Question

Topic: Other

How To Negotiate A High Level Bus. Relationship

Posted by Anonymous on 5/4/2009 at 2:44 PM ET 500 Points
I am seeking this advice on behalf of a colleague.
She (we’ll call her Karen) is negotiating an independent relationship with a company in the health care industry.

Background information:
The company has been trying (unsuccessfully) to enter Karen’s metropolitan area for over a year now. This entails earning acceptance from local managed care/health insurance organizations. They have brought in top company executives and have gotten nowhere. It is important to note that the territory is a very provincial, albeit lucrative area. Outsiders don’t do well here.

Karen recently completed a nineteen year career as a top performer in this market for a leading pharma company. She is the Absolute #1 Person for managed care in the area. She knows everyone there is to know and her name alone has tremendous brand value. Simply put, Karen can get the company in to this market and gain acceptance of their products inside of a year (she is THAT good).

The company’s sales volume in a comparative area was $15 mill last year. It is a small (new) company with a promising product that has done well in the markets it has gained acceptance in.

Karen does not desire a long term relationship with the company after she successfully gets the product adopted. She seeks a combination base/incentive package.

The Question:
What is a reasonable arrangement to propose and how should it be presented? If she wants a piece of gross (in addition to small base), what is a fair figure? How is it arrived at and substantiated?

Thanks in advance.
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RESPONSES

  • Posted by michael on 5/4/2009 at 3:03 PM Member
    Seems she's in a great spot! The company will save at least $5000 in recruiting fees.

    But it depends on the start-up relationship. Employee(contract) or contractor? She should ask for her last salary plus a scaled merit plan:
    10% at $3million
    15% at $5million

    If she hits the $15million that you mentioned, she needs a cash bonus.

    Michael
  • Posted by Jay Hamilton-Roth on 5/5/2009 at 8:37 AM Accepted
    First, determine what is median salary/commission (see: https://www.saleshq.com/sales_careers/articles/199-salary-commission-guide-... and https://www.payscale.com). That will help frame the company's expectations.

    Her value to them is based on their expenses to-date to try to establish the territory. How many people and at what level of the organization were they? Attempt to figure their expenses based on roughly time x salary + bonuses. That will also frame the value of the worth of the region.

    Her value is at least their expenses to-date (which failed) and should also include going forward future sales potential (based on the developed relationship).

    There's also a risk to Karen, in case the company's products produce negative PR and sour her relationship with her network. That risk should also be included in her compensation.
  • Posted on 5/5/2009 at 4:43 PM Accepted
    One thing that was mentioned briefly in an above post that should be reinforced is that Karen is opening up a market which will produce returns for the company for a long time. She needs to be compensated well beyond the initial penetration phase. Her negotiation should absolutely include a strong residual for many years afterward. This could even be used as a bargaining chip if needed - she could make concessions on the front end and shift them to the back end, making it more initially palatable to the company and giving her a longer lasting source of income.
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