Is it safe to trust small biz clients for your performance numbers?

SalesGod

7 years ago

Just charge a monthly fee up front.

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animal44

7 years ago

Originally Posted by Delta223

I'm planning on offering some customer reactivation campaigns to hobby shops and jewelers but a potential point of concern is in the tracking of revenues and profits I generate for the businesses. I'm not sure how to track walk in business other than offering discount codes to the reactivated customers and then asking the business owner how much revenues were generated and what the bottom line profit for the campaign was.

I want to be trusting but the incentive for the owner sure is stacked the other way if we do a rev or profit share agreement, which is my preference.

Is there a better way to account for campaign performance when you're not local to the target business? And Is this even something one should spend their time considering, or is it fine to rely on what the business owner claims you did for him?

1. Most business owners are honest and will do what they say they will do. Look for clues in their language, their actions, their reputation for any signs of dishonesty. Be selective about who you work with. Look out for those who procrastinate. They'll be hard to work with.

2. Pitch it as in the business owners interest. This isn't (or shouldn't be) a one off thing. You're looking at building something up over a longer term. With them seeing results each and every month. Tell them you need accurate results to monitor how the campaigns are going. Include audit rights in the agreement.

Depending on the size of business, most business owners won't be involved with the day to day accounts. It'll be delegated to the accounts people. The business owner will be looking at the management accounts at the end of the month and so long as profits are up, they'll be happy. Sometimes businesses will drop out. It happens...

3. We don't tie people in on long term contacts, however we do make it clear that it's a long term thing. We tell them to get the best out of this they need to commit to at least a year. However, if they're ever unhappy, they can get out anytime at the end of any given campaign, once we're paid.

4. You don't want too much attention on this, but a casual mention of the punitive IP laws dropped into the conversation might help

Probably other things I could say, but I'm a little pressed this morning...

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simon leach

7 years ago

Firstly, don't do campaigns like this on performance. All you can do is get folks in the door. Too many other variables you dont control lead to conversions.

Do something more focused on driving traffic and leads and reviews, engagement. Dont over promise and as long as they are seeing value most business owners might be tough negotiators but they play fair.

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Ron Lafuddy

7 years ago

Even Jay Abraham, a huge advocate of joint ventures had a problem with this one.

Here's what he said about it.

"Don't start the deal until a "contract of agreement" is fully discussed and signed. Don't start to reveal too much. Don't make your assets available.
Don't make your operation open to the other party until you have an irrevocable, binding, and fully stated agreement. Take my word for it, you will regret it if you don't."

In his writings, Jay talks about some of the ways he's been burned. Greed can rear it's ugly head at any time, especially when there is new found cash sitting on the table.

Are there other ways to approach this?

Sure. One way is to have a third party audit and verify. You can still be cheated out of money, but insisting on this up front will smoke out a lot of the bad eggs, which is good. They don't want anybody looking at their books, for good reason and they weren't going to pay you anyway.

If you get into jv's, you'll eventually figure out other ways to operate, as I did. Ways to get your share of the profits, without relying on someone else's "good intentions".

Good luck!

Ron

P.S. A good book to read for background purposes is Robert Ringer's "Looking Out For Number One".
It's been decades since I've read it, but it gave me a new perspective in how business deals are done.

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Ron Lafuddy 7 years ago

Very few, maybe 5% of small businesses, do any kind of tracking/measuring, keeping statistics regarding their marketing. The reasons are many but the bottom line is, it's not important enough to them, to be bothered.

And they're aren't about to start and continue doing something they aren't interested in doing, to make sure that you get paid, either.

There are joint ventures being conducted every day, where everybody gets paid and no one is worried about being cheated.

I've had these types of relationships with my suppliers. They wholesale, I retail. Everybody gets paid, every time. Everybody is happy, over many years.

I've also had these relationships with people I've outsourced to, and with peers who were in the same business I was, but passed specialty work my way. I did the same for them.

I've also sold parts of a business, while keeping and operating other parts.
These were joint ventures that relied on the cooperation of both parties for the business to make money and remain in business.

There is big money being made in joint ventures, just not in the "easy, fast buck", way they are generally presented
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TrickyDick

7 years ago

Originally Posted by Ron Lafuddy

Even Jay Abraham, a huge advocate of joint ventures had a problem with this one.

