Working Without Pants podcast. The name is a reference to location-independent digital entrepreneurs more so than Magic Mike types. The host is the founder of one of the small handful of B2B lead generation agencies I’ve recommended: LeadCookie.
(There are so many bridge-burningly awful lead gen agencies; make a note when you find a good one.)
On the episode, Why Selling Marketing Services Is Stupid, he talks about a new venture he’s established that’s based on commission pricing: BridgeTac. BTW, he also admits that this episode’s title is a bit clickbaity. Most of his revenue still comes through selling (productized) marketing services such as LeadCookie provides.
But he makes a really good point – is there an opportunity for essentially partnering with some of your clients? Not partnering as in claiming, we take a partnership approach in your website messaging; this is misleading. And not partnering as in defer-billing-till-funding-round, as some Silicon Valley marketing consultants do.
Instead, Jake’s talking about actually sharing financial risk by getting paid a percentage as soon as a client deal closes.
Nothing new here in the big, wide world. You’ve bought shoes sold on commission and people have probably done commission deals since pre-history. But it’s unusual for most niche, expertise-based businesses.
Here’s the downside, though:
- Wait a long time (think 6 month-ish) for deals to close
- Take the risk of deals not closing, ever
- Risk bad intentions – the client-partner not paying you because of their greed
- Risk good intention – the client-partner not paying because they misunderstand the terms of a complex deal
- do attribution work (the work of attributing what sales are attributable to whom)
- allocate your own resources against all of these risks, including the time it takes to structure the deals themselves
So choose carefully – as with any partnership.
Jake reveals that so far, these risk were worth 12.5% of revenue, at least for one client engagement. Total earnings for that deal nearly 10x’ed what he’d have made selling cash-pay marketing services, too.
Is this value-pricing? Not really – value pricing is getting paid according to the total value you create, which is not something you can constrain to a specific timeframe.
This is why value pricing might actually represent a larger de facto commission. It also relies on massive trust. It also only works for a certain kind of client.
Performance-pay partnerships like Jake’s work better for businesses focused on optimization, as opposed to transformation.
If that’s you, you might want to consider the “true partnership” model.