We were approched today with an intriguing proposition. A client (retired Marketing exec.) wants to market our company. Or more specifically, a certain branch of it.
My question is… what is the going rate for something like this and how does it bill out? Is it a flat fee or a percentage fee?
They will be doing the marketing and selling and we will be doing the work. This is something we have never done or even seriously considered before.
And why is he wanting to come out of retirement for this endeavor?
They will not be associated in any way with us, just be a marketing company that markets for us.
Replies
If you're interested, you should have a serious sit-down with this guy and ask him why he wants to do this and what he will cost you. Whatever he charges has to go to your overhead and be reflected in how much you charge for that part of your business.
You will also need to establish some ground rules regarding what he sells, how much of it he sells, and what he tells customers about prices. If you aren't careful, the marketing tail can start wagging the company dog. - lol
Back in my engineering management days, I had a real love-hate relationship with the marketing/sales department. I hated that part of the job and was glad to have someone else doing it. The downside was that they often promised the customer the moon - and I had to figure out how to actually deliver that big, heavy, SOB!!
This guy is a good client and easy to work for. I dont understand the sudden interest in our company. I've seen some similar models in the same line of work that are in house, and they are costing close to 20% of the gross. This particular work can absorb that high overhead but to me it is way too much.
Take for instance: Real company in business now that I know alot about.
Sales marketer :
$1000/week salary
company truck that is used for personal on company money insurances paid, gas (personal too)
40-45 weeks out of the year at La Quinta: $500/week
Meals out of town personal and business
Training classes
Specific advertising
etc.
Its easy to say they are spending $100,000/ year but he is only bringing in about $500,000. (didnt say he was a good salesman)
I dont want the headache of an in house system. We travel a lot of miles in this business, if their truck conks out they will be responsible or speeding tickets will raise their ins.
Bambam,
This is somewhat of a personal question, but how big is your company and what type of work do you participate in? If you are in the multimillions of revenue, I could see hiring a salesperson. From previous threads it seemed like you were a smaller shop. If so, spend your money on establishing a pro active referral system. Your return will be much higher and you will get much better clients. If you are interested, I can write about it a little later we've got a slab to pour today
Bruce
Yes hiker we are a small company but this is something we've been doing for seven years and would like to get bigger. The volume of work we can handle because we have done so for other companies as a sub.
We were THE go to guys when schedules got tight.
We started on our own contract three years ago and have not been doing the same amount of work because we are not marketers by trade. So to fill in we have been doing private sector work. This would be a tremendous opportunity for us I just dont want to get bit.
BTW, this would be considered light comm./ heavy res. type of work.
If you are interested, I can write about it a little later we've got a slab to pour today
Sure, we're always interested in other opinions. There is always more than one way to skin a cat.
A contracted salesman typically only gets a commision and pay all his own OH. An employed salesman is usually paid monthly and must be paid at least minimum wage, but the company picks up all OH.Marketing is a completely different animal than sales. The marketing budget is usually based on a percentage of gross projected sales. If marketing is outsourced, the marketing company wants a fixed fee plus production costs. Both those costs come out of your marketing budget.Selling price must be based on COGS, (COGS is the Estimate,) OH, Profit, and Cost of Sale. The salesman's comission is a part of Cost of Sale. That commision percentage is added to the sale price on top of your already set sales prices. IOW, if your Markup is 50%, with a salesman earning 3%, your Sales Price after Markup, must be multiplied by 104.5% in order for you to earn the same amount. Either that, or you take 3% of the Sales Price out of your profit, which is probably only around 5% of the Sales Price.Not a problem, because a good salesman can sell for a higher price.The problem is that the selling process is:
Meet the client, get the plans;
Spend the $time$ to create an estimate;
Set the Minimum Sales Price;
