Revenue Sharing As Payment
There are two types of revenue sharing for freelancers and other people who work in entrepreneurial areas:
- Revenue sharing in lieu of payment
- Revenue sharing in addition to payment
A lot of people get confused, and the whole area is a landmine. Let’s talk about the good and bad of revenue sharing.
Firstly…
Most people who offer you revenue sharing are stupid and the reason they’re offering you a share of the revenue is because they’re convinced that they have a super idea but they can’t pay you because they have no money.
These are the nightmare clients, the timewasters and the people who are looking for you to be their lapdog as well as ultimate architect of their success.
As an example, I had one guy once who had seen my niche site articles. They emailed me saying that we should “work together” on building a niche site.
This basically amounted to:
- They gave me the idea for the niche
- I researched the topics to write
- I then wrote the topics
- They “built the brand” on social media and it’s all under their brand name
- We split the profits evenly
Now… you have to understand that this is a terrible deal. Ideas aren’t worth all that much and I had no incentive whatsoever to do this. But that doesn’t matter to the people who think that their ideas are brilliant.
Most people aren’t involved in business, and to them, ideas are amazing, magical things that just bounce into reality.
These are the majority of people who want to “split the profits” with you, and you should ignore them. Even when they get upset at you for suggesting that you’ve got a bad deal.
Check this out for a good example I found the other day:
The Other Type Of Revenue Share…
Oftentimes, you’ll hear copywriters, me included, who say that copywriters should work for a commission.
This isn’t the same as the above. This is where you’re providing a lot of demonstrable value to a client who is established and can see where your value comes from.
Let’s say you get paid $5,000 for a sales letter for an affiliate marketer. They have a list of 80,000 subscribers. Your sales letters get a conversion rate of 5%.
That’s 4,000 sales. Providing the item costs more than about $2, they’re making a hefty profit on hiring you.
If the item costs $100, then they’re making $400,000 from your sales letter.
You should probably get more than $5,000.
Rather than pay you a huge sum for a campaign that might underperform, you might agree to work for your base fee plus a small percentage. (Typically 1-5%.)
Then, you get the $5000 and if your sales letter overperforms, everyone wins.
You’re the happy writer, your client is happy.
This is a completely different scenario to the above one.
How To Tell And What To Do?
If you want to take a revenue share, then your skills need to be high. You need to have demonstrable value.
You should do this with clients who you have a baseline of experience with. They should have a platform that makes it worth it and margins that make it worth it. (i.e. you shouldn’t ask for ten percent of profits when you know that the companies profit margins are 2%.)
In general, you shouldn’t ever accept revenue as an alternative to actual money. You should still charge your base fee, although you can lower it. I’ve found that lowering it to zero is a bad idea. Your experience might vary, and I’m not your mum.
On the flip side… don’t take revenue share from a “start-up” with no budget.
This isn’t just for the sake of protecting your own time, wallet and self-esteem (although those are top reasons) but run the math.
If you have a person hiring you for freelance work who cannot afford to pay you, then how exactly are they going to pay for everything else?
Say you write a sales letter… if they can’t afford your base fee, then they almost certainly can’t afford to run ads 24/7 eating into the budget that they don’t have.
This means the project won’t succeed and you’ll leave with nothing.
The Sad Reality…
The sad reality is that we have a complete lack of business education. Add to that that the internet has added a lack of a barrier to entry and a whole bunch of dream peddlers, what you get is a bunch of people who are doomed to fail at business.
On this site, I’m trying to rectify that, but I’m not exactly Superman.
In general though, you need to say “no” to these people. It’s always best to be polite, and you can explain all of the above, but you probably shouldn’t.
Also, for the new freelancers among you, it’s important to note that you don’t have to justify your actions. You don’t have to work for anyone and you certainly don’t have to work for free.
Put “exposure” out of your vocabulary. Forget the possibilities. Forget the fact that some dude will seethe at you because he’s turned you into the reason he’s not the next Zuckerberg.
Say “no” or you’ll learn the hard way… and you don’t want that.