Dear Preston: How Do I Get My Money?
January 24, 2012
On your blog you’ve written a lot about the importance of planners not accepting commissions. However, I’m a planner, and my payment model is mostly commission-based. I charge my clients a minimal fee with the understanding that I’ll be collecting a 20% fee from the vendors. To make things easy, I also ask my clients to pay the vendors directly. My problem is that I have a difficult time getting the vendors to pay me my commissions. What should I do?
Dear Distressed Planner,
You’re right; I have written a lot about this topic, and it’s something I feel strongly about. Yet, I want to be very clear: As long as your clients know what you are doing, I don’t think there is anything wrong with accepting commissions. It sounds like you’re very upfront with your clients. Good for you. However, I was surprised by the percentage you quoted. 20%? Forgive me if I’m out of touch, but I thought most commissions were either 10% or 15%. No wonder vendors are resisting payment! Even assuming they agreed to 20% , that’s still a big dent in their profits!
With regards to your question, though, my answer is very simple: Collect ALL payments directly from your clients. Keep your 20% and then pay your vendors. Just be sure to pay your vendors the moment you get paid.
Now, for all you vendors out there, I know you need jobs, but if you’re giving away 20% of your profit, you’re headed toward some serious financial problems. Trust me; I know. I’ve been there.
Dear Readers, am I totally clueless? Is 20% commission standard these days? That seems awfully high. Please enlighten me! What’s the going rate?