Commissions vs. Kickbacks

Posted March 1, 2011

Pop Quiz:  What’s the fastest way to make a fight break out in a room full of event planners?

Answer:  Start a debate about whether commissions are good or bad.

Yesterday I delivered a rousing seminar at the Event Solutions Idea Factory / CaterSource conference in Las Vegas.  The topic was “Show Me the Money: How & How Much to Charge for Event Planning Services”.  Everything was going great.  Of the three tracks being offered during my time slot, I was given the big i-Room, and we had a packed crowd.

Even better, the i-Room had a confidence monitor!  A real confidence monitor!  How cool is that?!  [For those of you that don’t know, this is a flat screen tv placed at the foot of the stage, facing the speaker.  It displays whatever is on the screens behind you, so when you’re speaking you don’t have to keep turning around to see what slide is being shown.]  I’ve spoken quite a bit, and though I’d arranged for tons of clients to have these at their events, this was my first time using one, and I was like a kid in a candy store.

Anyway, I’m cruising through my presentation.  We’d covered flat fees, hourly fees, markups, % of budget fees, the whole transparency/value thing, and had arrived at the commission section.  As with all the other pricing models, I went through the pros, cons and pieces of advice on commissions, and was about to get into the section on how to calculate your rates.

Here’s the last thing I said before the audience put their gloves on and went at it: “The difference between a commission and a kickback is one word: disclosure.”  It’s almost as if you could have heard the presentation skid to a halt.  Then hands flew up with questions and comments.  Really most were comments, very passionate comments.

“I will not take commissions because I don’t want that to influence who I recommend!” one woman says.  You can bet that went over well with the commission-takers in the crowd.  A Jerry Springer episode was about to break out.

I reiterate a key tenet I’d mentioned earlier: “Integrity has nothing to do with it.  If someone discloses that they take commissions to their client and the client is ok with it, that’s all that matters.”

And I believe that.  It’s my ‘consenting adults’ theory.  If your client wants to be paid with a weekly supply of Shake Shack burgers (feel free to substitute whatever local food item people will wait on endless lines for), and you agree, what’s wrong with that?

Mind you, nobody seemed to have an issue with markups, which, like commissions, are part of what I call non-itemized fee structures.  There’s something about the commission topic that elicits strong feelings on both sides, like nothing I’ve ever seen.  I spoke the day before on Prospecting: Where to Find New Business & How to Land It, and there wasn’t anything even close to this kind of divisive issue that came up.

Again, my biggest takeaway was that people should disclose whatever pricing model they use, and if you don’t disclose a commission, then it’s a kickback.  And make no mistake, a kickback has negative connotations.  It’s money you’re getting for something you’re not supposed to.  Money you don’t want people to know about.  Images of folded manila envelopes slipped into newspapers, being passed from one passersby to another at a train station come to mind.

And if you’re not disclosing it, chances are it’s because you don’t think you can justify it to your client.  The same applies to markups.  The cure for this is to work on your value proposition, and get to a point where you can openly defend the full amount of money you need to make for a project.  That’s the holy grail, to be able to tell a client, “This event is worth X dollars for me to produce it.  I can be paid for it in a number of different ways.”  And then the client’s choice of paying you a fee, or a % of budget or whatever, is no different than a store asking if you’ll pay with cash or a credit card.

FYI, if you’d like a deeper dive into this area, take a look at the White Paper I produced.

Postscript:  After about five minutes of back and forth comments from the audience, someone blurted out “lets move on”, which snapped me out of my umpiring stupor.  So let me say here, if you’re in the audience of a class somewhere and the conversation threatens to go off-topic, you have the right to yell exactly that.  It’s your time and money.  This will be Rule # 1 of my Audience Bill of Rights (coming soon).

2 COMMENTS

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  1. Howard
    Anne
    March 3, 2011 at 10:27 pm Permalink

    Being above board is always better in the long run because it is always worse if they find out you are taking a “kickback, etc.” and then they feel duped.

  2. Howard
    Trina
    November 4, 2011 at 8:53 am Permalink

    The main reason that event planners do not want to disclose commissions is that they are afraid they will be nickeled and dimed to death by clients.