Here's what he said about it.

"Don't start the deal until a "contract of agreement" is fully discussed and signed. Don't start to reveal too much. Don't make your assets available.
Don't make your operation open to the other party until you have an irrevocable, binding, and fully stated agreement. Take my word for it, you will regret it if you don't."

In his writings, Jay talks about some of the ways he's been burned. Greed can rear it's ugly head at any time, especially when there is new found cash sitting on the table.

Are there other ways to approach this?

Sure. One way is to have a third party audit and verify. You can still be cheated out of money, but insisting on this up front will smoke out a lot of the bad eggs, which is good. They don't want anybody looking at their books, for good reason and they weren't going to pay you anyway.

If you get into jv's, you'll eventually figure out other ways to operate, as I did. Ways to get your share of the profits, without relying on someone else's "good intentions".

Good luck!

Ron

P.S. A good book to read for background purposes is Robert Ringer's "Looking Out For Number One".
It's been decades since I've read it, but it gave me a new perspective in how business deals are done.

Very true....

The most important aspect is the third party audit.... I have quarterly third party audits written into my contracts...

It is not a matter of trust... I trust I'll keep my end of the contract... :-)

Honest business partners will welcome you auditing their books as much as you like... even daily. When they balk at transparency, you know not to trust them.

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Ron Lafuddy

7 years ago

Originally Posted by TrickyDick

Very true....

The most important aspect is the third party audit.... I have quarterly third party audits written into my contracts...

It is not a matter of trust... I trust I'll keep my end of the contract... :-)

Honest business partners will welcome you auditing their books as much as you like... even daily. When they balk at transparency, you know not to trust them.

Good point! Business partnerships generally involve a written agreement and sometimes multiple agreements, depending on the arrangement. The ability to audit, see the books, financial and tax statements is expected and commonplace.

We won't get into what might be required personally.

This thread hasn't even scratched the surface regarding what's involved in assuring for successful business relationships That's a study unto itself.

I've had my teeth kicked in (figuratively) a few times by some real pros, but it always comes back to my own lack of due diligence. I had some experience going in. The fault was entirely mine.

But you learn, and the scars are there as a reminder.

I have learned that there is no easy. And my experience bears out what Jay Abraham has said about partnerships and joint ventures. ""Don't start the deal until a "contract of agreement" is fully discussed and signed. Don't start to reveal too much. Don't make your assets available. Don't make your operation open to the other party until you have an irrevocable, binding, and fully stated agreement. Take my word for it, you will regret it if you don't."

The world of business is a serious place. The players are playing for real money.

Learn to protect yourself. Hire the best legal assistance you can find, if you need help or don't understand something. It will be the cheapest and probably the best investment you could make.

Ron

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TrickyDick

7 years ago

Originally Posted by Ron Lafuddy

I have learned that there is no easy. And my experience bears out what Jay Abraham has said about partnerships and joint ventures. ""Don't start the deal until a "contract of agreement" is fully discussed and signed. Don't start to reveal too much. Don't make your assets available. Don't make your operation open to the other party until you have an irrevocable, binding, and fully stated agreement. Take my word for it, you will regret it if you don't."

Those are wise words from Jay...

I would also add... I require the full payment be wired to my bank for "one time" services... before any work is started.

Checks bounce...

Clients fail to pay... even after a contract is signed.

A bank wire is the only way to be 100% sure you have the payment.

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Claude Whitacre

7 years ago

The problem is that you are relying on the client to gather the information to pay you. Even if they are intending on being fair with you, there will be lots of new customers that they will justify didn't come in from your efforts. Eventually, they will stop being so scrupulous about keeping tabs on her business is coming from.

I've done some of these performance deals. They have all gone bad. It's because you do all the work up front, and they keep having to pay you "for doing nothing".

The best solution I've found is to go in with the "revenue share" idea, to justify a much less expensive flat fee.
For example, you show them a conservative figure of growth (get them to give you the figure), and let's say that's $500,000 over ten years. And you were going to ask for 20% of the increased revenue...so it would work out to $100,000..in the hypothetical example.

Offer to do everything for $20,000...and spread the payments over a year. That's an example.

