Consultancy commission

The Woodcock

I've been working as a self-employed consultant for a couple of years now. Recently I was approached by another consultant who wanted to collaborate to make a pitch to an organisation. This guy is older than me with more experience etc. However, I have specific experience and contacts that he doesn't have. We wrote a proposal whereby I would do most of the legwork at a lower daily rate and he would oversee my work but charge a higher daily rate.
However, he also insisted on taking a percentage of my daily payment as 'commission', in other words increasing my daily rate by 33% and keeping this himself (on top of his own payment). I'm just wondering if this is the norm as I've never come across an arrangement like this and at one level it seems bizarre that he would get paid for work I'm doing.

dbran

Hi

It sounds like he wants to treat you like an employee and enjoy the fruits of an additional income stream.

At the end of the day you need to be making money out of this arrangement and be happy about the the money you make versus the time that you put in. Otherwise it just wont work out and you will eventually have conflict. This is bad for both of you, him and bad for the customer. If you don't think it is fair it is time to renegotiate. As you said he needs your contacts, how much do you need his experience.

Good luck with it.

dbran

Graham

Are you pitching jointly, or is the joint pitch in his companies name?

How risky is the project, how much are you bringing to the table (in terms of experience) to pitch for it? Is he likely to be able to pitch without you and if so would your lack go involvement reduce his chances of winning the business?

Are you going to be putting in significant effort to prepare the pitch, is he?

As dbran has suggested, it sounds like you need to renegotiate.

I'd certainly be looking to share in the rewards if you're sharing the risks. The risk in this case could be limited to the time spent preparing the pitch.

Could you:
agree on any expenses if you win the business (e.g. insurance).
agree an hourly rate and a budgeted number of hours for both of you.
agree a percentage split for the remaining profit.

sconhome

The Woodcock wrote: »

I've been working as a self-employed consultant for a couple of years now. Recently I was approached by another consultant who wanted to collaborate to make a pitch to an organisation. This guy is older than me with more experience etc. However, I have specific experience and contacts that he doesn't have. We wrote a proposal whereby I would do most of the legwork at a lower daily rate and he would oversee my work but charge a higher daily rate.
However, he also insisted on taking a percentage of my daily payment as 'commission', in other words increasing my daily rate by 33% and keeping this himself (on top of his own payment). I'm just wondering if this is the norm as I've never come across an arrangement like this and at one level it seems bizarre that he would get paid for work I'm doing.

Sounds to me like you have skills that he doesn't and he thinks he has a business opportunity that you might not be able to get yourself.

If you are already happy with the level of business you currently have why would you want to go work with someone else?

If you can benefit from extra work and this is an opportunity for you to do so, why wouldn't you go for it? I would be going back from a position of we can both benefit from this arrangement but 50:50 as a partnership or company.

NotaSheep

I have worked on similar (consortium) arrangements and the way we do it is agree division of hours and daily rate. The lead consultant takes an additional flat fee for managing the contract as in consortium there is always a principal who does all the customer liaison, deals with general contract paperwork, deals with report production (printing, binding, sending) etc so as such carries a heavier administrative burden. In my opinion taking commission on every single day worked is a bridge too far, and certainly a 33% mark-up seems particularly excessive - I see no real justification for it. I would renegotiate.

The Corinthian

Other than the points that have been already raised above, I'd look on it this way:

• Is he going to bring in more/better business for you?
• Are you going to get an overall better net hourly rate?
• Will you learn anything or build up your contacts by collaborating with him?
• Are there long term possibilities for growth in this collaboration?

At the end of the day, it comes down to whether you profit in the long term from the collaboration. If it means your net earnings increase or net earnings per hour increase, what do you care if he makes money out of you? Or if you get better contracts as a result? Or if after two years you can walk away with significantly more contacts and experience from him? Or the whole thing grows into a profitable consultancy firm a few years from now with you as one of the senior partners?

If you project and crunch the numbers and the above rings true, then it could well be worth your while. Otherwise walk away.

Either way, I too would renegotiate and pin down some of the issues raised here before progressing.

AndyJB

The Corinthian wrote: »

Other than the points that have been already raised above, I'd look on it this way:

• Is he going to bring in more/better business for you?
• Are you going to get an overall better net hourly rate?
• Will you learn anything or build up your contacts by collaborating with him?
• Are there long term possibilities for growth in this collaboration?

At the end of the day, it comes down to whether you profit in the long term from the collaboration. If it means your net earnings increase or net earnings per hour increase, what do you care if he makes money out of you? Or if you get better contracts as a result? Or if after two years you can walk away with significantly more contacts and experience from him? Or the whole thing grows into a profitable consultancy firm a few years from now with you as one of the senior partners?

If you project and crunch the numbers and the above rings true, then it could well be worth your while. Otherwise walk away.

Either way, I too would renegotiate and pin down some of the issues raised here before progressing.

"The Corinthian" puts it very well!

If you're upping your income, as long as your various expenses are covered it seems a no brainer. The issue of the % taken from you is a little odd though. Why would he just not up his own rate and cut yours? Will you both be billing the client separately?

Not knowing all the facts, it certainly looks like a great opportunity for you to widen your net. Make sure you have a formal agreement between you that outlines all the T&Cs covering.....

• Payments
• Rates
• Works expected
• Deliverables
• Banking arrangements - ie joint / separate accounts
• Working location(s)
• Tax arrangements
• Travel expected/expenses
• Even state who'll sign the client agreement, one or both.

You may think I'm going OTT but as previous posters have stated the arrangement will only work if you're both happy, eliminate the potential for needles friction up front.

Of course client interaction will throw up challenges, so you'll need a separate agreement for them.

Ultimately the real prize is future projects! You may not get this one, but if he's impressed how you deal with him on this tender there may be others.

Best of luck.

Best wishes for Christmas.

Sounds like he is just subcontracting you, and putting some fluff around it. Nothing wrong with doing that kind of job, just get everything in writing like the previous poster mentions. Start off with a downpayment for yourself as well, break the work up into stages too and get paid at each stage to reduce your risk.