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Middleman's commission?

appsusappsus subscriber Posts: 1
edited August 2014 in Sales
I have a small Mobile apps development company. Recently I have an enquiry from the middle east for an app development project. The thing is it came through a reseller, basically a middleman. He is asking me for 15% of the total project cost as commission.
What I want to to know 1. Is this a standard practice? 2. If so, what are the going rates for such a service? 3. What kind of contract do I enter with a middleman? 4. Is there anything else I need to be aware of while entering such an agreement?
Any input is greatly appreciated. Thanks in advance.


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    threetincansthreetincans subscriber Posts: 2
    Some sort of commission is to be expected, that's for sure. If you are like most consulting companies, your gross margins are probably 40%. So a 15% commission of gross sales seems a bit high; it will basically wipe out half your profit.

    On the other hand, if you don't have this deal, then you will make zero money on this deal.

    Here are some things to consider:

    1. Is there likelihood of any follow on work; if so, is the referrer looking to make 15% on that too?

    2. Try to give up to 1/4th of your net profit; so a commission in the range of 5-10%.

    3. Will this referrer bring more work for you in the future; if so, set a structure so that it is attractive for him to bring more business for you in the future.

    4. Always, always, make money on every deal; you are running a business.

    Hope that helps. If you want to connect with more people who can refer business to you, please let me know and I can help too.
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    psttwfpsttwf subscriber Posts: 0
    I think the above post is very true. Overall, you should set a commission range of 5-10%. Create a big referral incentive and reward those who bring in new business. The cost to advertise is high these days.
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    altafaltaf subscriber Posts: 1
    I am also running mobile app development company from India.
    As per message from one member share of 10 to 15% of total project cost is possible and practical.

    I am also looking for projects on mobile app development and I am ready to pay the remuneration for getting project.

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    angelopaglialongaangelopaglialonga subscriber Posts: 0
    Hi Appsus, why don't you just try with a low commission for the first sales, just to see if this middleman is good or not?
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    jimallenjimallen subscriber Posts: 0
    I have been paid as much as 75% percent of the net profit on a one off project and averaged 35% of the net on any ongoing deals, plus a piece of the future fees that may be yearly or continuing. If you want the best results you pay for them. If I am working for the net profit I am also given responsibility to keep costs at minimums and competitive. 5-25% of the gross depending on the project size and scope.
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