At what stage of the process should you discuss commissions with the supplier?
Initially, you will talk to the supplier about the product and the price and the terms of payment etc.
You will relay all of this back to the buyer and then if the buyer has additional requests for pictures, certificates etc, you will go back to the supplier and ask for these things.
This way, you will be liaising between the buyer and the supplier without disclosing any name/contact information of one party to the other.
If you do have to pass a document such as a LOI to the supplier, or pass the SCO from the supplier to the buyer, you can simply blur the contact information before you pass it on.
Alternatively, you can copy all the relevant info on to your own letterhead and pass that on.
At some early point in this process, the buyer will want to know the price.
So take the price from the supplier and add your commission on top and then quote that to the buyer.
Once he accepts the price, then now is the time you need to be crystal clear with the supplier regarding the commissions.
You will inform the supplier…
You have given me a price of $xxx and I have carefully calculated a commission for myself and my company to be added on top. So I have quoted the buyer $yyy. This means that my commission from you will be $zzz per ton.
If the buyer does negotiate the price with you, feel free to change the price but please keep my commission amount intact. Also remember to quote him my price in all communications.
I have already spoken with the buyer and he is happy with my price, so we may proceed with the deal.
Are you happy to sign an agreement for the transfer of commissions to my account after you have been paid by the buyer?
You may have just sprung the commission discussion on him suddenly but 99% of suppliers have no problem with paying commissions. They know that there are many agents in this game and it’s quite normal to be paying commissions to anyone who brings them a deal.
When you add your own commission on top of the supplier’s price, they don’t usually have a problem with that because it’s not their money.
However, if you ask for a commission from within their price, they may try to limit that to a certain percentage.
I always add my commission on top. That way, you have free reign to add as much as you want. It’s no skin off the supplier’s nose.
But sometimes, some suppliers don’t want you to add too much on top. It could be for a couple of reasons. Either they don’t want you making more money than them (sometimes they ask you to share that overprice with them – cheeky gits) and sometimes they don’t want the price to change too much in the market for some reason.
Whatever the reason, if they limit the commissions, I generally try to find another supplier who doesn’t have a big ego.
If your buyer is willing to pay a large price and you can comfortably fit your own commission in between his price and the supplier’s price, then I would generally take all of it (while giving a small discount to the buyer) and expect the supplier to be ok with that since it’s not part of his money.
When they try to dictate how much you can put on top, I really dislike that. However, sometimes you have to accept it when there aren’t many suitable suppliers around.
Amin