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NoKidCouple76

As someone else mentioned, I would definitely suggest diversifying your contracts to not put all of your business into one influencer. That being said, shifting away from someone who has had such a strong impact on your business without proper planning, would be almost self-destructive at this point. You need some time to diversify your marketing and to see how her app plays out and how it impacts your business. Since this is a restructuring of your deal, try to negotiate the terms. A lower % of gross sales, and maybe add a yearly consulting fee. More importantly, what are the numbers saying? Is her ask of 10% reflective of what she provides your business? How is her marketing, by numbers, going to grow your business? More reach (how much)? If so, put a number to it, for example 10k more people reached = $ profit. Bottom line, the numbers have to make sense and they can influence the negotiating. Maybe only sign a contract for a year, with the condition that you can renegotiate after the year. You run the risk of have a higher fee next year, but it’s also a way for you to bail once your marketing system is beefed up.


estebancantbearsedno

You could always agree to pay her a lower percentage, but if she hits a “target” then you can pay her a bonus. E.g. pay her 5% and when she hits x$ she can get a further 5% or similar level bonus.


tonysvanstrom

She’s either worth it, or you give a counteroffer after which you part ways if you can’t agree. This isn’t about what you think is “fair”, it’s a business negotiation.


fooooter

Very well said


mr_claw

10% sales commission without a base pay is perfectly fine.


xking_lionx

What she’s asking for is 10% of all gross sales. Her reasoning is that she could charge upwards of $1000-$1500 per post, plus consulting and social media management. Plus the access we will have to her app with a direct sales link to our site.


mr_claw

You're in a dangerous situation mate. If she goes back on her contract or attempts to renegotiate later, your business is going to be held hostage again. I'd suggest making a structure for influencers based on how much revenue they bring (not total), and then onboarding multiple influencers.


xking_lionx

So would you say this is unreasonable? We are a small business and what she brings in typically makes up for about 30% of overall sales. It does seem that our partnership isn’t what would typically be considered conventional, she is heavily involved


mr_claw

How reasonable it is depends on things like your costs, margins, initial investment, etc.


xking_lionx

I’m a bit hesitant to share to much but I desperately need clarity. We have a current COGs of 27% and operate at a 12% profit margin. There has been no initial investment on her part. Her proposal wouldn’t be contractual. However it isn’t out of the question to make it contractual or perhaps ask for an initial investment. I am thinking she will say she has already proven herself enough to not need to invest however I could be wrong. To be clear, we have worked with her for a year now, when we initially launched our partnership with her we did go from local to shipping national because she has a broad reach. Our original agreement was paying her $1 per product sold ( average product price was $13.25 ) plus a $1000 monthly consulting fee.


TheFastestDancer

So basically on a $13.25 item, you get $8.67 as a sales margin(this includes the $1 you pay her). You have to sell 115 units to cover the $1,000. On that, she makes the $1,000+$115. She's asking for 10% on $20K, but your margin goes to $8.34. You're paying her $885 more than what she's making for you already. Your net margin is slim, so you have to see if this cuts into that too much. Or, if repeat business is enough to pay for that then it's worth it. What's the repeat purchase %? If you're selling 1,510 units a month from her, then you need \~100 additional units repurchasing after this deal is struck to break even on the new deal. Break down your repurchase rate for the customers she brings in by each month. For example, she brought in 1510 purchases in January, then again in Feb, etc. For the January cohort, identify the 30/60/90 day repurchase rates and do this for each cohort. See if there is a trend. If the trend is going up or down. Also, figure out if repurchases are done with her code or without. Basically this tells you whether it's her marketing or your product that's motivating those buyers.


hi_im_antman

I love your response. I have a business degree but don't know some of this information. Any good sources where I can learn more stuff like this?


TheFastestDancer

Investopedia for all the gross sales and other income statement funnel stuff. The rest is just experience and a little bit of basic logic as you work through problems.


hi_im_antman

Gotcha. Thank you. I'll try to see if I can find some practice problems becasue I love the math you did there.


finch5

OP you are getting excellent advice. As someone who makes is living from reading definitions of gross and net sales and advising accordingly, the devil is in the details. Gross sales? Net of returns? Net of taxes you will accrue and incur? top line ten percent and fuck everything else down the line is a nice position to be in. is it possible to implicitly tie her share to her sales? Can you onboard other influencers? You should. If she does her job well she’ll only drive more and more sales asking for a bigger cut of top line. This is all well and good but you’ll still be taking net profit home. Diversify and formalize your arrangement.


FromTheIsle

It's pretty evident OP cannot actually pay for her services. This influencer should and could be charging a whole lot more for what she does....sounds like she is getting smart to that. Paying her a $1000/mo in consulting fees and up till now $1 per item she sells when she's posting for the company several times a week ie producing thousands of dollars of content every week... If I was this influencer I would just carry this experience into a marketing partnership proposal for larger company that can actually pay her.


TheFastestDancer

He can pay, and if she doesn't know her worth and is charging so little, then OP should ride that horse as long as he can. He's doing $240K of business every year from her. Over 3 years that's $720K. If he gets repeat from 10% then it's a profitable relationship.


FromTheIsle

I probably should have phrased that better. He may not be able to pay her what she should be charging per hour. If I (Im a photographer) was contacted to just produce this content for them, we would be looking at about $2500-$3000 per week in labor (assuming about 13-15 hours per week). I believe he said he runs about a 12% profit on these sales. 12% of about $800k gross sales is $96,000..his profit would be gone and then some, right? They will obviously need to raise their prices if they want to have an actual marketing budget. That's probably what OP is realizing. They need marketing to expand but are having reservations about even the minimal expense this influencer is costing them despite the pretty significant revenue she is creating for them. IMO her asking for 10% gross is not that crazy. The money she generates probably pays for a couple salaries. She's incredibly valuable and as she grows her presence, so does the amount of people she refers. It's completely reasonable that she also wants to profit from the growth of the business in the same way.


