How much compensation should I ask for as an independent contractor?

Discussion in 'Growing and Managing a Business' started by Sonata, Apr 19, 2015.

  1. Sonata

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    Apr 18, 2015
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    I'm an hourly wage employee in the construction field (office job). I work on a two man team (though we don't share work) in a smallish firm (~30 people, 2 firms, 2 states) making one of the products that my firm offers, which my boss sells exclusively to one buyer for $X.

    I want to take on my overhead costs and be free to work as many hours as I'd like. He's agreed to hire me as an independent contractor to perform the exact same role. But I will now work and access the firm's network from home and produce (using my own resources) my product. My teammate maintains his role and will distribute and bill (both done simply via email).

    I'm going to meet with a lawyer next week to make sure we are setting everything up right (I.C. vs. employee), and I will ask them this question, but I can't stop wondering about it and am curious:

    What % of $X should I charge my boss for each product I give him? For now we have verbally agreed that we would wait a month to see how it went and then consider compensation, his suggestion as he wasn't prepared to consider that when we discussed this.

    I don't know exactly how much money I earn for the company, but I have estimated that my profit margin is around 20%. My business mentor suggested I ask for 80% of $X and my boss continue to receive the same 20% I have been bringing in. Which I would be happy to agree to and think is more than fair.

    But I can't stop wondering if I should consider this as a situation where I am paying my boss royalties. Aside from paying for his established relationship with the buyer (his firm's name on my product), I'm putting all the money and effort in to producing the product (save the simple email distributing/billing), so maybe he should get 7-10% of each product I produce, or whatever the standard royalty rate is, I'm not sure right now?

    Some bias things that may not matter: I've worked at the firm almost 3 years. I have a good relationship with my boss, who has always been kind/generous and we have somewhat of a father/son relationship. I believe he is genuinely interested in my well being and would like to see me succeed. He's run his offices a very long time and earned his retirement probably at least 5 years ago. In previous conversations he's mentioned how he'd like somebody within the firm to eventually run it, but I don't want the whole firm, just this specific part of it that I handle now. I guess I'm trying to say I'm not exactly up against a cut throat negotiator who has share holders to respond to or anything like that. He is the one owner, is very well off, and I get the impression based on 3 years of knowing him that he will be a fair if not slightly charitable negotiator as long as it is fair for his firm.

    Thanks. I can supply more specifics if necessary.

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