Compensation for Acquisitions

Compensation for Acquisitions

Beaverton, OR · Member since 2014 · 22 posts · 12 votes

I have a question about something that I'm trying to decide on, and I can't seem to find previously posted on any forums.  I have a couple of people that I've sort of brought on my team to help me out with finding and negotiating properties to buy or wholesale.  Without going into too much detail, they are each helping me out on specific niches or strategies that they are particularly suited for.  Both guys are valuable individuals who I will want to keep close to me for a long time I believe.  Neither are employees, they will essentially be acting as contractors for me.  When we successfully turn a deal into a profit in which one or the other specifically helped me with, I want to make sure I take care of them well enough to keep them interested in growing with me as my business grows.  

My questions is... how are you compensating people who help you out in this way?

I know that every situation is going to be unique depending on the needs, relationship, business structure, and other things, but I'd be very interested in hearing some examples of how people handle this or what they think this service is worth.  As of now, I'm thinking of a percentage of total profit at the end of whatever it is I do with it (flip or wholesale).  So far, they've been along for the ride based on trust that I will make it fair when it happens, and I haven't put any numbers out there, but they are comfortable with taking a percentage of the profit at the end.  I just don't want to go too far down the road before we have an understanding on this and risk a sour situation due to mutual mystification.

Thanks in advance for the help!

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  • OH · Member since 2015 · 34 posts · 8 votes
    10y

    I think it's important to lay out clear expectations as soon as possible.  That way everyone knows what their time is valued at and what they are working towards.  The enthusiasm can die down quickly.  I'm using my regular corporate career as a guide there, myself and my teams have done the best when expectations are clear, we know our goals, and we all know our roles.

    I would suggest a 50/50 split, especially if each contractor is doing their own work in their niche and finding motivated sellers.  If they are not spending their own money for lead generation (direct mail), then maybe a 70/30 split as a guess.  

    Hope that helps.

    -Brian

  • Beaverton, OR · Member since 2014 · 22 posts · 12 votes
    10y

    Thanks @Brian Stephens.  I totally agree about setting up clear expectations, goals, and roles.  I need to get this taken care of.  All of the money/investing is on me (business expenses, lead generation, etc.), as well as any other part of the business.  So pretty much all of their investment is time, which is very valuable.  So maybe somewhere in the range of the 80/20 to 70/30 split makes sense depending on their involvement level.  I really probably need to sit down and think out all the scenarios of different involvement levels they might have, then put numbers on those.  Or maybe another way to look at it is define their roles more specifically and put a number against that.  As you can tell I'm just thinking out loud here... I'll need to spend some more time thinking this one through.  Thanks again.

  • OH · Member since 2015 · 34 posts · 8 votes
    10y

    Sometimes thinking out loud helps get the ideas out and gets to a solution.  The point is that you are thinking through all of the possibilities.  I commend you for being conscious about it and thinking about your contractors.  It's the same way any manager/leader needs to think about their employees.  Put yourself in their shoes and think about what they would want to hear, and you are doing that.

    -Brian

  • Temecula, CA · Member since 2015 · 27 posts · 2 votes
    10y

    I'm new but if the people you work with might be considered the proximate cause of the deal happening I would say 50/50.  If they are doing leg work or research maybe 80/10. The discussion would be about what each will be responsible for.  Then the negotiation begins.  Remember win/win.  As I am new, if I made a couple thousand for helping I would be stoked.  If I know what I am doing and really help the deal move forward I would be more excited with more.:)  

    I will follow this topic to see what works out.

    Thank you for sharing.

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