Questions

I've been asked to ADVISE an established small biz in exchange for a PERCENTAGE of monthly revenue. THREE SPECIFIC QUESTIONS: 1. This is a small biz that is cash flow positive monthly -- should I ask for a larger % of gross or smaller % of net? 2. Anyone have contract examples they are comfortable pointing to or sharing? 3. Accountability of payouts -- I'm guessing I need to ask for ongoing access to bank account and sales reports? Thanks kindly, Josh

Josh,

I am a contract and negotiation expert. I have over 8 years of small business advising and consulting experience. A more detailed bio is easily available on all social media and this site.

Let me be a lawyer and give this disclaimer

*This is not legal advice, and this information does establish an attorney/client relationship. This is merely for educational purposes*

Here are some short answers to get you started, hopefully in the right direction.

1. If it is an option, always ask for a % of the gross. There is a term that I use, "companies WILL net you to death!" Legally, companies have a wide range of what can be written off as an expense, thus shrinking the net profit, thus affecting your rate.

If you can't get a % of gross, make sure you have a detailed list of expenses that are routinely taken out every month, and negotiate from there.

Why?

In some (if not most) businesses there are "necessary" (internet and rent) and "unnecessary" (payment on Lexus for CEO) expenses. Your goal is to eliminate all the unnecessary expenses from the raw number that you will be taking your percentage from.

2. There are many template contracts available. I think entrepreneur is trustworthy (and free).

Here is the link http://goo.gl/fz36zg

3. I think it would be smart to ask for some type of accounting sheet. Thus, how would you know if they are telling you the truth about profits and/or net.

An additional question to ask yourself, is what are the benefits to taking a percentage vs. a flat fee? I'm assuming the contract is going to be based on performance, thus another option can be a base fee, with bonuses after you hit certain numbers. Just something to think about.

I hope this helps! Good luck!

If you need more advice, schedule a call!


Answered 9 years ago

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