Profit Share with Customers
Has anyone here ever tried giving a share of company profits to regular clients? We are thinking of allocating about 30% of after tax profits to a pool in which our regular customers share. The payout per client will be determined by the percentage of purchases he made compared to the others. So, by buying more from us, he effectively buys a larger share of the profits. Also, in order for the customer to be a part of this incentive, he has to enter into a sole supplier agreement with us where he agrees to only buy that product from us and of course, at market related prices. An added benefit for the client is that he shares in the total profit the company makes, from both the "contracted" clients and "non-contracted" ones. Any comments on this model?
Sales Equity Terms And Conditions
3 Answers
Yes, something quite similar (but not exactly) to what you describe is done occasionally. In the US this is known as a cooperative or co-op.The idea is that a portion of profits are returned to members.
Anyone who has gone to school in Boston, Mass. may recognize the Coop as such a business. In rural areas one often finds farmers cooperatives.
Perhaps the biggest examples are insurance companies that return "dividends" to policy holders at the end of the year. Millions of people have insurance with mutual insurance companies.
-
INAL but you need to do more than give back 30% of your profits to become a coop – Tom Squires 12 years ago
-
I was a member of The Coop 30+ years ago. They always asked you your Coop number. So for 4 years I recited that many many times. Fast Forward to now. The Coop had a techie bookstore near to where I used to work. I buy a book. The clerk asks me my number. Without even thinking about it, I rattle it off again! Repetition builds memory for sure! Thanks for the trip down memory lane. – Paul Cezanne 12 years ago
Why?
I don't see how this can benefit anyone and is only going to cause trouble down the line.
If you go ahead with this, you'll need to speak to your accountant and lawyer. Apart from anything else, it sounds like a "discount", in which case it should be allowable against tax, so should be allocated before tax.
Although I'm interested in the concept, for me, it sounds way too complicated, so I wouldn't want to be involved, as a customer or running such a scheme.
Your strategy just sounds like an overly complex way of giving your regular customers a discount. Surely its much simpler and a much better customer experience to charge people less rather than giving them part of their purchase back at a later date.
