What follows is a response to several individuals who had taken their time to assist me with a question on Linked In. The Q&A feature on LinkedIn provides a valuable resource to tap into my extended business network for research and advice on many areas of my business. I appreciate all those that respond for their time and consideration and always offer back any assistance in their businesses I can provide. This to me is the essence of give and take.
Due to message size limitations on Linked In and my desire to help others, I have posted it here on our blog. Thank you for stopping in and reading. ~ Dan
Begin My Response Below.
Let me begin by saying, Thank you for your time in responding, I appreciate and have learned much more from the answers then I ever intended. Perhaps that is the entrepreneur in me, finding the greater opportunity in every experience I have.
Admittedly, the question I posed was not worded in the best way to achieve the answer I was looking for. I simply wanted to know “If a consultant designed a sales and marketing system for your business that generated $7 Million, would you pay $1 Million (or 15%) to that consultant for its design”? Keeping in mind that a system, can be utilized over and over again by your business to continue generating results for years to come.
The “Guaranteed” $7 Million was simply a play on words if you read it carefully. Given that the ONLY way $1 Million would be paid out on a commission basis is if you actually achieve the $7 Million then logic would prevail that the $7 Million is guaranteed. This is the way almost all pay for performance programs are designed. In fact, if you have ever had any experience with the insurance industry, look at the commission payment structure of life insurance sales from the back end and you will find that this is it.
That takes me to the “impossibility” part in some of the answers received. In the life insurance industry (as one example), commissions on a life insurance product can be from 60% – 125% First Year Commission. That means for a life insurance agent, contracting $7M in premium sales, they would in fact generate a commission in the $ 4.2M range. Payment terms on this type of commission are an entire separate topic.
The insurance company would then be able to enjoy the $7M in premiums year after year until either: A. The policies canceled (resulting in a charge back to the agent) or B. The individual dies (resulting in a benefit payout). The insurance company pays the agent for the use of the agents sales and marketing systems to generate this type of business.
This is an oversimplified view of a complex relationship, but hopefully it clarifies that it is entirely possible. If you still doubt, feel free to locate any Million Dollar Round Table insurance agent and pose the scenario.
In the question, I posed several facts and clarifications: (admittedly not in this clear fashion)
• $1M Performance Based Compensation (incremental based on return, not if $7M was not achieved there would be no payment to consultant)
• $7M Guaranteed Revenue
• $10K up front or retainer
• $5K refund of retainer to client for not achieving agreed upon 90 Day performance goal
• $6 Return for every $1 spent (recoup the original $1 plus 85% return)
• 1 Time payment to consultant for development, implementation and business sales
• Ongoing use and revenue generation to the client post project
Anything other details added by respondents was purely based on understanding of the question including: client not having the 10K, Ponzi similarity, lack of work involved, etc.
As far as the $10K up front fee, the answer is very simple:
1. Very few people place any value on work performed by someone else where there is none of their own “skin” in the game.
Taking our insurance agent scenario; a company can contract a licensed agent for as little as $500 in background checks, contracting and license verification. Unless that agent proves to be top producer, in most cases they get little more than a holiday card, access to companies online training (if present) and statement of commissions paid aide in their business efforts. There is really no one on one working relationship.
This leads to a high turn over rate and lack of loyalty to the company within individuals in this line of work. Only slightly different would be in the “captive” world whereby the commissions are lower to offset the office benefits provided to the agent.
2. In ANY project, there will always be up front hard costs associated with the initial steps of the project. These could include plan design (think of a financial planner), materials acquisition (think video, website development, ad placement, survey performance, or any number of elements unique to the client and project). All of these are provided to the client regardless of program success and therefore must be accounted for. In this example, once this initial work is done, the rest of the compensation to the consultant is purely based on, whether or not his/her program works to achieve desired results.
Why do I suggest the refund? Well, this model is taken from my own business and how we work with our clients. Our commitment to the client is that our work for them will result in NO MORE than 25% of their total revenue generated from our services. Meaning that for $10K we commit to generating at least $40K in business to them. Profits are not taken into account in this figure due to the fact that the system is given to them, is ongoing and over time the incremental cost to develop the system will be minimal.
I use 90 days in most client scenarios, due to the fact that if my system and efforts can produce those results in 90 days, that is better than any system I have come across in actual, legitimate functionality. Most consultants will propose systems that can take much longer, up to years to yield those types of results and label it a branding project.
Finally, we work one on one with the client in the implementation of the project. I have found in my experience that the reason clients were not getting these results to begin with was not because they were ignorant of some of the strategies and techniques; however it has more to do with the time involved, tunnel vision due to daily activities and the ability to appropriately integrate the new or additional process back into their current process in an efficient, fluid and beneficial manner to continue achieving results. Our group handles all of these processes in addition to reviewing the clients operational structure to be sure he/she can handle the increased business and retain the new clients achieved.
As for the response regarding the client not being able to afford the up front 10K? Simple. That in not one of my clients. Our target market is to businesses and projects where there is unrealized potential for great and rapid growth through the placement of excellent systems and strategies.
I have worked for several different industries over my years in business. All of them at one point in time brought in very highly paid, competent consultants that would analyze and provide a well thought out strategic plan for achieving goals. Almost ALL of those consultants disregarded one main component: Did the client have the ability to successfully implement and achieve those results? NONE of the firms I have been in contact with during these events were willing to stick their neck on the line for the clients success and cheerfully billed anything from $60K to over $500K for their services.
I come from a “day one” commission sales background and decided there was a better “medium ground” to be had by where I could get the work done and be paid based on my clients success while being sensitive to their individual economic, business and emotional needs. So far, especially in today’s economy, this has led us to business in 2 countries (primarily US) and profitable all while transacting business for just over 1 year.
It hits on one of my core beliefs: Maintain sensitivity to our clients emotional, financial and operational needs.







