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    7 Replies Latest reply on Nov 26, 2007 11:06 PM by Lighthouse24

    Sole Propriator - Home Based Business

    JGREER45 Newbie

      A question came up today that I cannot really answer.
      " How much of a KICK BACK should I offer existing Home Care Providers to offer my Medical Alarm product to their customers. They could be a great source of sales and I cannot predict a number? HELP Please.
        • Re: Sole Propriator - Home Based Business
          Techie Wayfarer

          Do you know what the standard commission or incentive is for this particular industry? Also, other than providing an incentive to endorse your product - is your product better than others out in the market? If so, your incentive can be less.
            • Re: Sole Propriator - Home Based Business
              JGREER45 Newbie
              To answer your question, I know what my Commisions are (about $48.00) per unit sold with a recurring Quarterly revenew of $48.00 .My income is based on how long a customer keeps the unit. The incentive for the otherr companies is that they can offer the newest and less expensive product to their customers. Along with that, they can hve the monitoring company call (contact) their caregiver immediatly at the customers request. That in it-self must be worth the incentive.
              My thoughts of a standard commision for these companies, thinking about what the worth is to me,
              around $15.00 per sale. One Time payment.
            • Re: Sole Propriator - Home Based Business
              DomainDiva Ranger
              There is a difference between kick backs and commission incentives. Kick backs are not reported to the IRS, commission incentives are.
              • Re: Sole Propriator - Home Based Business
                Lighthouse24 Ranger

                One way to determine this is to calculate your Profit Per Unit.

                Profit Per Unit = Retail Price - Wholesale Price - Selling Costs

                 

                - or perhaps in your case -

                 

                Profit Per Unit = Unit Sales Commission - Unit Selling Costs.

                Dividing your total selling costs (advertising, marketing, overhead, etc.) by the number of units you've sold will give you the Unit Selling Cost.

                 


                Example: Let's say you've spent $1,250 to sell 50 units over the past year. That makes your Unit Selling Cost = $25. In other words, you could expect to spend $25 selling each additional unit you sell yourself. If your commission is $48, your Profit Per Unit = $48 - $25 = $23.

                 


                What this would mean is that for every unit the Home Care Provider sold/placed, you could pay them up to $23 and still make some money on the sale yourself.

                If the actual numbers looked anything like that example, I'd use a sliding scale -- they'd get $10 for the first unit they placed, $12 for the second, $15 for the third, and $18 for the fourth and each one thereafter. It would give them an incentive to place more units, and you would still make at least $5 (that you wouldn't have otherwise) on each unit placed. Of course, you'll have to plug in your own numbers to see what will work.

                Hope this helps. Good luck!
                • Re: Sole Propriator - Home Based Business
                  websignia.net Wayfarer
                  I agree with lighthouse 100% on the sliding scale to incentivise them to sell more units. Depending on the volume of sales for this type of product, I might only have 2 tiers to the scale to keep the accounting simple, eg. 1 - 49 units = 10% commission, 50 + units = 12% commission or a similar model.
                  • Re: Sole Propriator - Home Based Business
                    Lighthouse24 Ranger
                    Whatever you decide, you might want to call it "Direct Seller Compensation" rather than a "Sales Commission" -- just so there's no risk of confusion by them or the IRS that they are responsible for their taxes. If you paid someone over $600 in a year, you'd file a 1099, but you wouldn't have to worry about withholdings (or a later reclassification claim -- and penalties). Just a suggestion.