Re: Ideal split for the writer?

Subject: Re: Ideal split for the writer?
From: "Steven J. Owens" <puff -at- NETCOM -dot- COM>
Date: Wed, 31 Mar 1999 07:31:26 -0800

Tzvee Zahavy writes:

> Writer will work for a large financial firm on an interesting assignment.
> Contact made through a small recruiter he does not know previously...
> referred by a consultant at the financial firm.
> What is the best split of fees that can be justified as "industry
> standard"? Is it 80/20?

The devil is in the details. The above is vague; did the
consultant in fact "refer" them to you or is he/she/it/they
subcontracting to you? Or are they arranging a direct relationship
they hire you and then charge the firm for your services)?

If it's 1099 - where both you and the consultant are indepenent
business entities and nobody's withholding any taxes out of the
transaction - all bets are off and you have to negotiate some sort of
comission or finder's fee. I don't know enough about this sde of
things to give any concrete examples.

I do know that most really large companies have extensive
bureacracies that attempts to manage risk - particularly IRS
complications - arising from hiring individuals or very small firms
directly under 1099 arrangements. Typically people within the large
Company have to hire from companies on "approved vendor" lists (and
may well have a "preferred vendor" list that gets first crack at such
opportunities). If this is the case it will limit how much leverage
you have with the guy.

If it's W-2 - where you're a "regular employee" of the consultant
and their company withholds taxes, pays half of the FICA, does
paperwork, probably handles billng the large firm and floats your
weekly paychecks (paying you out of their account and waiting for the
large firm to pay up after 30-90 days or worse) the typical cut is
anywhere from 15% to 50%.

Actually, again this varies a bit depending on some details, like
where the job is, what the local and state taxes are, how much money
you're getting (they may be willing to take a smaller slice of a
bigger pie), etc. Around here, 15% is the best I've seen and that's
from a small and very exceptionally honest and effective job shop fo a
job I brought to the table. Around 22% is much more typical, and most
firms hate to go below 32%. Most will go for 50% and gleefully not
tell you what *their* end is.

Just remember that their end has to start with 7.5% for their
half of FICA (you pay this yourself if you're 1099), plus their own
taxes, unemployment, any benefits you get ($2.50/hour for health care
is not too unreasonable), not to mention their own overhead and
eventually profit. Apply some logic to figure out what their bottom
line has to be and you start to have a vague clue as to how far is
definitely too far. What remains is open to negotiation.

StevenJ. Owens
puff -at- netcom -dot- com

From ??? -at- ??? Sun Jan 00 00:00:00 0000=

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