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I'm not sure if this is the best group to post this discussion, so please offer any suggestions.

Anyway, I was wondering about different models of compensation for web design services. The most obvious ones are flat-fee and hourly rate, but has anyone ever heard of something like a commission-based compensation? For example, instead of charging a flat fee or hourly rate for an e-commerce site, I would charge a percentage of the revenue from each product sold.

I've never heard of it, but have considered offering it as an option for projects where I'm willing to take a risk since I see greater financial potential.

Any thoughts? (Also, if this is the wrong group for this discusssion, please let me know)

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Yes, I've thought of that. My previous employer was discussing something like that with the ecommerce site I built there. I think it has some merit and could really be a win-win. The customer wins because neither of you are counting hours. You win because you should gain more autonomy and you can commit to the site on an ongoing attention needed basis always improving SEO and applying new ideas to bring both of you value. WIN-WIN.

On a side note, check out jonathanstark.com and expensiveproblem.com he is a real giver and author of Hourly Billing is Nuts.

Thanks, I'll check those links out!

In software outsourcing, graphic design, and web design, this is called a "revenue sharing" model. I do this occasionally with my company. Some things you need to look out for are the structure of the revenue sharing, the length of term, the ongoing maintenance, and contract termination. But, the biggest problem is making sure that your client will be able to make money. Smaller organizations and entrepreneurs may leave you without getting paid because they "hoped" they would be making money. It becomes really difficult if their accounting books are not open for you to inspect.

Yeah, looking at the books might not be likely with all clients. It's a relationship that would have to be built on trust. I have one client that I trust enough to ask. What would be a reasonable amount for a company bringing in about $5K-$10K monthly? Should I just take the average spent per year and translate it into a percentage of revenue?

I've been reading Dan's No More Dreaded Mondays and it's stirring up a lot of new ideas about how to get compensated. One of my biggest hurdles with some clients is that I discover something's wrong that takes longer to fix. I then feel like I can't fix or improve things because they'll have to pay for it, but if there was a way to change my compensation model, I'd love to do more web development work.

$5 to 10K...Maybe they can't afford you. but like Michael said the importance is on building trust and really providing value. If you're not on the same team, it is WIN - LOSE not WIN WIN! I like to look at 10% of my direct value (guided by Jonathan Starks instructions). If what I provide gives a value of $100,000 this year, I should collect $10,000 for the job and my direct costs and time should be $1-2,000 in my old hourly thinking. I get a 10x value, my client gets a 10x value. So translating this to ongoing revenue sharing maybe it is 20x for them since it is based on perpetuity unless you put an end date on it. This is fun to think about.


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