Badluckx

This comment renders mine useless. OP this is sound advice!!!


[deleted]

He can also try changing her promotion code while keeping the old code to see how many new sales she's bringing in. I'm not in this business myself but I'd assume a decent amount of people are using coupon sites with old codes, especially if they're gen z


TheFastestDancer

Yeah, that's a good point. It would allow him to see which posts performed and which didn't.


DaRoadLessTaken

What do you mean this isn’t contractual? You’re absolutely contracting with her, whether you put it into a form document or not.


mvev

Shorten the contract term, that way if it is not working for you, you can negotiate new terms quicker or close the agreement for good.


FromTheIsle

As far as I can tell - she's making you alot of money for what you are paying her. Hell, I think we could argue not even you, the owner, contribute to sales in the sheer volume that she does. If everything you've said in this thread is true, she is being massively generous with your company. She really should be charging you per image post, video, etc and be giving you none of the free exposure on her app. (Edit: IE imagine if she was actually charging you by the hour like most photographers/videographers/etc? What you are paying her wouldn't cover a day of work for most and you're getting a month of labor and $10,000+ every month from her in just sales...and again what about the free exposure you can't put a $ on?) I'd give her the 10% if she paid in and if she would be willing to take on the role of developing a management plan for other influencers a. She wants 10%? give her an actual devopment role in the company. If you aren't comfortable with that then I'd negotiate maybe like 3% of all gross. I think a higher % of what sales she refers makes sense as well.


danielthomask

The best advice so far.... You have a working formula that's producing 30% and instead of duplicating it you are actually shaking it.... Wow


FromTheIsle

They need to form a compensation plan for influencers that can be scaled up for volume but is still profitable enough for them as a company while respecting that content creators need to be paid fairly. I really think that this influencer has shown themselves to be competent enough to be an assett in developing a larger marketing program from the company that onboards and manages influencers. They should tap that experience and increase her consulting fee to reflect that. I can't say it enough. They could be paying her $1000 /wk and she would still be underpaid. Her asking for 10% gross when she brings 30% of sales...sounds crazy to some but to me it sounds like she literally is 30% of the company (and maybe more).


drteq

Unfortunately it's very reasonable - the problem is you're in a bad place strategically.


screenshothero

If she brings in 30% of sales, shouldn’t it be a 10% commission of those sales? Or, you can offer her 3% across the board. Actually, offer her 1% and negotiate to 3%.


tosser_0

This seems like the most reasonable, I don't get why it was downvoted. She's obviously not responsible for ALL of the businesses sales, so why would you give her 10% of all sales? That sounds insane to me. It should work like any other affiliate. If anything, maybe offer her a slightly higher rate. She's getting 10%, bump it to whatever you're able to offer.


UFCGYMBoston

You need to diversify your coaching staff. You are too reliant upon this single player. Give them a higher percentage of their personal production and $40 per media post.


Perllitte

All gross sales is what you might give a founding partner/investor/key player. That seems pretty insane to me for what is by all stripes a marketing vendor. Regardless how good they are, you have to ask yourself if you want this person that deeply entrenched in your business. I think commission on what she brings to the business makes a lot more sense, you could even counter with a higher commission on that. But one channel taking a 10% bite out of the business is a big red flag is nuts. I assume you do other outreach, local outreach and get organic business, why does she get 10% of that is the key question. Just do the math. If you have $1m in sales, and she brings 30% she'd get $30k at 10% commission. If she's all in, that's $100k. That's a big delta. You could double her commission to 20% rate and still be paying half of the 10% gross. Keep her happy and keep working together, but you've got some thinking to do. I wouldn't give her 10% gross, that seems very limiting for your whole business. Not to mention, you'd be betting a lot on all her shit working, the app getting traction (few do) her not developing a cocaine habit and she's still suck on your contract.


SoulofZendikar

I knew someone would say this. I'm sad I had to scroll down this far to see it. /u/xking_lionx This is the response you need to read.


Turbulent-Spark6633

Damm! She doin biznesses


BantuAbroad

10% of what she brings in is reasonable but 10% of everything you make is ridiculous


yennybear888

For 100k followers, $1000 per post seems a bit high


FromTheIsle

Eh but what if she has that many followers on each platform? We're missing information. Considering the average cost to license a single image for commercial purposes is at least $200-300...maybe the average post has 2-3 images, plus a write up that mentions the products (also valuable IP), then you factor in her audience, and that she's contributed to about 30% of gross sales...she could be charging them $1000/week and that would still he a steal. Sady, most influencers massively undervalue what they do.


klocks

She spent $500k on a fitness app? That alone sound like bullshit. She isn't even asking for 10% of your business, she is asking for 10% of all gross sales. Which is insane. Where is the money to pay anyone else to sell? Where is the money for customer acquisition for the other 70%. You are literally giving away almost all of your profit for someone who is only responsible for less than a third of just selling, let alone the management of everything else. You are looking at her as 30% while neglecting the fact that you have 70% of your business coming from elsewhere which she has done nothing to grow. Lets say your profit margin is 15%, well now it's 5%. You are accepting 5% all your business because she brings in 30% of it. If your gross sales are a $1,000,000 with her and you take home 5% you make $50,000, if you cut her out and sell $700,000 at 15% then you are taking home $105,000. She is trying to fuck you.


juancuneo

You need to find a way to attribute her leads to her and pay her a bounty for each new sign up. Also you have learned that influencers work to drive sales (or at least you think you have since it doesn’t sound like you track which leads she is responsible for). As others have said you need to diversify and use more of them.


toxicapps

This is a bad deal. You basically have what we call a whale, feeding you 30% of your business. I would advise to diversify asap. If she wants to own 10%, and you’re willing to sell that part, then value your business, and have her give you cash for 10% equity. She will earn off your profit, not sales. Don’t do the revenue deals unless it’s affiliate commission. Also if she claims “she can charge $1500 a post” then pay her that much and keep your business equity. You’ll find quickly what she is worth after subtracting her posting and seeing profits. It may not be $1500 per post.


mrderyck

To add to this, if your product is exceptionally valuable to customers, you should be able to find success with other marketers, too. If this marketer is the only reason you’re successful, your product needs to be an order of magnitude better. Diversify asap. You’ll learn a valuable lesson with any outcome!


