Subscriber Discussion

How Much Of A Cut Should I Give A Real Estate Dealer Who Refers Sales?

UI
Undisclosed Integrator #1
Jun 19, 2017

 Hi All,

I've approached a client who is a real estate dealer with a proposition to give him a cut of every installation he brings in (he sells homes & commercial properties).

About what would a reasonable cut/ finders fee be ?

5%, ...1%  - of the installation ?

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Michael Silva
Jun 19, 2017
Silva Consultants

I think it really depends on how solid of a deal that he brings you.  If he brings you deals that are fully sold, and all you have to do is process the paperwork and do the install, that could be worth 10% of the deal or more. On the other hand, if all he brings you is a lukewarm lead, and you have do all the actual selling yourself, that's worth much less - perhaps one or two percent.

With all that being said, if this guy is even halfway successful as a real estate agent, he probably would find any commissions that you would pay him not worth his while, unless he is doing it for something other than money (he loves you, he wants to offer a range of services to his clients, etc.)

 

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UI
Undisclosed Integrator #1
Jun 19, 2017

Thanks Michael, this is helpful.

We haven't ironed out any details yet (we've just begun discussions) but i suspect the latter option will be the case - where i would do the actual selling.

Will see how it pans out.

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Brian Karas
Jun 19, 2017
IPVM

How would your sales people be commissioned for the same account? You should probably pay him something similar, maybe even slightly higher since you are not also paying base salary and other expenses to him.

If you do not have a lot of sales people and commissions already, two things you might want to consider, and are probably good metrics to know about your company in general, are CAC and TLV (Customer Acquisition Cost and Total Lifetime Value). There are a lot of sites that cover these topics, this Kissmetrics post is a good overview.

Understanding the above will help you gauge what it would have cost you to attract the same customer on your own, and how much that customer is worth long-term. From there you should be able to come up with a commission that pays him a referral fee in-line with your overall margins.

 

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UI
Undisclosed Integrator #1
Jun 19, 2017

A fair amount to chew on.  Haven't actually looked at these metrics but will do some reading as suggested.

 

Thanks Brian

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