Another way is to peg your fee strictly to increases in revenue after you start work. The problem is you are still trusting them to keep the records and pay...probably in ever increasing monthly amount. The idea eventually creeps in that "We've already paid you enough". And the deal goes south.

These deals are different from joint venture mail order arrangements, where the results are easily tracked...and it's impossible to fudge figures without outright cheating.

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Delta223

7 years ago

Thanks. If doing a mailout or email blast, how would you track results? I can see how to attract clicks, or even e-commerce sales with some help from their end. But store walk ins from direct mail or email, I'm having a tough time figuring that one out.

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Claude Whitacre

7 years ago

Originally Posted by Delta223

Thanks. If doing a mailout or email blast, how would you track results? I can see how to attract clicks, or even e-commerce sales with some help from their end. But store walk ins from direct mail or email, I'm having a tough time figuring that one out.

Personally, we simply ask buyers what brought them in the door. I assume that they are telling the truth about 80% of the time. So it's accurate enough to allocate marketing funds.

Most people simply brought in the ad that they had seen.

When I was doing local online marketing for retailers (mostly), I made their online ads and videos so that there was something to mention to get a free gift, or discount. like "Mention you saw this video and get a free set of sheets with any mattress". Not perfect, but it let the retailer know that the work I did was paying off.

Originally Posted by Ron Lafuddy

Very few, maybe 5% of small businesses, do any kind of tracking/measuring, keeping statistics regarding their marketing. The reasons are many but the bottom line is, it's not important enough to them, to be bothered.

It's always fascinated me that even rather large businesses, doing a few million dollars a year, have no idea what ads are working, or if they are just wasting money.

They not only don't know how to track ad performance, but the entire idea is foreign to them. In fact, the idea that advertising should pay for itself and generate a profit is almost as foreign an idea to most business owners. Of course, ad reps aren't going to suggest them tracking ad effectiveness, because ad reps have no idea how to advertise in a way that generates a profit.

I've given talks to advertising company reps, and the idea that ads were bought to generate an immediate profit for the advertiser....was very hard to sell to them.

So it was a great relationship. As reps didn't know how to advertise, and ad buyers had no idea that ads could generate an immediate profit for the company.

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Ron Lafuddy

7 years ago

Originally Posted by Claude Whitacre

It's always fascinated me that even rather large businesses, doing a few million dollars a year, have no idea what ads are working, or if they are just wasting money.

They not only don't know how to track ad performance, but the entire idea is foreign to them. In fact, the idea that advertising should pay for itself and generate a profit is almost as foreign an idea to most business owners. Of course, ad reps aren't going to suggest them tracking ad effectiveness, because ad reps have no idea how to advertise in a way that generates a profit.

I've given talks to advertising company reps, and the idea that ads were bought to generate an immediate profit for the advertiser....was very hard to sell to them.

So it was a great relationship. As reps didn't know how to advertise, and ad buyers had no idea that ads could generate an immediate profit for the company.

Yes, it's fascinating and bizarre at the same time.

I have advertisers who run the dumbest ads in some of my print products.
They have absolutely no idea where their business is coming from - or why.
It used to frustrate me, but I've learned to let it go as I've gotten older.

You can't fight city hall.

The ad reps who you refer to, remind me of some yellow pages guys I knew.
They were very poorly trained. Compensation was based almost entirely on
ad spend, so that was their entire focus. It was drilled into them.

Of course their business customers, who were even dumber (marketing-wise)
took the ad reps advice as to what worked and what didn't.

Two peas in a pod.

I keep hoping "Animal" will come up with some angle I haven't heard of or tried myself, that will magically make the "easy, jv riches" fantasy come true.

No luck so far.

Ron

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animal44

7 years ago

Originally Posted by Delta223

Thanks. If doing a mailout or email blast, how would you track results? I can see how to attract clicks, or even e-commerce sales with some help from their end. But store walk ins from direct mail or email, I'm having a tough time figuring that one out.

We do packages which are named. In order to buy, they have to ask for the package. And this name is programmed into the POS system, so reporting is automatic.

If client is still in the abacus and quill pen and parchment era, then you'll need to work with what they have. Use coupons which are thrown into a box and counted up at the end of the week.

