Ever get a commission from vendor u recommended

Getting paid to do sourcing nad find a supplier - kosher. I do it often.

Getting paid as a trading company or agent, where you make a clear % on top of the fty FOB and the client pays you - kosher.

Taking a kickback on a recommendation when the client is not aware - not kosher.

As stated before, it’s all about dealing in a clear, honest way. If you are taking a kickback and the client is not aware, there’s too many factors that can make it appear or be shady.

  • do you find the supplier that can offer the best price/service, or the one that gives you the biggest kickback?
  • if the client needs to negotiate a lower price, how does your kickback affect the client getting the best price they can and how does that affect them working in their own best interest?


    etc.

R

Is the Client really paying indirectly? The Manufacturer has sales agents they pay a commission to for sales. If the Designer brings work to a Manufacturer, the Manufacturer saves money because his cost of sales is less. So the Manufacturer makes more profit, the Designer gets nothing.

If the Designer gets a commission, it should come out of the Manufacturer’s sales budget and will probably be less than their own in-house sales get. It is up to the Manufacturer not to overcharge the Client for cost of sales and be ethical and not gouge, this will come out in the competitive quoting process, where the Client will / should do due-diligence and get competitive quotes.

I wonder if their is something similar in other industries, like real estate, where there are finder’s fees, split-commissions or some other typical business arrangements.

Most suppliers don’t really have sales agents that I’m aware of. If they do have in house business development people they are probably on salary, so they get paid anyhow. You are not saving anyone money.

Rationalize it however you like. It’s pretty clear I think from all the comments that it is not good business practices.

R

Again, all clear fees that clients are aware of upfront. Big difference.

R

OK, key is to check with a qualified business development person and corporate lawyer and make everything open.

Catch22. But legal advice usually costs money freelance designers don’t have. :cry:

As I mentioned earlier, I think the correct way to go about this is to make it known up front to your client that if you are responsible for finding manufacturers, you will charge them a fee for doing so. If you are vetting multiple vendors and providing guidance to the client, you can be expected to be reimbursed for this. Especially if it’s in a case where during typical vetting processes you are travelling to Asia to review capabilities etc.

The reason what you described previously is an issue is this:

Manufacturer A and B are both reasonably competent Chinese molding houses. You review samples and capabilities and they are relatively the same. Manufacturer B is willing to give you a 5% fee for their selection. By choosing company B your intentions are unclear. Were you recommending them based on their capabilities, or on the 5% - that in effect is the kickback.

I have been in a similar situation and my services were billed to the client for “engineering and manufacturing consulting” at a very premium rate and it was negotiated well in advanced before any work had begun. You are providing a service to the client and are impartial to manufacturers because you don’t have a stake in who you choose.

Put it this way. If kickbacks weren’t bad, you have no problem telling you client about it. By keeping it secret it shows you know it’s wrong.

R

One of the better modelshops I work with have a scheme where you earn prototyping ‘Bucks’ for each new client you recommend to them… they usually do good work for a good price, so I would have recommended them anyway. It’s a hundred US bucks each and only usable at the model shop, but still a nice perk. The clients themselves earn 100 ‘bucks’ per thousand they spend too.

I never saw this as a grey area or unprofessional at all - it never crossed my mind. If there was more $$ involved it might feel a little wrong, though getting payments for referrals doesn’t jump out to me as a bad thing in general, especially when your name is attached to the resulting manufacture quality and service. Maybe it’s something to think about…

EDIT I don’t mention this to clients, but I wouldn’t have any problem telling them about it.

That’s a good system. It’s totally legit too as everyone involves knows what the terms are. No need necessarily to tell your clients because you are the client for the model shop, not them. Im assuming you offer your clients models and then bill them for it, while you subcontract it out to the model shop and pay them, right?

R

Yes. Business 101. Price - Cost = Profit. No matter how you slice it, your “commission” is a cost and the client pays.

I do find it interesting how you expect the manufacturer and client to be responsible for due diligence yet somehow you are exempt. Good luck with that.

I dunno… I’d still call this a kickback. Just because you aren’t getting cash per se, you are still being reimbursed for bringing them clients. If there were two of these shops in town that did equal work, which one would you be more likely to refer them to?

Now if your answer to R’s question is: “Yes, I handle the buying of them models and bill them for it as a service I provide” then, you’re probably in the good.

Im my case, I usually direct the clients to the modelmaker and get them on the hook for the prototyping payments .
It does sound technically like a kickback, but i think its on their website in the fine print too. If they didn’t do good work, I wouldn’t use them for my own reputation’s sake. I do see where you’re going though - one could steer a client toward a bad vendor because of kickbacks, and that would be unethical + your rep might take a hit. It also might sway me one way over another equally good shop

as an employee, if you steer company business for your own personal gain is glaringly unethical and probably illegal.

What I stated is that the Client is responsible for due diligence in getting competitive quotes so they may determine how expensive the manufacturer’s costs are. The Manufacture should not gouge and if they do it will come up in the competitive quoting process. If the Client does this they will understand which manufacturer to pick, the decision is ultimately theirs, they are not stupid.