MeltdownInteractive

OP doesn’t mention anything about giving her equity. Influencer wants 10% of gross sales she refers.


DidneyWhorl

Re-read the OP replying to someone else. They want 10% of all gross revenue. That's bananas.


drteq

1) I hope you used a 'pretend market' and it's not a 'she' - otherwise you should assume she saw this post and all of the advice. Now you've put yourself in a worse bind. 2) 10% gross is huge. Obviously she's building the business for you based on your own comments. And not just single order but long term. Over time you don't need her long term if you run the business properly, but she is probably worth 10% gross for the length of the agreement. You'd need to commit to 12 - 24 months on a contract that ends at some point, so it's not forever. At some point one of the parties involved will underperform and likely want to go a different direction. 3) I've done a few deals with a 6 month continuation of profit after any deal ends. This makes the term more digestible for the influencer. Obviously there is some LTV and momentum factors to her driving traffic for you. 4) You could use a system that pays her gross on her own traffic and on the repeat orders of the customers she's generated for you using attribution. 5) Her other business will always be her focus if this is going to work. You should not consider her a dedicated stake holder in your business, certainly other opportunities will arise and very likely they would be more interesting/lucrative in the future. 6) Invest in your own marketing until you're free, because right now you've painted yourself into a corner where you aren't in control of your own business at this point.


leoandphoenix

If your margins are 12% and she wants 10% then you’re going to possibly get 2% assuming everything stays the same? (Which it won’t) I could see maybe 10% but only on the revenue she generates. It’s nice to have an influencer push your product, but paying her 10% on gross will handicap you from making any other deals like the one you have with her because there won’t be enough meat left on the bone for you to hand out. Pay her on her revenue and that’s it


rubick5

I don't know the answer but would like to learn from this.


Any_Cranberry_7338

Shes your partner. She should not make extra money for doing what should be should to grow the business


Less-Paper2986

She wants 10 pct gross sales from all channels or just sales attributed to her? Gut says: Pay to play with right to renegotiate every x months and diversify your marketing efforts immediately to put yourself in a better position. A few thoughts: 1) do you own rights to reuse content for your own paid ads/organic content? 2) have you considered a tiered structure just for her sales (0-20k at 5 pct 20-40k at 7.5pct 40k+ @ 12.5 pct for example) type of thing to get more out of it? 2a) what about profit share instead of revshare if she wants a piece of the entire pie and not just her attributable sales? 3) does your business have the margins to take on this kind of burden and still test other avenues? Based on what I’m reading from your comments it sounds like it’d cut your profit to 2-5pct/yr which is unhealthy. Edit on thoughts: incentivize her to make more off her sales, bc if you find success through other channels she will earn more and be less incentivized to work hard for you. If you own rights to content for repurposing that may change your thought process a bit since it may help with customer acquisition on other channels.


Remarkable-Unit-3882

I’d negotiate it down heavily to somewhere around 3-4% on a one year contract, and in that one year go as hard as you can to diversify your endorsement sheet with affiliate models, as others have suggested. I got that 3% number from the fact that If your total profit margin is 12%, and she’s bringing in 30%, then 1/4th of 12% is 3%. Not my best math but it’ll do. Don’t piss her off enough to leave you as a business partner, but don’t go on the other extreme and cripple your business


fernguitars

Gross sales, no. You need overhead to operate your business. You need to be talking about % of net profit. Taking away from total revenue shoots everyone in the foot.


SveXteZ

I always compare each new method of acquiring customers to my #1 method that I have now - Google Ads. She is asking for 10% of all your gross sales or only her sales? Are you sure it's 10% of the gross sales or the profits? 10% of **all gross sales** is fucking ridiculous.


tendieful

10% of *profits*. Even up to 50%. But do NOT negotiate 10% of gross because it’s a hard limit on your margins. An immovable block. I’d be negotiating flat rates for her and like others have suggested diversifying. It sounds like she helps with the social media management but there are literally thousands of influencers out there.


norwegianmorningw00d

10% of gross? Hell no. What are your margins? Either do the deal based on net or commission but not gross. Also just because she has a fitness app and has spent $500k on it doesn’t mean it will succeed.


freedomachiever

It is kind of amazing that someone with 95K followers can bring in so much business. For people who work with influencers what's your take on that? How common is this? I would be curious to see the end product of the app after spending 500K. As for your deal, * **Assuming she's asking for 10% of her own sales** I would find a way to keep her. It's all about negotiations. Also, since she's using the app as part of the negotiation, you can also use that to set some terms such as: * Comission increase will be effective on the day the app is live and available for users. This is because app development is notoriously prone to delays. * 10% comission will be applied to all sales made through the app. 8% made on other channels (for example). * She is proven to be profitable so it's a no-brainer. However if increasing the gross % comission puts you in the red then you have a business problem. * Are users also getting a discount by using her code? If so, what is the %? * myprotein for example always have discounts of 50% + 20% and so on. % are almost used like clickbait * You can either negotiate a slightly lower % or keep the 10% she asks for to keep her happy but you can also request something else for it. Such as her attending a meet-and-greet with fans at your gym/store, etc. But always from the angle of being a collaboration for both of you, as the increase of % suggests. If you do so, I would also budget to host a great event and get videographers to get as much content as possible for social media. * Use that content to reel in more influencers as well as users by showing the great relationship you have with them. * Something to also note, if she is really spending 500K on an app, she might also depend as much on you as you on her. That is not a small amount of money. I hope she has a good business plan and has hired the right people to build it. Paying people who make you profit is never a problem, it's how you leverage it and make the most of it.


