A Question from the Field

Hi Everyone,

I thought I would post a question received on a forum that I moderate at Software CEO. The question is relevent for many of my clients....


Dear Colleen

We have offered finders fees in the past (generally around 10%) for qualified referrals leading to a sale of our software product. A partner company has asked us for a similar arrangement, except the referrals may involve a significant amount of services on our part in addition to or in lieu of the software product sale. The services may be done on a fixed price or hourly basis, depending on the project.

Does you have suggestions for the structure and rate of a finders fee for services engagements for 1) fixed price and 2) hourly projects?

My concerns are 1) the real cost of the services deliverable compared with the negligible cost to provide a downloadable copy of a product, 2) the added financial risk on a fixed price engagement (unless we bump the price to account for the referral fee which may not be practical), and 3) the finders fee size for long term engagements.

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Hi,

If the services delivered really are "significant" the profit should also be "significant" if priced correctly. - albeit NOT as high as a product sale.

It's my opinion that most early stage companies under value their service contracts in an effort to win the business. Ironically most buyer will pay we just don't ask for it. So....my suggestion is that you keep the 10% finders fee standard and work on increasing your service fees to a rate that better reflects the true value you are delivering to the client.

Dedicated to increasing your sales,

Colleen