I don’t feel I am exempt from any type of due diligence. I diligently approach my work, am fair and ethical, and take the time to research to make sure I am making the right decisions - such as taking the time to discuss this topic with my peers in this forum rather than rushing out to jump on this type of business practice. Why would I recommend a manufacturer who I thought would not serve my Client well? Yes, the allegiance should be to the Client. I at least know what comes around goes around.

Please do not claim I feel I am exempt from due diligence because I bring up, and am trying to understand what is a controversial subject.

I get it, the allegence is first to the Client, all Design costs should be up front, no back-end deals even if they are totally transparent because it is a conflict of interest because it could influence which supplier you recommend.

Food for Thought:
Finder’s fee
From Wikipedia, the free encyclopedia
This article is about the business practice. For the 2002 film, see Finder’s Fee (film).

In the United States, a finder’s fee is the compensation given to an intermediary in a business transaction. Usually, there is a causal relationship between the one party and the intermediary (the finder), another relationship between the finder and the second party, and the two parties of the transaction would not have met if it weren’t for the work of the finder. Such compensation is common in business and is regulated by contractual agreements and law in the United States.[1] A finder’s fee can also be a gift from one party of the transaction, who feel morally obligated that the profits of the transaction be shared with the finder for making that transaction possible.[2]

Again, a finders fee is transparent and normally would be paid by the person who is you client. Not a kickback.

You keep trying to somehow justify it, but pretty much all 3 pages of this thread has said the same thing. Kickbacks are bad and possibly illegal.

R

Again, make it up front and transparent, be a designer and a sales rep for the manufacturer. Many suppliers I have dealt deal with have commissioned sales people, the majority in fact.

“Kickbacks” is a heavily loaded term. Of course a kickback is bad. In this discussion, which I just re-read, no one has defined the legal definition of kickback, or what laws it might break. Little bit of research, let me make an attempt.

An ex-Apple employee is looking at 20 years in jail this week for taking kickbacks from suppliers. He was an employee of a public company. Although all of the charges from the conviction seem to be related to laws regarding wire fraud, conspiracy, etc. Not specifically kickbacks.

“In pleading guilty, Devine admitted to engaging in a scheme to defraud Apple, Inc., of its money or property and its right to his honest services while he was employed with the company from 2005 through 2010,” the press release from the U.S. Department of Justice stated. “In addition, Devine admitted to transferring the proceeds of the wire fraud between various bank accounts in the U.S. and overseas in order to conceal the nature, location, source, ownership and control of the proceeds; and to conducting financial transactions with criminally-derived property worth more than $10,000.”

Read more: > Former Apple Employee Pleads Guilty to Receiving Kickbacks | TIME.com

In US government contracts, kickbacks illegal. https://www.acquisition.gov/far/html/Subpart%203_5.html

“Kickback” means any money, fee, commission, credit, gift, gratuity, thing of value, or compensation of any kind which is provided, directly or indirectly, to any prime contractor, prime contractor employee, subcontractor, or subcontractor employee for the purpose of improperly obtaining or rewarding favorable treatment in connection with a prime contract or in connection with a subcontract relating to a prime contract.

“Person” means a corporation, partnership, business association of any kind, trust, joint-stock company, or individual.

“Prime contract” means a contract or contractual action entered into by the United States for the purpose of obtaining supplies, materials, equipment, or services of any kind.

“Prime Contractor” means a person who has entered into a prime contract with the United States.

“Prime Contractor employee” means any officer, partner, employee, or agent of a prime contractor.

“Subcontract” means a contract or contractual action entered into by a prime contractor or subcontractor for the purpose of obtaining supplies, materials, equipment, or services of any kind under a prime contract.

“Subcontractor” (1) means any person, other than the prime contractor, who offers to furnish or furnishes any supplies, materials, equipment, or services of any kind under a prime contract or a subcontract entered into in connection with such prime contract; and (2) includes any person who offers to furnish or furnishes general supplies to the prime contractor or a higher tier subcontractor.

and http://www.dol.gov/compliance/laws/comp-copeland.htm

I have a slight problem with labeling the proposal to take a commission from sourcing, a kickback, if one is not an employee or working on a government contract. Being an open rep for a given company or set of companies eliminates the issue completely.

There may be other sets of laws that I am unaware of, perhaps someone else can point them out.

My anecdotal understanding is that Nike does not even allow its Asian suppliers to buy dinner for its visiting employees out of concern for higher costs.

What you seem to fail to recognize that business is primarily about relationships. You get jobs from previous clients, previous clients who moved to a new company and the recommendations from previous clients. The relationship with a client is largely based on performance and trust. You don’t build trust because you “have to”. You build trust because it is in your best interest.

Because you are getting a kickback.

Either a Client is paying you for sourcing, or they are not. If they are and you get a kickback, they are paying you twice for the same service, also called double-dipping. If the Client discovers that, you will never do business with them again.

If the Client is not paying you to source but you do source, it begs the question as to why. If the Client needs to ask why instead you explaining why, again, you are likely lose their business. Even if you are sourcing for the reason to go above and beyond on a project, there is no “commission”, if a Clint needs to ask, why would they trust your answer?