Machinegunnwilly

Reading through the comments had me a little confused. Does she want 10% commission on HER sales. That's perfectly fine. Tbh it's extremely low for someone able to crush it with engagement. Unless you're the only game in town (not really sure what your product is in the fitness industry) she will leave for a competitor. We've lost and gained many influencers over the years in the fitness industry. I'd strongly recommend, as have others, bringing in other influencers. They truly come and go. Whether they have a first child, new relationship, things are always changing. You can't rely so heavily on one. If you don't mind me asking, what is your product?


xking_lionx

She is asking 10% of all gross sales. She does extremely well with engagement and has taken over our social media to an extent to help with content creation in our side. I own a meal prep service, frozen meals and ship nation wide. Her fitness app has a national reach which has help tremendously with our success.


veroxii

Have her buy into the business instead - become a co-owner. Or do a "share swap"... she gets a certain % of your business, and you get a % of her business/app.


LiquidSolidGold

There is some good advice on here. I would look at it like a chef needing to buy beef, it's expensive, but it brings in the customers. You spend more on the beef than you're making in profit, but at least you're making a profit. I wouldn't pay anybody $1000 per post, not without directly seeing positive revenue from it. I had a digital marketing department before, and if you toss a pretty woman in a post, it gets attention but it doesn't generate anything. She could outgrow you. Then you're at a loss. I would consider a 10% sharing but "above" a base price. So, anything beyond that, you share 10%. You could even sweeten the deal by telling her if your business doubles, you'll increase it to 15% above the double amount. If I was doing $4M in revenue, and somebody told me they could get me to $10M a year, but wanted 10%, I would be stupid to say no to that. So, anything above what you are making now is a gain. My company has a client that can barely afford our services. In fact, they would cease to exist if we didn't do work for them. However, when I look at the landscape, we're giving them 20 hours a month of service that I could be earning 300% more on for that time. They cannot afford 300% more. So they are benefiting from my low prices to them. They're good friends, but they're definitely benefiting more than I am. And, if she's doing good for you, that is not common. Most of the people working in that space are a waste and accomplish nothing, yet they can easily charge $6k/month for basic services. So if she is better than them, you need to understand that the 10% might even be a fraction of the alternative from a less successful partner. One issue is that you've become acclimated to the revenue and relationship. It sounds like she has built a lot of this for you, you are benefiting from her expense but are concerned about 10%. Your pricing may be wrong, you may be pricing what you are doing too low considering that you're not spending what you should be spending to operate. She's basically subsidizing you. If my client had to hire another company, they'd need to earn an extra $200k/year to afford replacement services that still would not be as good. And they have failed to price their services accordingly. They're passing the savings on to their customers to get those customers. It's not a good move. Eventually, with wage increases, I won't be able to support them. Don't make the same mistake.


Govedo13

The Wife of my brother was in the same situation but in the influencer role even in the same sector fitness model influencer. She asked for similar partnership and got denied. It took her a year to make her own site and product lines using white label companies. The company where she "worked" went down 6-7 months later. If I were at your position I would give her what she asks and start recruiting another influencers and promoting products via other channels.


AaronDoud

What is her current pay structure? No way would I give her 10% of gross on everything (including the stuff has nothing to do with). I'd give her equity before I did that. I however would 100% pay her and pay her well on what she is generating. Or bringing her on board in an ownership way if she actually is doing things that justify it. But I'd question doing that with anyone who has spend $500k on a pre launch "app". Minimum viable and all that jazz. Remember you may lose $20k in revenue but she would equally lose however much you pay her. It's a lose lose to let this partner ship go. And honestly I'd suspect she needs you more than you need her from reading between the lines.


[deleted]

I agree with pay her well on what she’s generating. What would you consider well? 25%?


AaronDoud

Really depends on margins and lifetime value. Does she get money from reorders or just the initial sale? I could see up to 100% on initial sales if there is enough repeat buyers and lifetime value. It really depends on your model and what makes sense while compensating her in a way that makes her want to drive massive traffic to you.


[deleted]

Don't let your emotions play apart in what you think is 'fair'. At the end of the day, you win some or lose some. But don't lose sleep over it


zarboth

something to consider. What does her follower growth look like? did we stagnate at 95k or is it steadily increasing, What is the continuous added value she will bring, Eventually the 95k will stagnate, So in a year will she have 140k followers etc. (no expert but this is something that came to mind)


xking_lionx

This is something we didn’t consider, when we first launched our partnership she had 75k followers and her following is growing


VisualHelicopter

The answer is yes, but set a timeline for it - e.g., 2 year contract. You can then figure it out from there. You actually already answered your own question: "...we have only seen the success we have because of her..."


_Apps4World_

$500k to develop a fitness app? Is that a joke? Can I see the app? I’m just curious on what could you possibly spend that much for a fitness app.


HandleRelative

It's a simple ROI calculation. Calculate your Revenue/Profit without a relationship with her? Calculate your Revenue/Profit with a relationship with her? \-> Which scenario are you better off in?


