5% commission is it enough?

Discussion in 'Growing and Managing a Business' started by rudi, Oct 4, 2010.

  1. rudi

    rudi
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    Hi all,
    I would like to boost my small company by building sales freelance network in some potential countries.
    But the problem is how much commission i should share to them?
    Since I start this business, i decide to focus on manufacturing process and use freelance rather than recruit a permanent sales team. It can safe me from over cost if there is only few order.
    For your information, i also have few freelance sales here with 5% commission of total amount from every customer they handle.
    But i don't know, is it acceptable or not for freelance in another country.
    My target market is Europe and America.
    Please advice :)
     
  2. Fergal

    Fergal
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    rudi a lot depends on the product or service you are selling and the selling price of that product or service. Some items are sold on a commission of even less than 5% and the commission works well for that business. In other industries the commission is over 50%. Do you know what the average is for your type of industry? You might be able to see what the norm is for your type of product or service by looking through affiliate offers at http://cj.com.

    The commission rates on digital goods, are generally much higher than those of physical goods. This is because the additional cost of selling one more individual unit is much lower with digital goods, due to the fact that a physical product is not produced every time a sale is made.

    Please feel free to tell us a little more about what your freelance sales people would be selling and the average value per sale. Obviously we understand if you'd prefer to keep that information confidential.
     
  3. rudi

    rudi
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    Thank you Fergal for your advice.
    I create home good products (physical goods). The average value per order is about US$11.000 per order (min $7.000; max $17.000 per order).
    My freelance sales here usually contact a home goods store by email or phone and then I produce the goods and ship them to the store directly. For the next order, the freelancer only need to forward the order email from the store to me. The freelance sales will get 5% for every order from total amount.
    What do you think?
    If it is good deal commission, i will start to build the network.
     
  4. GekiDan

    GekiDan
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    It seems to be enough.
    I'm an affiliate of an online store and most of my affiliate commissions from my sales ranged from 3% to 5% depending on what products I could sell.
     
  5. rudi

    rudi
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    Thank you GekiDan,
    Now i am looking for an agent who can collect small order from several small home goods store. The agent will work as a customer coordinator for several small store. You know, since crisis, some of my customer close their store especially in usa few years ago. Some of them still exist but they cannot buy many because the cycle of product in their country is very-very slow. I hope, by this way, the store still able to buy from us at their limited budget and low cycle.
    I realize that it's not easy for the freelance sales to collect it. My freelance sales here cannot do this strategy, only freelance sales that close to the small store can do this.
    I have a website, but i will not publish it at this forum, only private person.
    Please PM me if you have an advice for me.
    regards.
     
  6. Fergal

    Fergal
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    What do you mean by "freelance sales", are you referring to people who sell your product, on your behalf, on a freelance basis?

    Have you asked your resellers about the commission rate of 5%? Are they prepared to promote your product for a 5% commission? Do you know what commission percentage competing or complimentary businesses are paying?
     
  7. sigma

    sigma
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    It depend on the "product", you need to study on the market to know what is the common pay for your "product" or "similar product". For example, 5% is good commission for properties selling but it wouldnt work on book selling
     
  8. Fergal

    Fergal
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    sigma I agree that type of commission would not work for ebooks or for most physical book sellers. Amazon give a circa 5% commission to their affiliates for book sales. However, Amazon is world famous and hugely successful, other book sellers would probably have to pay more to encourage affiliate sales.
     
  9. sigma

    sigma
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    True. branded product is different compare to no brand product, all the well known brand can get sales easier than unknown brand, and therefore the branded company always pay lower commission. However, for the new company or new brand product, company have to pay higher commission, or they hard to get promoter
     
  10. royal383

    royal383
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    HI

    No its not enough as you are new company

    Try to get some more
     
  11. fashionhandbagsl

    fashionhandbagsl
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    very good topic! i think 5% is reasonable pay.
     
  12. William King

    William King
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    Actually when people come to know that you are a new in business than obviously they know that you are finding orders to establish your business and they take benefit of this
     
  13. Alfred23

    Alfred23
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    Not bad. It is based on the amount of sales you created and the agreement for your commission.
     
  14. Dayanan

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    I have sold products with commissions ranging from 10 to 20%.

    What you need to take into account is the industry standard and the other hand how much support will you be giving the sales people.

    Brochures, samples, quota bonuses and other sales incentives.
     
  15. ava_camen

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    It really depends on its equivalent value, you would want to ask or survey and also calculate if the rate is good and fair enough to motivate them more to work for you.
     

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