Has anyone ever been successful in getting a commission from a manufacturer or printer they recommended a client use to make their goods after the client placed an order with them?
For example, you’re doing freelance for a maker of dog dishes and redesign a product, as part of that service the client asks you if you know any good injection molders who can make them. You bring their business to the injection molder X. You get a commission of ? % of what for how long? So it might be 5% of the total first order or 5% of every order for the first year. Do you think this is fair practice?
Haven’t ever heard of this - in reality that commission would really be a kickback which is nothing more than a bribe to choose a specific vendor.
If you were to charge your client $X as a fee for “manufacturing support” I think that would be fine, but trying to get a commission for bringing a client in is a gray area IMO.
Maybe someone else will feel differently on that one.
If you are asked for a recommendation for a supplier and provide one, the understanding is that it is a supplier you think would be good for the job, not that you would be taking a cut.
Do you recommend one supplier over the other because you can make more money, or because they are better?
Does the supplier just add x% to the cost to cover your costs? Doesn’t that make your client pay more money, so you are doing them a disservice?
Why would a supplier pay you money when you did nothing?
This sounds like extortion - it is dishonest, and if I were a client and found out you did this, would be very upset and perhaps take legal action. Business is based on relationships. Doing this goes against everything good business is based on.
This is known as a kick-back and it is 110% illegal. While you might have the best intentions and recomend the vendor that you think is the best for the job, your client and the courts will not see it this way. They will assume that the only reason that you recommended them was because there was an under the table exchange of money. Would it be safe to assume that if a vendor that was not as good offered you more money that you may be swayed into specifying them? You could just as easily go down the line trying to get the next vendor to pay you more than the previous for a simple recomendation.
I do a lot of work in the hospitality industry and this is unfortunatley extremley common. Now if you ask the vendor they just might pay you for this, but is the money worth the potential loss of client, reputation, morals and possible legal problems?
OK, I THINK THERE IS MISUNDERSTANDING, I AM NOT TALKING ABOUT A DESIGNER WHO WORKS FOR A FIRM GETTING A COMMISSION, BUT A FREELANCE / INDEPENDENT DESIGNER.
I am sorry, I should have clarified, receive a commission as a Freelance/Independent Designer. I see how it would be unethical for a staff designer to receive commissions and gifts from vendors they recommend.
[quote=“rkuchinsky”]I think we all understood it to be a freelance/consultant arrangement. All comments still apply. It is wrong not ethical and perhaps illegal.
OK.
1-So a Designer calls up XYZ company, talks to their salesman, owners, etc. and vets the company.
2-Designer tells Client he/she thinks XYZ is a good company for the project.
3-Client contacts XYZ company, put through to salesman.
4-Client likes what they hear and places $40,000 order with XYZ company.
5-XYZ company salesman gets $4,000.00 (10% commission) year 1.
6-Client likes XYZ work and is successful with product, orders another $40,000 worth of product year 2.
7-XYZ company salesman gets another $4,000.00 (10%) year 2.
etc., etc.
So, the Designer is ethically shut out of the loop in receiving any kind of finder’s fee or commission, even though they brought XYZ company sales that the XYZ salesman would have never thought to find?
The Designer can only residually profit from what their services created if he/she initially negotiates a royalty agreement with the client? Is this the only ethical way to make money after the completion of the design services - negotiate a royalty?
Would it be ok if the Designer handled the whole manufacturing deal?
For example:
1- Client would only deal with the Designer, order goods from the Designer.
2-The Designer would purchase the goods from the vendor, the Designer would then would ship widgets to the Client, etc.
3-The Designer would bill the Client for widgets, adding a mark-up on parts (or sales commission) since the Designer is not only designing the widget but is now the SELLER of widgets.
This is similar to how an interior designer makes part of their profit, they do the design work, bill for design work, then they also spec. certain products, furnishings etc, then sell them at a mark-up of 20% to the Client, making additional profit, because they are the SELLER of those products.
This has to do with disclosure and agency. If you get a kickback, you would be considered an agent of the manufacturing company. You have a vested interest in guiding the client to this manufacturor without disclosing the comission you would recieve if they went with them. So the client is approaching the agreement in a different way than if they were approached by a sales rep who informs the client that he is an agent of the company he represents.
This is illegal and not good practice.
The manufacturor could become a supplier to your business entity and the relationship identified as such to the client. In this fashion, you charge for all services rendered, collect amounts due and then pay the supplier.
It’s a question of mis-representing where your interests are.
Sure, you can become a wholesaler and supply the product, but do you really want to just to make a few bucks? What happens when the quality is bad? The production is behind schedule? The supplier goes out of business? You are left holding the bag.
Trying to make money by being greedy is more than just illegal, it’s not how business is done. If you were to somehow try to extort money from the supplier for the business, do you think they’ll ever pass along your name to another client who is looking for a designer? Not a chance - or they’ll be asking you for money!
Business is built on good service, good product, good faith and relationships.
Wow, glad I asked. In this economy, just trying to think of ways to increase cash flow not be greedy. This is why designer fees should be higher up front, because we do not benefit AT ALL from any downstream revenues unless it is the form of royalties.
A client’s and a designer’s ethics are independent. If the client is acting in an unethical manner, it does not absolve the designer acting the same way.
Sourcing a manufacturer is a service. All services should be reimbursed. The client can directly pay for the sourcing time. The client can pay as a royalty for “savings”. A manufacturer can pay but there must be full disclosure to the client because in reality, they are paying indirectly. I’m no lawyer, but without disclosure, you have perfectly described a kickback.
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?
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.