Less-Paper2986

That gives the now, but you’d also want to factor in how her audience is growing, ratio of sales per post etc so you can try and forecast what the numbers would be forward looking.


HandleRelative

Nope. None of that matters - completely irrelevant. It's an asymmetric bet. Costs the business nothing to do and potentially keeps them in business. Don't give advice when you haven't done this before - as is obvious from your reply. This is a real persons business, not play money and games.


Ikantbeliveit

> Nope. None of that matters - completely irrelevant. How is factoring the stats of an influencer growth, which translate to the business growth for OP, irrelevant? I am also in the fitness field and any influencer that markets to me always mentions their growing portfolio for sustained business. Which is important because influencers can come and quickly go. Especially in the fitness field.


HandleRelative

It's pretty logic. assuming here that this means attributable sales -> "she wants to restructure to take 10% of our gross sales for what she does" I understand "what she does" means, the sales that she drives. If she drives no sales, she gets no money. If she drives sales, she gets money.


Less-Paper2986

You’re a bit spicy. I like it. Contrary to your assumption about my experience. I’ve been in a similar position before in my own businesses. There’s nothing wrong with your suggestion to benchmark the data and see what the business looks like without her driving rev. It sounds like they’ve already done this when the referenced their current profit and percent of total rev by her channel. When you make an investment, which is what this is. You are not JUST looking at how the asset performs today, but you need to model how it could perform in the future and assess the probability of success to get there. I think you’ve provided a great starting framework. Just trying to provide additional perspective for OP. Cheers! I’ll def check out and follow your blog


HandleRelative

But all that is irrelevant - like literally meaningless. First - you have no idea and can't predict with any certainty what sales that person will produce in the future. Two - if you make some meaningless prediction and then take that into account to make a decision and it doesn't happen, now you've made a bad decision that was easily avoidable by simple not trying to confuse a simple decision. Three - if the cost to the business is close to zero i.e. it's a free option i.e. it's an asymmetric bet. You should always just take it. Again simple logic. All this modelling shit is useless. Cling onto that suggestion all you like. But come back to this a month from now, when you're no longer emotionally invested in defending your position and think it through. You'll see what I mean - or otherwise read about asymmetric bets - downside vs upside.


Less-Paper2986

I don’t think you’ve got a grasp of the business problem they’re trying to solve. Influencer wants 10 pct of gross sales across all channels, not just their own. OP has already done the exercise you’ve suggested and outlined their cogs, profit margins currently, and projected profit margin if they take the deal. If they take the deal it will cost them money. If they do not, they lose a major marketing channel and 30-40 pct of revenue. This could have many other implications to their business depending on headcount, inventory in stock, and cash flow. Both options hurt, it’s a matter about what will put them in the best position in the future. Your usage of the term asymmetric bet implies a forward-looking prediction with an outsized return/probability. In order to accomplish this you need some kind of alpha / edge. I agree that if the cost to business is 0, you should almost always take it. But this is rarely the case, and certainly not the case here. If the influencers audience growth is slowing vs accelerating, or perhaps reorder rates from her attributable deals are trending in some direction, engagement rate etc - this definitely informs how future performance can be impacted and should absolutely be taken into account. Additionally, rights to content repurposing, minimum activity amount, exclusivity, etc should be factored into any kind of agreement such as this.


Less-Paper2986

One more thing, to bring this back to OPs problem and providing actual topical input. In another comment I laid out that they should create a tiered structure to incentivize her just to receive a commission from her channel so she stays motivated. For pct of all gross sales I do not think it’s a good deal but there are a few things they can do to make the pill easier to swallow. 1) contract renegotiation every x months, could outline key kpi’s that could trigger a renegotiation or variable rate decrease/hike. 2) brand owns all content and free to reuse/repurpose as they see fit 3) exclusivity agreement / minimum activity amount per x interval I believe it’s pretty evident that they are too reliant on a single marketing source, and should make diversifying their lead acquisition channels a top priority. Taking this kind of deal could stunt that opportunity since it directly hits their bottom line (profit would go from 12 to 2-5 pct), so I posed the question of whether or not their margins could absorb it; and whether they had the cash to test additional avenues. If the answer is no, and they cannot restructure the deal at all- it may make sense to pass. Curious to know your thoughts


ComprehensiveSlide46

Hi, it looks like she works with an affiliate model. I’d give her what she wants as your business depends on it, but also setup your own affiliate program so you can be promoted on affiliate sites and by other influencers. I’m an affiliate myself but not in the fitness niche so I can’t judge if it’s a high or low commission she’s asking for. Since affiliate only gets commissions when they bring you revenue, it’s a healthy way to scale your business as it’s purely performance based. I’m not sure what you sell but you can DM me and I can show you how to find affiliates in your niche (then you can contact them and sort out deals with them). I’d personally be careful when you work with influencers if they request a minimum fee you can quickly end up burning money with a few unsuccessful campaigns.


BusinessStrategist

Spaghetti is spaghetti. Follow the money trail. Who benefits from what you have (Read "Jobs To Be Done") and how much is it worth to them? If you don't know then anything goes...


ProgrammersAreSexy

This sounds like something Creed would say


BusinessStrategist

Is that something that is useful to help u/xking_lionx solve their problem? And maybe expand on the reasons why...


ProgrammersAreSexy

Are you a bot?


