Risk sharing

Hi, this company was made up of three owners and one staff member and is an IT ARCHITECT COMPANY. When I asked their budget they said the main diferrence between themselves and other IT Architects is they consider that a below the line item, so they basically take the marketing fund from 20 percent that is left over — the same place they pay salaries to themselves if its a good quarter. Instead they wanted me to consider agreeing to receiving 30 percent of the margin as long as we generate more qualified opportunities. I was told the president likes doing business this way and without this, there’s probably not going to be a deal because he is very “cheap.” (Their words, not mine.) so I’m wondering if anyone else had done a job via risk sharing and had it worked for you? Basically anything you have to say would be helpful as I’ve never done a deal like this and am basically in the dark. So anything you can possibly help me with woul be so unbelievably helpful and new, I would appreciate it so much! Or if there are questions that I could ask back — that would also help! In addition, I am really in need of a business development person or team to help me! Please respond here or to anastasia@insightdesignsolutions.com. Very grateful!!

Ask them if they would take the same risk in order to secure a job as an IT architect. ie, that if the company they work for generates more sales do to their IT upgrades, they maybe get paid.

You can’t eat margin.
Get paid.

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I would walk away from these morons (and laugh at their lame play). If they need their offices painted, will they offer the painters a meager percentage of their month’s take, but only if it’s a good month? No paint will be hitting walls on those terms because painters aren’t that stupid.

Yeah, “the president likes doing business this way” but only in accounts payable. You can bet accounts receivable doesn’t work that way.

Not really. Your instinct was to ask someone what’s up with this, and that was a good instinct. Only you can gauge how desperately in need of work you might be, but if you take work on their terms, it’s very likely you’ll regret it.

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@PrintDriver thank you. I didn’t explain properly (and that’s part of the problem… I don’t completely understand this process…that the three owners take their salaries from what the consider a “below the line” pool of money. So after they make their profit and consulting fees the 20 percent leftover is where they take their salary from. That’s also where they want pay my agency from, but not straight out. As long as we agree to engage in risk sharing to get our payments — or not. I agree with you…my tendency is to say if their owner wants to get offshore design, and not in US then I don’t want to begin a large project depending on creating ROI Matrices that prove without doubt we will make an income on this. Clicks I can measure, branding, I cannot. Again if anyone can recommend a biz advisor I would really appreciate it. Thanks again @PrintDriver

@HotButton, thanks…I’m having that tendency to walk away, I just want to be be sure I’m not missing something in the interim. I don’t always understand potential “deals” as I’m without a lot of business understanding but that’s just it right? If it made sense, it would be easier to articulate! Thank you for helping me see it’s not always me! :upside_down_face:

In a typical arrangement you’re already “sharing risk” they risk 50% of the quote that you’ll finish the job, and you risk the remainder of the invoice that they’ll pay you the balance when the work is completed.

Why the type of risk sharing they’re proposing is stupid:

  1. They’ll most likely want input on the design, which will affect the effectiveness of whatever you produce.
  2. You have no way of knowing which will be a good month or which month they decide to pay your from
  3. You probably won’t have access to their financials, so you have no way of verifying you’re getting treated fairly.
  4. By not wanting to pay for your services they are effectively saying that they, themselves, aren’t willing to invest/bet on their business, so why should you?
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@kemingMatters, great points all the way around. I’m especially drawn to #4…that’s the kicker for me. As far as quantifiers and qualifiers, they said they would leave that up to me, but all these years and it’s still foreign to add a number to ROI in branding.

I appreciate your feedback!

If someone offered me only a chance to get paid for my work, I would walk away.

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@Buda thanks. Generally so would I buy if we do find a unique measurement tool, what we stand to gain is a pretty handsome amount. So yes, there is risk— but not without reward.

I would run for the hills. Find better clients and don’t waste your time. Don’t be desperate the right clients will come.

Use your time to prospect real paying clients that appreciate your work and understand the value you provide.

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But we already have a measuring tool to define value and risk. It’s called money.

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@Buda …ah yes! It’s green (sometimes multicoloured)…wrinkled…pays for services like design…? I remember it well! :wink: Dhanka Buda!

@harrisbrown, honestly this is new territory for me — prospecting I mean. I’m moving toward consulting and away from freelancing, finally. I was literally handed projects and having three or four waiting in the wings whilst freelancing but this consulting world is a different one for me. It may sound crazy but I’ve been designing for a long time (almost 18 years) but I’ve never needed to prospect. Until now I suppose.

The challenge is, no clue how to do that properly. I despise the word, “desperate,” but perhaps you’re right.?

How did you begin prospecting? Even this lead came from a past client via word of mouth.

There’s all different ways to prospect. First find your audience to target. Can’t target everyone. What industry Finance, Retail, Pharma, Plumbers, Dentist etc.

Tap into your immediate network family, friends and past clients.

Make a list for free by going to referenceusadotcom through your local library and access it at the library or at home.
If your library doesn’t have it then ask them to get it.

Register with your local chamber or commerce and meet businesses.

Join networking events

Start a blog

Be active on social media like LinkedIn

Send cold emails to companies that you want to work with

Facebook advertising is great and better targeting than AdWords and much cheaper

These are some starting points but you get the idea.

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Actual clarification! :blush: Thank you so much :pray:t3:. Maybe it’s naive but like I said I never had to do this before. Although I did parts of it here and there. Chamber of commerce — met a lot of people but mostly startups that aren’t willing to pay for real design. But I understand, everyone knows someone. I’ve never done all of these at the same time. I appreciate that you helped with examples. The one industry choice is very difficult. I’ve prided myself on learning from every industry and serving them and I thought it worked pretty well but maybe I’m missing something. I’ll have to roll this over a lot. Thank you! Btw, I refused the deal but offered other options: he pay for it separately, we work one piece of marketing at a time (not great but it’s keeping the conversation moving). Many thanks!

I’ve worked with start ups. Some of them have money. It is a good idea to give them options as you have done. If I sense a client is on a tight budget, I’ll suggest cheaper alternatives.

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Good point @Buda, it’s not a good practice to assume anything…

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