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Is this a good referral fee? - Page 3

post #31 of 39
8/24/12 at 10:02pm
Thread Starter 
Thanks Jason. I truly appreciate the time and thought you put into this topic. I value your insight and opinion. Take care!
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post #32 of 39
8/24/12 at 10:06pm
If you are at 26% before overhead, that will probably put your true net margin below 20% (with a low volume you will have relatively high overhead allocation per order). That low a net margin means a max 0% referral percentage, especially given the dubious value of this partnership.
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post #33 of 39
8/24/12 at 11:03pm
Just my thoughts: The majority of the referrals that you're going to get from this arrangement will probably be kid's birthday parties because of the other parents at the parties. But I'd think that most of them would be more inclined to use the entire party planning service as opposed to just the cake that was at the party. Also, typically these same parents are not going to be planning more expensive events such as weddings/bridal showers/etc. since they already have kids (just in general it tends to be marriage then kids, although I know plenty of people that went in the opposite order, so I'm not judging, just pointing out the "norm").

I think if you want to give the arrangement a try I'd go for the 10% referral fee for the party planner and make sure you've got the specific details in writing so there are no miscommunications. I also think that the previous suggestion of having a couple designs for each theme for the customer to pick from may be beneficial because it would save you time (and therefore money) by not having so much back and forth between you and the customer on the details of the cake.
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post #34 of 39
8/25/12 at 7:57am
Thread Starter 
Yes, that's what she was wanting - set designs for each theme so that it's already decided and coordinated. Also, I've been thinking about starting at 10% and telling her that if I get a certain number of referrals through her, we might raise it to 15%. But I think 20 is too much to start.
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post #35 of 39
8/25/12 at 8:23am
I would personally go for 10% referrral fee and a 3-6 month trial contract.

You need to see how she does the rest of her party planning before you commit to anything more than that. I would also offer a very simple choice of cakes and I would make up a one page flyer showing exactly what the cake options are. These should be given to the party customers so they know up front what they will get.

The issue that I can foresee is that some mother will think that she should get a 3 tier Disney 3D cake for her little one year old princess, and there will be screaming on Facebook after she sees the one layer cake at the fair and reasonable price. That's bad for business all around. So make sure the party-plan Facebook page does NOT name you.

After the trial period, your best guide to whether you continue the contract is how the party planner accepts feedback about her problem parties.
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post #36 of 39
8/25/12 at 8:29am
There's also the copyright issue here...chances are most of the parties will center around copyrighted characters, so be sure the party planner understands that you cannot legally create edible characters on the cake (licensed toppers only) and sets expectations accordingly.

Given your relatively low margins for a home-based business I would start by raising your prices across the board, then propose a 50/50 split for the commission where she would get 5% of the cake price and include a 5% surcharge somewhere else in the party package. If you raise your prices by 5%, this would give her a 10% commission without impacting your margin.
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post #37 of 39
8/25/12 at 8:39am
Thread Starter 
Jason - She's got copyright issues covered, ie. "Missy Mouse" instead of Minnie Mouse... high quality costumes, but the design is slightly altered. The same would go for the cake designs. I think your idea of splitting it with 5% on each side is great - I hadn't thought of that. My business is still somewhat in the early stages (I have been decorating for 16 years, but only started a business within the last year - small overhead is the only reason I can even consider this, but I really do understand your concern nonetheless).

BakingIrene - Your trial idea is something I have been throwing around in my head, but without specific ideas on numbers.... I like what you're thinking there. I know she does not plan to name me on her website, and I would imagine the same would go for any online forum she uses, but I will make sure this is in the contract. Thanks for the input.
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post #38 of 39
8/25/12 at 8:50am
Quote:
Originally Posted by glanduners

Jason - She's got copyright issues covered, ie. "Missy Mouse" instead of Minnie Mouse... high quality costumes, but the design is slightly altered. The same would go for the cake designs.


If that's her solution, she most definitely does not have copyright issues covered. Anything still recognizable as Minnie Mouse would be infringement, even if there were cursory changes.
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post #39 of 39
8/25/12 at 3:47pm
Thread Starter 
I haven't asked her about copyright, so I don't know if she has something else in place to protect against that. I will put that on my list of concerns to address.
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