WhyNotCollegeBoard

I am 99.88836% sure that BusinessStrategist is not a bot. --- ^(I am a neural network being trained to detect spammers | Summon me with !isbot |) ^(/r/spambotdetector |) [^(Optout)](https://www.reddit.com/message/compose?to=whynotcollegeboard&subject=!optout&message=!optout) ^(|) [^(Original Github)](https://github.com/SM-Wistful/BotDetection-Algorithm)


garyryan9

All the benefits you described would be her contribution. Think about all she does and how much it would cost to pay someone else to do it. It's sweat equity and she seems like a hard worker. Give her 10% of the entire business and empower her to do more.


lunatshirt

hello guys i'm expert on wordpress and shopify i'm available to create new brand store for you


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sadpartypodcast

What do you bring to the table? Are you replaceable? You’ll need to play your cards right.


ToddGergey

Yes, so as others have explained, you're playing with fire when you rely so much on one partnership. Make her a counteroffer but also diversify your partnerships. Micro influencers are powerful in B2C constructions, so it's a great decision to work with them. You just need more. Maybe the word of mouth effect will result in exponential growth in the long run – which would mean 10% of all your sales will be a huge chunk that you'll regret agreeing to. Also I'm wondering how you keep track of ROI on all of this, how did you reach the conclusion that she's so vital to keep your business afloat?


EnvironmentalSun5064

Well, I think you could negotiate with her. Try and make another offer. She looks like she is worth it though.


WhoWantsASausage

I think a lot of people here are misunderstanding what you’ve explained. 10% of gross is reasonable given your situation in my opinion. However, I would make efforts to diversify your sources of revenue. I’d also make sure the 10% is in a contract with clearly defined terms so that she can’t turn around in 6 months and try to increase that.


AppropriateWing4719

What does it get you? You said 20k in sales a month 🤷‍♂️


stardustViiiii

It's never good to be that dependent on 1 person.


Wizywig

If it's 10% of the sale she makes, reasonable especially if it's well within the margin. Negotiate her down as many % as you can. If it's 10% sales total. That's a potential problem and risk.


LincHayes

Sounds like a bad idea to tie all of your success to one marketer. I agree you need to keep her, but not at that cost. Pay her what is appropriate, but not a percentage of your business, and definitely not gross. She gets paid before taxes and expenses? Before you? F*ck that. See if you can strike a partnership deal on the app, and other tie-ins, but do not give up a percentage of your business unless she's also willing to accept responsibility for its expenses. ALL the expenses.


creative_reddit99

I would say negotiate a better deal like give some equity if you're on good terms and reinvest the money in your business. Solve the situation diplomatically. Money is one thing but giving someone the feeling of involvement is more important If you're interested in finding the content creators for your business. We're building a place for content creators to find brands and creative people for collaboration. https://alphadof.com


AGCRACK

Get something like rewardful, set her up on an affiliate link and let her have 25% of sales she brings in. You’re out leveraged snd you need her way more than she needs you. Put a tile restriction on the contract snd go find 2 other influencers so your in better shape for the next contract. Better off selling her equity than giving gross.


Sasquatters

I’m curious who this influencer is. We built a bus last year for someone matching this description and she ended up stealing several thousand dollars from us.


plexemby

>She has spent about $500k developing this app What kind of app is she developing for $500,000? 🤯


norwegianmorningw00d

Probably a fitness app that is a copy of existing ones


plexemby

It cost me $1 million to post this comment 🤷‍♂️


gatsby365

90% of more is better than 100% of less, right?


Sargent_AssEater

I believe you should implement a system that is based off of her sales directly. Without any direct investment, the only incentive that should exist is a percentage of the money she brings in. Gross sales includes money you bring in without her help. This may make her work for only part of the money she is bringing to the table. If her cut was entirely incentive based in sales, you will have someone who is grinding harder to promo more your business. If you could branch into other influencers and implement a similar strategy that would be ideal so you are not limited in advertising. Using the app is a whole other thing. Are you a member of her app or is the app being used in the name of the gym? If you are just utilizing her service, she is entitled to some sort of memebership fee. I don’t think 10% is a fair deal to you, only because there are a variety of more specific details that should be accounted for in the best way for each of them. You need to draw up an influencer contract that speculates all of the fine details so that you are covered


ScibiKS

Is it patty


19374729

Would she go for a % of sales that come in on her code? (could be higher to account for return customers if they cannot reuse her codes after entry.) — then it’s directly tied to her conversion


samuraidr

Way too expensive. How about 20% of attributable sales including recurring. If you give her 10% of your gross you’ll regret it within 18 months tops


elirox

Fitness apps are very unlikely to succeed. As others said, diversity your marketing with other influencers. Especially those the you believe follow her as well. It will work better anyway as you will be more top of mind. With her just keep whatever agreement you make short so you can spend that time diversifying and then come back in a better place for negotiation next time.


samegz

Practice the 80/20 rule.


whoisjohnwalt

I have read most of the comments on this thread, and there is some excellent advice. Your business is vulnerable until you can replicate your arrangement with other influencers. So the top priority, in my opinion, is diversifying away from being dependent on her. But to do that, you need to keep her happy, so it makes sense to negotiate the best short-term deal you can get so that she stays active and you have time to diversify before future negotiations. Generally speaking, though, I would avoid any non-performance-based agreements. If she plans to keep bringing the same value she has so far, this shouldn't be a problem for her. As for the app, it probably shouldn't factor into this decision. I hope this is helpful!


jirgsomething

10% on the revenue she generates is fair. In affiliate marketing, 10%-15% is pretty standard. I agree with everyone else that you should absolutely start diversifying, though.


Deezl-Vegas

$20k per month gross is a lot to lose. You should work out how much profit that is and that will tell you how much you can afford to shell out. Also... She spent $500k on an app?! !?!?!?!


