Question: My small company puts on real estate investment seminars. Recently, the company that hosts the seminars started asking for a percentage of sales. Until now, we've paid them a flat fee. Is this a legitimate request?
Answer: What does this company provide for you? If it's just the space where you hold your seminars, you've got a landlord-tenant relationship and a flat fee is appropriate. Companies don't profit-share with their landlords, right?
Is your partner doing valuable advertising work and bringing in new seminar attendees? Maybe it's time to renegotiate your contract, but it's likely that a flat fee is still the most beneficial arrangement for you.
"I never like it when a company asks for a percentage of sales from another business [because that] doesn't take increases in expenses into account. Your rent can go up, your supplies cost more, your advertising expenses rise and you will be getting an ever-smaller piece of your own revenue stream. Your partner wouldn't bear any of those additional expenses, but would make the same money, while you made less," said Chellie Campbell, the author of "The Wealthy Spirit" who also leads financial seminars throughout the Southland. She said when one company hosts or sponsors another, it must be beneficial to both.
"If there's no upside benefit for you in agreeing to increased revenues for your partner, this relationship is doomed," Campbell said. "If you settle on a one-sided agreement and you're not being fairly recompensed, you'll be resentful and eventually you will part company."
Another caution: "It's imperative that you keep your business and seminars distinct from the place where you hold them, or you leave yourself open to the danger of the hosting company having the name recognition and you being seen as an employee. What prevents your host from then canceling your agreement and doing their own seminars in that same space, at the same times, on the same subject?"
Figure out how much you would pay another company to get the same services your partners are providing, then offer to increase their payment, if necessary, to reflect their value. But be very careful about tying their compensation to gross sales, unless they are responsible for generating those sales, or they will agree to reduce their compensation if your expenses increase.
Lots of Legwork Keeps You on Top of the Game
Q: I own a small tech firm that's always scrambling to keep up with the latest innovations. How can my business remain competitive when market demands are changing so quickly?
A: Scramble faster. That means you and your key managers need to understand what's going on in the global "food chain" that affects your market.
Read everything published about your industry. "In today's online world, this is easy: Subscribe to all of the electronic newsletters that you can," advised Marty Shindler, chief executive of Shindler Perspective Inc., an Encino-based consulting firm. Regularly attend influential trade shows -- not just those geared for your niche but also those relevant to your customers.
"In addition to the main [trade show] floor, cruise the start-up and back-of-the-hall areas. This is where companies with limited resources are often located -- and it is this area where next-generation technologies are often found," Shindler said.
Meet your customers in person to talk about their new projects and market sectors. "This kind of attention will pay dividends as you work diligently to anticipate their needs," he said.
Be strategic in your approach to your clients by gaining a solid understanding of what their customers expect from them and what other vendors who serve them do to stay ahead on technology topics.
And keep scrambling, Shindler said: "A little fear is not a bad thing -- it keeps us on our toes and makes sure we strive for excellence."
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