What is a normal finders fee for finding a distributor for a company?
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I run a business in the health food market. Recently an outsider helped us get in touch with a large distributor. This may lead to additional sales for us, and the person who got us in contact with the distributor is asking for a “finders fee”. He wanted 20% of all future sales through the distributor, which is out of the question. Does anyone know what a standard finder’s fee is?
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Tags: company, distributor, Finder's, finding, normal
December 11th, 2009 at 1:14 pm
In most cases finders fees for this type of situation would be negotiated before the exchange comenced. I take it this was more of an informal offering between you and the agent. It would be best in the future to have a system set in place to avoid ugly situations resulting from miscommunication or undefined roles.
These situations warrant different amounts and terms of monitory compensation. Some will be a one time fee paid, others a royalty based on the business volume. I used to be a manufacturers rep and had accepted payments in both forms.
I would look in the lines of 6% of the profit resulted directly from the sale through this distributor. I am basing this on the fact that you said it is a small company (assuming under 1 mil) and I am assuming this would represent no more than 15% of your total sales volume. The larger the percentage of volume and the larger the gross business profit from sales, the lower this number would go.
You could also offer a one time cash amount say 6-10% of projected 1st year gross sales through this distributor. The only issue here is that you will never see the money again if the terms with the new distributor fail in the future.
Without a good understanding of exactly what your market is and will bare, with hard numbers, I cannot be more specific. You can feel free to email me with a more detailed explanation of the situation and I will help further.
December 11th, 2009 at 2:02 pm
he is a pig