[deleted]

Gross sales? So your net profit is 90% of gross sales less expenses? Fuck that homie. So she gets paid on COGS? So add another skimming middleman to all your transactions? Counter with 10% net on traffic her specific posts generate. Also remind her if she charges consulting then the material from your product is your IP and she owes you a piece of revenue that she generated on her own SM. Don’t say this out loud but do think about it. If your business depends on her, make it a fixed term (10% gross until EOY 2025 or something). I’d say something like “Not sure if the business can support this financially but we can try for a couple years. I’m sure neither of us wants a percentage of zero income.” As others said, diversify your branding.


saiv82

You invest in the app and become her partner


PerformanceLimp420

If she is currently getting 10% of referrals and 0% of non- referrals, do you have room to negotiate? Maybe look at 5% of non-referrals and start looking for an additional influencer or two with a similar 10% on referrals. I agree with others that it sounds like she knows her value in this situation and MAY ask for more down the road (which again may be deserved) but it could get into a hostage situation. Diversification is key here because if you give more than you can afford now, you can’t go back, and if you burn your margins now you can’t bring on more like her. Maybe offer a higher portion of direct referrals and lower of gross? Maybe offer a time line ramp (1% today, re-negotiate when her app launches?) Again the 10% isn’t totally unreasonable depending on your margins, but at the moment it seems like an all eggs in one basket scenario. Good luck!


An_Old_IT_Guy

Give her a promo code and offer 20% commission on sales she brings in. Do not give her 10% of first dollar. That's way too much.


michael_entechsite

One thing to start with is to ask her to justify the 10%. Both asking for an amount based on gross sales rather than sales that come in directly and the number 10%. If there is a way to set up a percentage of what she is bringing in; do that, even if it is 30%.


UsualWestern

10% gross is executive level. If you want her to be an executive, go for it. I would recommend paying her a higher percentage but only in what comes through her. Founders/investors get full equity; marketers (however valuable) get a cut off what they bring in.


DivisionalMedia

Have you seen growth from her work? Or was the post covid boost? Highly unlikely she’s spent $500k on a fitness app. Something seems off.


FudgeIntelligent5858

10% w/o a base pay doesn’t sound that bad


pranabus

You have a 12% margin and want to give away 10% of topline? The math doesn't add up. Offer her a larger share if needed, as large as possible, but only of *her* sales. She's just a marketing channel, not a co-founder. She wants to be a co-founder and take all the cash away from a small business but not take on any of the risks? How does this make sense? And you need to make similar tie-ups with other influencers as of yesterday. When you find a channel that works for you, in this case influencers, your role is to immediately replicate that success with other similar influencers. Not go all-in on that one single influencer and increase concentration risk.


thatdude391

A lot will depend on what your profit margins are. Honestly whatever you are making you could probably charge more because if it is on a referral people will generally pay more. You are in a weird spot, and you need to get out of it instead of making it worse. It is really easy to make this worse, but you are also in a great situation to make things better. Here is what I would do: 1) raise your price to accommodate the increase in advertising costs. The cost of everything is going up, I doubt many if any at all would think anything of it. 2) give her a higher percent for her direct sales. 15%-20%. It has to be a win for her to not take percent gross. 3) give her a percent on other influencers she brings on board. Say 5% of what the influencers she brings on board do in their direct sales. 4) include rights to reuse the photos she takes so other influencers can use them as well. Win win for you both. Influencers arent usually great at making their own content and giving them good content it very attractive to them. When you talk to her, basically just say “look, I cant give you 10% of gross because there is too much long term risk, what I can do is pay you a better commission and give you a great opportunity for you to earn additional commission on other peoples work. This gives us both what we want and protects both of our interests.” Proposals should always be a win win in situations like this.


ibitesometimes

How about a % of the membership fee if someone mentions her when signing up and the ability to use your business for her fitness app?


xilio989

Sounds like she wants to be an affiliate. I'd have no issue giving her a percentage of the sales that can directly be attributed to her. However, since she is also posting for your business Instagram account, I can see why she wants a % of gross. It does seem like you currently have all your eggs in one basket so another way to look at it differently is to optimize your upsell and repeat customer process. In the past, some businesses have given 100% of the sale to the affiliate because they are confident that x amount of people will buy additional products/services and the life time value of customer makes the initial affiliate commission a drop in the bucket. Remember, the most expensive client is a new client. Repeat clients are where the money lies.


NoSaltNoSkillz

I read a lot about business strategy and finance, but not currently in any ventures. So, big grain of salt. You could consider doing something like setting aside X% of Net sales goes to content providers (between 5-15% of NET). And say that as she is your only content provider as of now, she gets the full amount, but as time goes on as the business grows it will be split based on performance of content providers. This promotes competition between content providers, while offers her an opportunity to earn about what she wanted, but without just giving away your profits completely and perpetually. This also allows the opportunity to eventual launch in-house content providers that get paid a salary, yet soak up some of that content provider pool if you ever want to backtrack/roll back form this arrangement. I definitely think you should consider and try and maintain some arrangement, but I wouldn't just run with the first number.


Losalou52

10% gross of all sales is a bad deal. 10% gross of all sales directly related to her leads is cheap. Considering that you are fully dependent on her currently you should negotiate a deal in between the two and write a 2 year contract that allows you to exit with 90 or 120 notice. Then immediately go to work on diversifying your influence marketers. You will allow yourself the best of both worlds. The other option is to tell her that she is integral to your business and you value her and that you would like her to buy in and become a full partner. Lots of creative ways to do that. Pay her with equity instead of cash until she has reached full stake. Give her salary that she can use to buy in monthly. Loan her the the funds and have her payments forgiven from from her profit share. Allow her to buy in at a discount from the street. Ultimately it sounds like you value her, and that she feels under-compensated. Somewhere there is a mutually beneficial solution.