A little trick is to always price them uniquely, then a sort on the accounts for the price will tend to show up anything that's not your named package.

Having said that, I can't think of a time when I've ever been suspicious of a client...

Contingency fees have made me rich. I don't have to wear out my shoe leather or dial for dollars on Xmas eve to feed my family...

My longest running deals are coming up to four years now. I've always been paid.

Clearly contingency deals are not for everyone... I suggest that you mix and match. Do some fixed fee and some contingency and find out which works for you...

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Ron Lafuddy

7 years ago

Originally Posted by animal44

We do packages which are named. In order to buy, they have to ask for the package. And this name is programmed into the POS system, so reporting is automatic.

If client is still in the abacus and quill pen and parchment era, then you'll need to work with what they have. Use coupons which are thrown into a box and counted up at the end of the week.

A little trick is to always price them uniquely, then a sort on the accounts for the price will tend to show up anything that's not your named package.

Having said that, I can't think of a time when I've ever been suspicious of a client...

Contingency fees have made me rich. I don't have to wear out my shoe leather or dial for dollars on Xmas eve to feed my family...

My longest running deals are coming up to four years now. I've always been paid.

Clearly contingency deals are not for everyone... I suggest that you mix and match. Do some fixed fee and some contingency and find out which works for you...

That's the kind of detailed response I'd expect from you. It indicates experience.
Experience with testing and tracking to uncover which packages to offer. Experience working with and qualifying the people you may be able to joint venture with and those you can't. Experience with setting up a point of sale tracking system, to try and ensure that you will be paid as agreed. Experience with negotiating the arrangement and with written agreements.

That didn't come overnight. And, it didn't come without trial & error. It didn't come without failures or deals going south. You're flat out lying if you say it did.

Those of us who have done joint ventures, of all shapes and sizes, know that it takes skill and knowledge to make them work. Not something an unskilled novice would be able to pull off.

The posts you've added in this thread and elsewhere support that.

Ron

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Ron Lafuddy

7 years ago

[QUOTE=Claude Whitacre;11156217]The problem is that you are relying on the client to gather the information to pay you. Even if they are intending on being fair with you, there will be lots of new customers that they will justify didn't come in from your efforts. Eventually, they will stop being so scrupulous about keeping tabs on her business is coming from.

I've done some of these performance deals. They have all gone bad. It's because you do all the work up front, and they keep having to pay you "for doing nothing"[QUOTE]

I wonder Claude, with all of your experience, why this is?

And, to have every one of them go bad? Geez. If it were as easy as some make it out to be, you'd think that at least one would have worked out.

So, it wasn't enough to have an understanding and to put the deal in writing?

Well, if a guy with all of your years of real world experience, marketing education and know how, has trouble making it work, what chance does a novice have?

Ron

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Claude Whitacre

7 years ago

[quote=Ron Lafuddy;11159416]

Originally Posted by Claude Whitacre

Well, if a guy with all of your years of real world experience, marketing education and know how, has trouble making it work, what chance does a novice have?

Ron

Ron:
We are only talking about a few deals that I can recall.

But these performance deals are different from joint venture deals. In a joint venture, the orders can easily be counted from both parties. And one party is providing the product that the other party doesn't have. Much...much more likely to be successful.

But doing online marketing work to promote a business is different. All the work is done up front. So you are seemingly doing nothing after the first month, but the client is paying progressively larger fees. Psychologically, it becomes ever more difficult to justify paying fees.

This is based on my limited experience working with sole business owners. My suspicion is that it's different with larger companies where the checks are written by bookkeepers and not the business owner.

Another factor that may be the single most important part, these deals were made because I couldn't sell a single fee...and decided to accept a contingency basis.

I didn't go in with the idea of accepting a certain percentage. I did go in with the prospect thinking it was a contingency fee basis though. I just couldn't convert them to a single fee. And there was no way to really track the sales directly attributed to my work.

So don't use my example as gospel. It's just my experience. Another factor is that these deals were sold cold. There was no prior business arrangement...no history between us.

By the way, there has to be a way to track sales that come from your efforts. Animal44's idea of unique pricing would solve the problem, as would bringing in a coupon. With these triggers it would be hard to cheat, except for outright fraud. And most people won't defraud you outright.

