and I both agree that I should get some kind of commission for finding this work, but have no idea what percentage would typically be paid on this. Also, what about commissions on any following projects from same source? Would they be structured differently than the initial project's commission?

In my mind I have this vague idea that there should be one percentage for the initial project, and then a lower percentage on subsequent work, but I have no example of this to point to. Any advice or information would be appreciated.

posted by juggler to Work & Money (5 answers total)

It depends greatly on how instrumental you were in bringing the work, and how much you stand to gain from providing follow-on services. If you effectively sold the work, and you're just using them to assist with staffing, 33-50% of their margin is appropriate. Scale down from there.
posted by dblslash at 8:06 AM on July 21, 2008

If it helps your Googling any, my clients refer to it as a "finder's fee." I haven't gotten one yet, but I've heard of fees being structured as X% of all income from the client you brought in. Decreasing the percentage over time seems a little odd, because the value of the client doesn't decrease.
posted by PatoPata at 10:22 AM on July 21, 2008

A search on "typical finder's fee" suggests that many fields use 2-3% of total sales, but that's just from a quick scan of Google results.
posted by PatoPata at 10:31 AM on July 21, 2008

Whatever it is: Make sure you get it in writing before they sign the contract with the client.

It can vary widely depending on the business, the client, and how nice your boss is. I've seen everything from 2% for the initial deal (and 0 on any followup) to 35% in perpetuity. In the first case it was a huge contract (many many zeros) but a lot of work and risk for the company. In the second case it was mostly for licensing an existing product, with very little new development time involved.

So yeah, as dblslash mentioned, it depends on the margin, which you may or may not have any idea about. It also depends on your involvement. If you're continuing in your usual position there, it's not such a big deal. But if you're going to be invovled with managing the client, both raise your rate and ask for a bigger piece of the pie.
posted by Ookseer at 10:43 AM on July 21, 2008

I do 10% on both sides of the equation.
posted by DarlingBri at 12:49 PM on July 21, 2008