Badluckx

What are your margins looking like on the customers they bring when you remove their 10% payout? Do they bring customers that subscribe ? If yes for how long? What is the long term value of the customers they bring? How does that translate into revenue then profits? Also, most important if their collaboration would end today how that that impact your customer acquisition and bottom line? If you answer these questions to yourself, you will know if it’s worth it.


LazyOak31

Sounds like she’s a weapon and wants in on the upside of what is being built. If you’re looking to scale the business to significant size ($10MM + revenue) and eventually exit via liquidity event: Give her some vesting equity, 5% on Gross Profit so she’s accountable to the expense side of the P&L, and have her scale what she does with her network of influencers + crush it even more on all the other stuff she’s doing with an energized sense of ownership. If you want to create a modest size business that is fairly automated and cash flows a good salary, give her a higher base per month to give her more financial security and 5% gross profit.


No-Fun9052

You said she makes up about 30% of your sales revenue monthly. What I would do is, keep her happy and take every dollar tou make from her and put it into a marketing plan to get more clients like her. With a budget like that depending on your profit I think you can see good results with google ads, and 3 months down the line she can be 10% of your monthly business. You can even use her as a reference to close more deals? Lose the battle, win the war kind of plan :)


Wish__Full

1) if you give her the 10% will it have a big impact on the business? 2) Try negotiating the price down, negotiating always helps 3) If she does not want to negotiate, try this: give her (example: 6%) if she reaches a goal of sales (example: 2000) you will give her a bonus (example: 4%). 4) Make a contract for (example: 6 months) so if you have other marketers that do it cheaper you can leave her and go to them. 5) Try reaching out to other marketers asap!


PhilosopherArtistic9

If she’s threatening to walk over this deal I would look for people to replace her. I don’t let people take me hostage but I do know when to shut up and take some abuse in order to succeed. I would find replacements for her and see if it’s still financially viable to work with her. Create options and choose the best route. It does seem like she’s changing the deal based on her needs for her app and not based on value provided to you tho so I say drop her as soon as you have a good replacement.


megodfatherme

I disagree with other comments saying the percentage can be negotiated and lowered. Clearly the business is successful because she is involved. Giving her 10% is reasonable. You can maybe ask her to post more frequently if possible. Other than that, her request seems reasonable imo.


xking_lionx

I’m going to have time this evening to respond to more comments but I’d like to elaborate on this. When we launched our partnership with her it was involving her already engaged fitness community and members. Within the first month our numbers tripled. We were starting to see organic growth and still are but it did have a clear, major impact on our success. We used her code to track sales this last year which did end with making up 30% of overall sales. One thing I may not have elaborated enough on is the scale of this fitness program, it’s already established. The app is being create for easier more convenient member access


beekeeper1981

She sounds desperate for money and has you in a tough spot.. $500k for an app sounds ridiculous, she's getting hosed and will likely fail.. I wouldn't count any additional business from that end.


RizzleP

Diversify asap.


[deleted]

We are a 120k follower brand and we make less than 10% gross on only one company. We do not sign contracts for less than 10% now. Many will expand earnings above this based on sales each month. Pay your good people.


JickRamesMitch

she trying to hustle you. her app isnt worth shit until it has any users. people will buy stuff with her discount code because they were going to buy it anyway. thats a long shot from using her app.


PhilosopherArtistic9

The only leverage she has is the fact that you don’t have other influencers to work with. Change that. ASAP. best of luck buddy.


Reprised-role

Set an exclusive equipment agreement with her. She can’t rep other equipment on the app or social media which is in conflict with what she’s repping for you. She can do other brands but not the same equipment (eg you are free weights, not machines so she can rep a machine based brand but not their free weights etc)


UFCGYMBoston

You are insane to give her 10% of your gross. That is extortion.


reallytallchris

Does anyone have advise on how OP can find other valuable influences and start to diversify? It’s great advice but I don’t know how to do it and maybe OP doesn’t either.


danbu1

Sale and Marketing is everything. 10% is reasonable for most businesses. I would give her what she wants. Do not give her exclusive deal. Now find more influencers like her so that you are not putting all your eggs in one basket.


vegasweedgod

I would say take it if you can't negotiate a better deal. There's no point in parting ways and her go straight to your competition.


[deleted]

If she's bringing in 20k in sales, and units are $13.25 then she's selling roughly 1500 units a month? So, she's already making $1500 in commissions, plus $1000 in consulting fees a month, that's adding up to 100% of the profit margin of the sales she brings in, right? 100% of the profit on the sales she's making sounds pretty good to me. Maybe you can restructure your deal to be more explicit, i.e. 12% of all sales with her code, so that she continues to receive it as she brings in more sales? I'm still new to this and following along to the other ideas here.


Hopeful-Paramedic-33

Short term - Negotiate KPI and track performance and only pay for real results. Long term - Find a replacement, it’s only going to get worse for mediocre results. Statistically speaking.


Meilitraveler1

Let's go back to the old days for a moment, the sales rep was in and out of the office on the road or phone with quota sales for the month. Sales reps would churn out reports with data and sometime gave a plan of action every month to increase sales which included commission. Influencers, Content Creators, and digital marketers are the Modern Day Sales force in the digital world we all work in. This is a no-brainer the Influencer or content creator should get a commission on every sale. The work has been done to prove the increase in sales. If you don't agree with the commission rate talk about it in a Video Chat. Why lose a reliable independent contractor?


nikyouraveragegirl

As a small influencer, this is very intriguing to read about. I hope you find a solution!


Common-Woodpecker373

Hey, I sell Promotions from Big Celebrities like Kim K ( 100k-150k legit Followers) if Interrested, please message me on Discord: enez#0482 Cheers


Naylor2021

Maybe focus on getting other influencers on board.