Hello,

I have a small company and I am launching a new unique toy product into the market.
A friend of a friend, is a business relations/sales person and is very
interested in doing sales for my product. This person is trying to
approach small stores and big chains and make a percentage of the
sale.

The sales person would like to make 33 1/3 percent of the profit of
the sale (NOT the gross).
This percentage seems a bit high to me, so I would like to know what
are fair percentages for salespersons.

Another questions I have are:
- If the sales person gets me an order from a store, do I have to give
her a percentage every time this store places an order with my
company?

- If I make a contract for 1 year with this salesperson, after the
contract expires, how do I deal with stores that placed orders through
her in the past? Is it "unethical" for me to ask for the contact
information to these stores?

It took me a very long time to create my product, so I want to make
sure I get a fair percentage for my hard work, but I also want to be
fair to the salesperson.

Please let me know if you require additional information to answer this question.

Thank you,

---

Request for Question Clarification by cynthia-ga on 31 Jan 2005 23:55 PST

ayar,

You're welcome, I'm happy to help.  I didn't post in the Answer Box
because my Comment is really only my advice and opinion based on
personal experience.  You should look at the 33 1/3 offer as a
starting point for negotiating every possible sales event.  Don't
forget damaged goods and returns... If you are able to negotitate a
BETTER sales contract with this person as a result of my advice, you
can pay me anything you like for this --including nothing, as it is
now, it's a free Comment.  You can also change the $$ amount if my
advice is helpful, but not worth $50 -- and then reply to this in a
Clarification.  I'd be notified by email to check this page.

Anything you decide is fine with me.  I do this for the love of the
job, but it's nice to get paid!

I recommend you leave it open for awhile, you're bound to get more comments!

~~Cynthia

---

Clarification of Question by ayar-ga on 06 Feb 2005 21:19 PST

Hi Cynthia,

I appreciate your answer it was very helpful.
I would like to know if you can get me some more info:

1- You said there are percentage standards on salespeople, but you
didn't know them in the toy industry. Any chance you can get me these
standards for the book industry, or similar industries?

2- Is there a place on the web that can give me advice on this type of questions?

3- This last question, might be tough, but it'll help me figure out
some things if you have the answer: What is the discount a Mass Market
store (let's say Costco, and Toys 'R US) expects on the retail price
of a toy and a book product?

If you can get me these answers, I would be happy to give you the $50 dollars.
If you are able to get me real info on question 3, I'll add a tip.

... or we could negotiate a fair percentage for the answers you have
given me so far ... maybe something around 33 1/3? ;)

---

Request for Question Clarification by cynthia-ga on 09 Feb 2005 07:38 PST

ayar,

I'll give it a go, however I have a comopuyer problem I have to fix
before I can start.  I popped in just now to check for replies, such
as yours, so I could reply in a timely manner.  It should less than a
couple days...

~~Cynthia

There are industry standards for what to pay salespeople.  I don't
know what they are in toy sales (especially new products).

Ask your friend to show you documentation that his offer is within
those norms.  Or, offer him 20% and negotiate to somewhere between the
two figures.

You asked:

1) - If the sales person gets me an order from a store, do I have to give
her a percentage every time this store places an order with my
company?

A)  This is negotiable.  If he insists you pay him the 33 1/3,
negotiate repeat sales considerable lower then this, say a 10-15%
residual.  You will want to pay him _something_ on repeat sales, it's
his motivation to sell your product, and those repeat sales would make
you very wealthy.

2) - If I make a contract for 1 year with this salesperson, after the
contract expires, how do I deal with stores that placed orders through
her in the past? Is it "unethical" for me to ask for the contact
information to these stores?

A)  As an employer, you have every right to know.  You can require
this to be disclosed on your invoices (sold by - purchaser - address &
contact info)

If you hire this person as a sub-contractor (?) and they BUY your
product to resell, then your contract is not for a commissioned
salesperson, it's a (wholesale) sale.

Additionally, you can put your contact information on packaging, or
--insist on doing all the shipping yourself (in the beginning). 
Create invoices where the buyers information and shipping address is
included on the form.

Good luck!

~~Cynthia

Thank you, Cynthia-ga for taking the time to give me some advice :)
It was very very helpful!

There are alot of things to look at when deciding on this percentage. 
I agree with cynthia to have the salesperson provide you with
appriopriate documentation for the services that they are providing.

A few things to think about when deciding on a percentage:

Is this person using existing business contacts to sell your product
(would give less of a percentage) or are they cold calling and
soliciting new customers all together (would give higher percentage).

Is this person going to have the authority to negotiate the sale price
of the toy (would give higher percentage) or are they going to sell
the toy at a set price (lower percentage)

Lastly, PAY YOURSELF!!!  The actual percentage that you give the sales
person on profit doesn't really matter because you are the one that
says what the profit is on the item.

When figuring profit make sure you count all of your costs not just
the cost for materials.  You should build in a charge for
administration costs as well as pay yourself a royalty or design fee
for coming up with the idea.

For example:  Say it costs $5.00 in materials to make your toy.  You
decide to sell it for $10.00.  The salesperson would make 33 1/3% of
$5.00 or roughly $1.67.

Now lets say that it costs $5.00 in materials to make your toy, but
you add on $2.00 for administration and design fees that you pay
yourself.  You still sell the item for $10.00 but the salesperson
would make 33 1/3% of $3.00 or roughly $1.00.

This would allow you to take the design fee as pure profit for
yourself.  Plus it would effectively lower the salesperson commission
to 20%.  You could adjust the add on fees to equate to whatever %
commission you felt was appropriate.

You asked:

- If the sales person gets me an order from a store, do I have to give
her a percentage every time this store places an order with my
company?

A.  In all fairness you should.  I would negoiate a much lower
commission for these items.  Probably around 10%.  If you do not then
you are just paying the salesperson to find you clients.  Then you
would be talking about a whole different pay scale because you would
have to project how much business this client would bring in over the
course of a certain time period.

- If I make a contract for 1 year with this salesperson, after the
contract expires, how do I deal with stores that placed orders through
her in the past? Is it "unethical" for me to ask for the contact
information to these stores?

A.  It is not unethical for you to ask for the contact information. 
In fact you should get it up front.  It is information you need to
conduct your business.

It is up to you how you deal with sales after the contract has
expired.  If you are not renewing the contract then you should have it
state that after the year is over that you will not be paying for
recurring sales.  In addition, you should address what happens near
the end of the contract when the salesperson is lining up clients and
then the contract expires.  Does the salesperson receive commission
for clients they procurred, but did not order until after the contract
had expired.

Happy Selling!!!

-Jason

If you intend to start a real business, please contact a professional
consultant! Before you begin!

Some point you have to consider:

1) End Price have to allow you to be on the market! The provision
charge, if to high, can dramatically change your business possibility!

2) different provision for different sales volume

3) Try to sell to gross and not to directly to shops

4) Do not underestimate the administrations and shipping costs for each order.
They are very high, more then you can think. Try to calculate each handling step.

5) A good salesman can help you to get great success, a bed one can
destroy the business. You need more then one.

6) ...and more ... and more ... and more

I wish you good Luck

A Italian friend that begann like you 20 years ago 
Regards

theprez50-ga and supplyoutsourcing-ga,

Thanks for advice!
I appreciate you taking the time to answer.
I am assuming you have businesses also. I hope they are doing well.

Good karma :)