Profit sharing is not applicable to every business. It depends on the nature, size, and financial capacity of the business who plan to partner up with each other.
We at Miami Marketer had already tried this kind of business relationship and has learned the advantages and disadvantages of sharing of profits or commission with other companies.
Unfortunately, we are no longer interested in profit sharing / commission.
BUT WE DO MAKE AN EXCEPTION TO OUR RULES.
If you are a business that has proven to sell and has a easy to track sales process, we have full access to the sales and payment history for a minimum of 12 months.
We can incorporate Zapier into your process to send future data over to a trackable google sheet. We have a well-maintained, effective system.
But for today In this article, we will discuss first our reasons why the profit-sharing type of relationship will not be good for your company in the long run. Read on.
1) Accounting and Reporting
A significant amount of time will be devoted to accounting and reporting when partnerships close deals and final prices when profit-sharing is involved.
If this is not well thought and a system is inefficient to define how both sides should have a fair share of gathering and retrieving information, then there will be a greater possibility of erroneous reports which in turn cause misunderstanding and doubt on each other’s partner’s ethics.
2) No Bottom Line Sales Data
One of the most difficult things to figure out for businesses indulged with profit sharing is that there is no bottom line data on sales numbers and the business closed.
It might be difficult for you too.
You can, however, track leads generated by relying on your partner company for an accurate report and record the bottom line sales data used to make this process work.
But this requires monthly audits by an unbiased third party accountant or a bookkeeper which will also have an extra cost for you.
There will also be a bit of legal assistance to determine specific details of both split sharing and profit agreement for both parties should be defined. It’s quite a hassle.
3) Loss of Focus
In business, there is a chance that the emphasis will be focused on the elements of a business partnership that generates immediate ROI.
However, these relationships are established to pursue longer collaboration on innovation and pursue longer-term goals.
When there is an immediate need for revenue shares or existing products on services, the company may lose its focus on the intended longer-term goals of doing business.
4) Lead Attribution Results
Some businesses use Google PPC and other campaign ads for their online marketing that give them direct response.
However, there are still many leads and new client acquisition that takes a lot of effort to track and attribute.
Picture this, a customer sees your print ads, then instead of calling your company, performed a Google search.
How is the lead attribute going to work that way?
Some customers will still go to Google with information about your business, and the lead data may show that it came from “organic search” from a visitor. It will really be that difficult to track the results.
Your printed ads or other marketing campaign and messages may touch or catch the interest of your customer, but attributing leads is more unlikely to be an exact outcome that may result in numerous issues and potential disagreements between you and your partner company.
5. Lack of Service or Product Control
One of the best reasons for us not to engage with profit-sharing is the fact that there will be a conflict for lack of control over the strategies and services.
For example, some of our Facebook ad campaigns for clients have generated over large numbers of new customers in just a month.
Some of our works have shown exponential growth through basic SEO application.
Sadly, but thankful we also learned in the process, there are some campaigns performed with lackluster results while others were done even if at first we know it’s impossible for the business to skyrocket.
This is just one of the instances that no agency or company who is engaged with other businesses can guarantee that profit sharing will produce enough results and ROI unless they have full control over the service, staff management and the product that being sold.
The point of all of this is that the success of your products or services is determined on the value and relevance it provides and also a comparable value of price offering with a similar value.
There are many pros and cons of using profit sharing as a revenue share as this is part of any business partnership.
However, as long as both businesses clearly had an agreement and understanding on what profit and commission are included in the relationship for each to follow then the thing will work out well.
Again, we’ll reiterate that we are not interested in profit sharing.
But if you are running a business that has proven to sell and has an easy to track sales process, we would like to offer you our full access to the sales and payment history for a minimum of 12 months.
We will be incorporating Zapier into your system to send future data over to a trackable google sheet.
That way, we can guarantee a success that will benefit the both of us.