The problem comes in where you charge a percentage of an increase in sales across the board. It's very murky as to what caused the increase...it could be seasonal changes, a competitor folding up, increased demand, any number of things.

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Ron Lafuddy

7 years ago

[quote=Claude Whitacre;11159464]

Originally Posted by Ron Lafuddy

Ron:
We are only talking about a few deals that I can recall.

But these performance deals are different from joint venture deals. In a joint venture, the orders can easily be counted from both parties. And one party is providing the product that the other party doesn't have. Much...much more likely to be successful.

But doing online marketing work to promote a business is different. All the work is done up front. So you are seemingly doing nothing after the first month, but the client is paying progressively larger fees. Psychologically, it becomes ever more difficult to justify paying fees.

This is based on my limited experience working with sole business owners. My suspicion is that it's different with larger companies where the checks are written by bookkeepers and not the business owner.

Another factor that may be the single most important part, these deals were made because I couldn't sell a single fee...and decided to accept a contingency basis.

I didn't go in with the idea of accepting a certain percentage. I did go in with the prospect thinking it was a contingency fee basis though. I just couldn't convert them to a single fee. And there was no way to really track the sales directly attributed to my work.

So don't use my example as gospel. It's just my experience. Another factor is that these deals were sold cold. There was no prior business arrangement...no history between us.

By the way, there has to be a way to track sales that come from your efforts. Animal44's idea of unique pricing would solve the problem, as would bringing in a coupon. With these triggers it would be hard to cheat, except for outright fraud. And most people won't defraud you outright.

The problem comes in where you charge a percentage of an increase in sales across the board. It's very murky as to what caused the increase...it could be seasonal changes, a competitor folding up, increased demand, any number of things.

Yes. Imagine a cold deal, without an existing business relationship. That's where a novice would be beginning. As you admit, not a great place to start, even for an experienced person.

They also have to overcome everything else you've mentioned, without your experience. What's the chance of that?

Ron

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Claude Whitacre

7 years ago

[quote=Ron Lafuddy;11159671]

Originally Posted by Claude Whitacre

Yes. Imagine a cold deal, without an existing business relationship. That's where a novice would be beginning. As you admit, not a great place to start, even for an experienced person.

They also have to overcome everything else you've mentioned, without your experience. What's the chance of that?

Ron

I suspect that Animal44 does something different from what we are discussing here.

My business was dominating the Google search results with listings for my clients for local searches. None of it was trackable, although I would ask viewers/readers to mention the ad/article/video/website when they called.

The client really had no tangible recurring evidence that my service was directly responsible for their increased sales.That's why (I think) that doubt would creep in, and the money would stop coming.

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Ron Lafuddy

7 years ago

[quote=Claude Whitacre;11159681]

Originally Posted by Ron Lafuddy

I suspect that Animal44 does something different from what we are discussing here.

My business was dominating the Google search results with listings for my clients for local searches. None of it was trackable, although I would ask viewers/readers to mention the ad/article/video/website when they called.

The client really had no tangible recurring evidence that my service was directly responsible for their increased sales.That's why (I think) that doubt would creep in, and the money would stop coming.

Yes, maybe Animal does do something different. I hope so.

Seems like it would be impossible to completely track all the new customers but you should be able to track the majority of them. It's not hard if you can get the cooperation of the business owner. That's a big if.

I have found that it's easy to set these kinds of deals up. Everybody is buddy-buddy, til the money starts coming in, and then the story changes.

Yes, you can take them to court and try and enforce the agreement. Great.
Not the way I want to spend my time or reputation.

Nope. There's better ways to do joint ventures so that you, and not someone else is in charge of the purse-strings. Thanks for the convo, Claudius!

Ron

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Claude Whitacre

7 years ago

[quote=Ron Lafuddy;11159777]

Originally Posted by Claude Whitacre

Nope. There's better ways to do joint ventures so that you, and not someone else is in charge of the purse-strings. Thanks for the convo, Claudius!

Ron

Thank you.

I've done several "joint ventures" speaking at someone's rally or conference. When I sell from the platform, I split the money 50/50 and I fulfill. I always want to be the one processing credit cards, and mailing their 50% to them when the cards clear. But only because if the card is declined, I don't ship the product. And I want the customer service calls to come to me so I can handle them.

