I am starting a two person partnership. We are offering a service at 500.00 a month per client, the operating costs are 150 per month per client. We will be giving salesmen 20% (100) leaving approx 250 which we will split. I am the manager/tech and he is head of sales. He will be bringing clients in as well as managing the sales team.
Should he be receiving half of the profits as well as the 20% on clients? And a smaller percentage off of a tiered sales schema.
This is difficult to answer as we don't know the necessary parameters. It depends on: amount of work, know-how each of you brings, the sector, competition in your sector,...
The general advice I can give you: Ask yourself, what you will earn with such agreement with such person... and what would you earn without him. Don't necessarily look at percentages etc. Look at it in that way : for each client, you earn $125. What counts for you is the number of clients that your partner can bring. If such a revenue split motivates him to work harder and bring more clients, then why not? It is better to earn $125/client on 1000 clients than $175 on 500 clients... Of course, if he doesn't succeed to bring enough clients (and thus his contribution comparing to yours decreases) then the agreement should be revised in your favor.
It is always a question of balance between the contributions of the two partners. It's as simple as that...
I agree that it is difficult to provide a specific answer without knowing more of the context.
However, I get the impression that you think the proposed sales incentive system for your business partner is a bit much. If that is the case now (at start-up), it could develop into a much bigger issue and, possibly, an area of conflict if the rewards are perceived to be inequitable by either of you. If it doesn't feel right, you are better off not proceeding. Work out something that you feel absolutely comfortable with.
It is also worth considering whether the proposed incentive structure could possibly skew the behaviour of your partner. For example, because there would be a sizeable incentive for him to make sales directly himself, would he personally try to do more of the work himself than delegate to others. Delegating work to the sales team is likely to be more important to the business overall than for your partner to do the bulk of the sales work himself. In addition, sales team members may resent it, if your partner allocates to himself the more lucrative sales deals. Incentive structures are developed to promote certain behaviours but some of these behaviours may not align to the corporate goals in exactly the way we initially intended. It is worth giving this some consideration.