Meet the client and Close the sale.The outside samesman cannot do steps 2 and 3.Now that you see some of the issues, here's what I would try in your shoes:Hire the guy part time as the Marketing Dept of your company. Maybe for 20 -40 hours the first couple of weeks then back to not more than 10 hrs a week. Pay him $25 - $50/hr, your research, your call. A good Marketeer is worth that, but that is a $25,000 annual expense, plus production costs.Contract with him as an outside salesman. Base his commision roughly at $3000/month, based on the minimum sales price, if he were to increase your volume to 50% of your production limit. IOW, If you are now producing $100K/month and you could possibly produce $200K/month, He should earn $3K for $150K sales. In practice, you will have to pay between 3% and 10% of sales. That is a range from good salesman to superstar salesman.As acontracted salesman, he is responsible for his own OH. Have you noticed that I keep saying "Minimum Sales Price?" The MSP includes the salesmans's base commision. If he can sell the project for more than that, split the difference with him, 'cuz after the minimum is met, it's all gravy. The difference between the MSP and Sales Price without commision is float, He should be allowed to lower the price within the float, but it comes out of his commision. If he goes below the float, that is considered a draw against his future earnings. Never take from your Net Profit to pay a salesman.Always pay on actual reciepts. IOW, if he collects a $50K nonrefundable deposit, on the 15th of the next month, after the check clears, pay him commision on $50K. 6 months later, you recieve the first progress payment of $100K, on the 15th, pay him his commision on that. If a client Holds Back until completion, you Hold Back the commision on that. Never let a salesman get ahead of your books.SamT
Sorry it took so long to respond I've had a very long day.
Marketing is not my strong suit. In fact I put it right up there with plumbing which for some reason has always been a problem for me.
I did understand your post though but I'm not sure if that applies to this in the exact same context. So here is the deal:
We get a contract from X company to service their clients. The actual clients pay nothing which believe it or not is a very hard sell because nobody believes that you can get something for nothing.
We do the job, they inspect, and we get paid. we never know exactly what the job pays until we load in their software after we complete the job. We can get a rough estimate on the project before we start but not an exact.
So would it be proper to pay on the estimated amount or wait until the actual amount.
These checks can take up to 90 days to get to us after completion. Would most marketers absorb that kind of overhead for that long or would they want some of it at contract signing?
I'm asking because He is proposing to do sales and marketing with his own employed salesmen.
X = Relaint or East-Tex?SamT
Close,
X =the investor owned utilities, but not the coops, in the state of Texas.
We put in "bids" to the electrical line companies to weatherize resisential and small commercial buildings.
They re actually buying kilowatt hours from us on a deemed savings type of program. There are certain measures that they pay for. Once these measures are completed you cant do these measures to that building for another ten years.
We have been doing this since its inception and the market is saturated right now. You really have to hunt for the work which is why a good marketer might be a good thing.
If the guy's retired he's probably just looking for a job to keep himself busy. Not at all unusual -- an old firehorse, straining at the traces. He probably thinks your business would be fun and interesting for him, but not terribly demanding, which is why he chose you. Could be a big win-win if he's any good and doesn't muck around in areas he shouldn't.
The main trick is to arrange things so that you can break it off quickly if it isn't working out. And, obviously, until he has a track record with you, you don't want him where he could abscond with your fortune.
Other than that, if you're interested see what you can negotiate. Probably a combo of a flat fee and a % of the business he brings in. (Make sure that at least half of the % isn't until after you receive final payment.) You should be able to come up with a ballpark by figuring what you spend now on marketing. (You do know that, right?)
Yeah I think he's just bored and wants something to do. He used to market encyclopedia's on the east coast.
We spend up to 10% on marketing for this kind of work. This market is fairly saturated so I can see it going up. The approach he is going to use has not been tried to my knowledge.
I would think that the guy would be willing, for starters, to work for 10% or maybe even less unless he's hard up for money (and if he was he'd probably be looking somewhere else). Make it clear that you'll renegotiate in 6-12 months, once things are going.
So convenient a thing it is to be a reasonable Creature, since it enables one to find or make a Reason for everything one has a mind to do. --Benjamin Franklin
If you're wiling to provide a little detail as to what your company does and precisely what this marketing person plans on doing for you, I'd be happy to add my two cents.