But I've also had the event owner process the cards and mail me the check for the balance. It has to be fast, because I won't mail the products until I get the check.

One event planner asked me to mail the programs (About $55,000 in sales), while I waited for the check. He had processed the cards. I said "I'll mail everything when I get the check. That way, if I don't get the check, you'll have $55,000 in refunds to process. If it were me, I'd overnight that check".

I've also charged (per attendee) for delivering a workshop, with the sponsor agreeing to collect the money and deliver my check when I show up. I've had a few times where the sponsor kept putting me off to hand me the check, making excuses, and I'd have to wait for the money a few weeks. I won't work with them again if that happens even once. I tell them that I have to pay for all my own expenses including manuals for the attendees. It can be thousands of dollars up front.

The last time I had a deal where the sponsor was supposed to hand me a check upon arrival (very clearly spelled out in our agreement, and mentioned by me several times on the phone)...they didn't have the check the morning of the event (I was the main speaker), and I refused to get on stage until I had a check in my hand.

It isn't that I assume people are dishonest.I just arrange things so it doesn't matter if they are honest.....I still get paid and product still gets delivered.

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Ron Lafuddy

7 years ago

Originally Posted by Claude Whitacre

The last time I had a deal where the sponsor was supposed to hand me a check upon arrival (very clearly spelled out in our agreement, and mentioned by me several times on the phone)...they didn't have the check the morning of the event (I was the main speaker), and I refused to get on stage until I had a check in my hand.

It isn't that I assume people are dishonest.I just arrange things so it doesn't matter if they are honest.....I still get paid and product still gets delivered.

Yeah, I read something similar regarding Elvis or the Beatles, where they refused to go on stage and perform until the promoter had paid them.

I did some work for Dick Clark many years ago. The live performances were paid in cash, which was always nice.

Ron

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Ron Lafuddy

7 years ago

Originally Posted by Delta223

I'm planning on offering some customer reactivation campaigns to hobby shops and jewelers but a potential point of concern is in the tracking of revenues and profits I generate for the businesses. I'm not sure how to track walk in business other than offering discount codes to the reactivated customers and then asking the business owner how much revenues were generated and what the bottom line profit for the campaign was.

I want to be trusting but the incentive for the owner sure is stacked the other way if we do a rev or profit share agreement, which is my preference.

Is there a better way to account for campaign performance when you're not local to the target business? And Is this even something one should spend their time considering, or is it fine to rely on what the business owner claims you did for him?

Seems you start a lot threads but don't participate. Are you a paid poster?

You might have more success getting the information you're seeking by actually participating.
But... then again...knowing what I know...maybe not.

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yukon

Banned 7 years ago

This is a bad idea.

Do you think the hobby shop (whoever) pays their electric bill based on rev sharing?

Probably not.

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animal44 7 years ago

Originally Posted by yukon

This is a bad idea.

Why?

I believe it was Ted Nicholas who introduced this model to the copywriting world. It's no coincidence that he was the first multi millionaire copywriter...

The John Lewis Partnership here in the UK has a profit sharing model for all it's employees - they all become partners and receive a retainer (salary) and have a share of the profits. Seems pretty successful for them.

And when it comes down to it, you'd better not invest in a pension fund - they invest their funds in shares which pay dividends made up of a profit share... no profit, no dividend.

As Claude said, it's not such a good idea where you are unable to make a direct correlation to revenue and profits, but where you can show a correlation, it can make you far more money than any other method of charging. People won't pay out millions up front, but they will keep on pay you a share, if you can get results...
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- yukon Banned 7 years ago
  
  Originally Posted by animal44
  
  Why?
  
  I believe it was Ted Nicholas who introduced this model to the copywriting world.
  
  Well hell, why didn't you say so earlier.
  
  This is a genius idea.
  
  Thanks
  
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DABK 7 years ago

C'mon, man. If 50 states can, why can't 2 businesses? It's a bad idea for many, because they don't think things through and end up feeling cheated (maybe rightly so).

If you go with Ronald Reagan on this one (trust but verify) and think things through upfront, it works.

Originally Posted by yukon

This is a bad idea.

Do you think the hobby shop (whoever) pays their electric bill based on rev sharing?

Probably not.
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