If you are in sales, you are in one of two groups. The first is made up of salespeople who got screwed out of a commission. The second group is made up of salespeople who haven’t got screwed yet.
For those of us who work in the service industry, we really only have two commodities: 1) our time and 2) our knowledge. Some professions such as accountants, attorneys, consultants, etc. bill hourly. Other professions only get paid if a successful transaction occurs, such as car sales and my profession, real estate. And of course there are hybrids that compensate via a salary / commission structure combination.
In any case, if you are putting in the time and sharing your knowledge, you expect to be compensated. To help ensure getting paid, most people in service industries utilize a letter of engagement, or an exclusive representation agreement. This is a letter that describes the terms of the services you will provide and the method in which you will be paid.
As a commercial real estate broker, my guestimate is that only about half of the clients I work for on the tenant side sign a letter of engagement. Many business owners hate to commit to just one provider and they seem to want the option to change horses whenever they want. But when I list a property for sale or lease, I always get an exclusive listing agreement. If I can’t, I always walk away.
Yesterday was a tough day…I have been “working” for a client for over 4 years, spending countless hours on reports and doing tons of dirty work for them without pay for the chance to work on negotiating their next deal. This client did not want to sign a letter of engagement but promised that I was their guy and they wouldn’t think of using anyone else. Well, yesterday I got a call telling me that the client was going to take all of my “free” advice and do the deal himself. Ouch…big ouch. Not only did I lose out on a commission but the number of hours I spent on this surely cost me lots of other new business I would have found.
My advice, of course, is to get it in writing. But sometimes you have to take a chance and work without a net. As sad as the above story is, I just completed one of the biggest deals of my career in almost similar circumstances. I worked for this firm for 3 years without an engagement letter. If I had insisted on getting an exclusive with them, I would have lost the account. How do I know this? They told me!
Some people have a golden gut and they just know what deals are going to work out. I think my gut is bronze at best. I win some and I lose some.
Here is how I ask for a letter of exclusivity: “We work on an exclusive basis. We think it is better to compete buildings rather than compete brokers. This will allow us to commit our total resources to your important task. “
Did you know that one of the professions who get shorted all the time is the legal profession? That is why smart attorneys ask for a retainer upfront for new clients.
Character means everything and if I have questions about someone I am working for, I do a couple of things:
- Look for trouble signs: response times slow down; language excuses for those English as a 2nd language clients; their story changes dramatically.
- Start taking good notes. If you are the procuring cause for a sale, you may have a legal case. 2012 was the most contentious of my career. I won a small claims court, sued and settled out of court in another, won a third commission by threatening a suit, won a commission dispute through arbitration and was awarded a partial commission from a contentious client. Before last year I never had to litigate. But one key to my successes was that every time I sensed something going wrong, I documented it.
- Cut your losses early. 99% of clients are wonderful. But watch out for the 1%. Learning to move on early is tough for new salespeople. But trust me: there are better days ahead. It’s ok to fire a client.
It’s better to work with a net than without one. Good luck out there.
Image courtesy of Stuck in Customs