Although my background is focused more on the creative side of marketing and advertising, I do have experience in the strategic side as well. In fact, I've recently finished set up of an revamped marketing and sales structure for a client with revenues in the $20 million range, with estimates of a 200% increase for the balance of '07.
Coincidently, I hired a retired, former marketing and sales director into a key position for this client with great results.
Keep in mind that sales, marketing and advertising are all very separate, all be they interconnected disciplines, so it would help to be clear about what this person's role and responsibilities would be.
Edited 8/4/2007 12:09 am by pino
Hey pino
I saw that you posted but will have to get back to you tomorrow.
My butt is dragging as I didnt get home until after 10 from a roof job.
No problem. I'm out tomorrow setting up for our annual block party, so no rush.
The above post explains what we do (I hope). but I'm not sure exactly what the marketer has in mind. For the residential customers he's talking about setting up town meetings to explain the program. Maybe have some food there and make it like a get together. He only had rough ideas so far as he is just getting started on some ideas.
On the small commercial and large residentil he will work on it and get back with us. He didnt even know we did that till the other day. These jobs are the bread and butter for us.
Residential we come in with blowwer doors, duct blasters, and insulation hoppers and seal air leaks and make the house more efficient. We can also do water savers and CFL's. Its not a total weatherize IMO but if customer wants that tehy can pay for the rest, ie.windows, E Star appliances, etc.
OK.Well we can disregard the confusion over who your client is. You're in a situation where your client and your market are different people. Let's call the structure owner the Authorizer to differentiate him from your client, the guy who signs the check."So would it be proper to pay on the estimated amount or wait until the actual amount.These checks can take up to 90 days to get to us after completion. Would most marketers absorb that kind of overhead for that long or would they want some of it at contract signing?I'm asking because He is proposing to do sales and marketing with his own employed salesmen."Pay after the check clears. The 15th of the month following the month the check clears. It's OK to pay sooner as long as your contract says "no later than the 15th of the following month," and you occasionaly make him wait till that date. NEVER pay before the check clears.hmmmn. . .I've got so many ideas for you and your Marketeer. And so many questions for you. I don't think you want all the answers on this very public forum. Do you PM? Does your Marketeer PM? AIM, MSN, IRC, Yahoo Messenger, or my favorite, Trillian?If you want to Email me your contact info, we can set up a virtual meeting and hash this out much faster and more privately.
SamT
Thanks Sam, I'll send you my info later today.
I dont have his yet but I'll get it probably in a week or 2. He is headed back to Georgia this weekend on business.
Looks like SamT has a good handle on your situation and I'm about to leave town unexpectedly, so I'll defer to his input.I will add a few quick thoughts having re-read your posts.1- The "town meeting" type of marketing forum can get pricey very fast. Renting an appropriate venue, food, wait staff, etc all add up. Advertising to reach a qualified and receptive audience can also exhaust resources quick, more so than the direct meeting cost. Development costs for the "dog and pony show" aspect of these meetings (more my fortay) adds even more. Then there is the risk that you'll reach too high a percentage of unqualified attendees, causing the cost per lead/sale to rise. Potential attendees may simply view this type of meeting as yet another "time share"-type pitch further reducing the quality of perspectives lead.With that said, I structured a similar effort for a friend (estate and tax attorney) that was wildly successful. Used local mid-priced restaurants with banquet facilities as the venue, offered a free dinner followed by a 60 minute presentation. This was self conducted by the attorney, so sales commission costs weren't involved.2 - What ever $$ amount you choose to pay this marketer/salesman, his real incentive to increasing his income ought to be in the vale-add. In this case, that sounds like it would be the "windows, E Star appliances, etc." He gets a minimal $ or percentage for each sale of your basic service package and a substantially increased $ or percentage on the extras. Not unlike a car dealer.Goods luck with whatever direction you choose. I'll watch the thread while I'm out of town should you have any detailed questions or need an alternative view to what Sam will offer. Based on his previous post, looks like you're in good hands.