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What is a business introducer? – Overview of Sales Commission Agreements

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When you are running a business, the importance of generating new leads and expanding your client list cannot be overstated. Knowing where your next sales are coming from is vital to the growth of your business, which is why business introducers are so popular. Initiating a business introducer arrangement is convenient for both introducer and supplier. The supplier grows their network of contacts and gains qualified leads whilst the introducer benefits financially from their recommendations.

What is a business introducer?

A business introducer is the term given to a person or company who refers new clients to a business in exchange for a fee. Introducers are often partner firms that a supplier works with regularly, such as accountancy firms, law firms, or others. They help the supplier to grow their list of contacts and provide the potential for increasing sales.

The business introducer is not employed by the business – nor are they an agent, since they do not directly sell their products for them and are unable to agree contracts on their behalf. Instead they make the initial introduction and pass the client on to the supplier in order for them to develop the client relationship and make the sale.

Key advantages of a business introducer arrangement

The relationship between a supplier and an introducer is mutually beneficial.

For the supplier the advantages are:

  • They grow their network of contacts with ongoing potential.
  • The introducer is only paid for the introduction if it turns into a sale. So it is a no win, no fee arrangement.
  • As the commission is often a percentage of the sale, the supplier has a clear understanding at the outset of what their profit margin will be.

For the introducer the advantages are:

  • An additional revenue source from making introductions.
  • Commission is linked to the size of the contract that is sold, so it could potentially be a very good (passive) income.
  • By referring their own clients to partnering organisations, they have the additional benefit of being able to find a solution for their clients.

For both parties there is the opportunity to build strong, supportive partnerships with other firms which can involve mutual work referrals.

What is a Sales Commission Agreement?

As with any business arrangement, it is essential that terms are agreed upon in advance. A Sales Commission Agreement is a legal document that protects the interests of both parties. The Commission Agreement will set out in advance what commission the business agrees to pay the introducer for any successful new leads, and on what terms.

As the middleman, it is important for introducers to ensure they are properly remunerated for their help. Referring new business is an important role, but it can often get overlooked or taken for granted once the introduction has been made. For example, if an introduction was made prior to the Commission Agreement being terminated, the introducer should still receive commission if that lead later generates an income for the supplier. From the supplier’s perspective, the commission agreement ensures they only pay for introductions that have successfully generated income.

A Commission Agreement is designed for suppliers who are generally looking to expand their client base, with no particular target in mind. Alternatively, when the supplier is using an introducer to target a specific potential customer, an Introducer Agreement is more appropriate.

Terms of the Sales Commission Agreement

In addition to the introducer commission rates, a Sales Commission Agreement will set out terms for confidentiality, competition, anti–bribery and non-circumvention. By ensuring that both parties fully understand the terms of their relationship, future conflict or legal claims can be avoided. For example, setting out specific conditions in which the introducer is allowed to market the supplier will avoid the introducer competing with the supplier’s own marketing or sales team.

The specifics of the agreement are down to the introducer and the supplier to negotiate between themselves. In most circumstances commission is only paid once a contract has been signed between the new client and the supplier. The fee will generally be calculated based on the new income that the introduction will bring to the supplier. This could involve an Introduction Period, where the introducer gets a percentage of the income made within the first few weeks or months of the new client’s contract with the supplier. A Commission Agreement is not generally used for situations where a fixed referral fee is agreed upon for each introduction. In this situation a Referral Fee Agreement would be used instead.

Drawing up a sales commission agreement for a business introducer

Good business relationships are based on a “win-win” situation for everyone involved. And a successful business introducer arrangement is exactly that. The supplier gets a new client, the introducer receives commission, and the new client gets the service they were looking for. Drawing up a Sales Commission Agreement will guarantee that everyone receives what they want from the relationship, without any individual being able to take advantage of the other. With clear guidelines from the outset, a business introducer arrangement can lead to a successful, long-standing partnership.

Commission Agreement

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A Commission Agreement is a legal agreement between two parties where an Introducer brings clients to a business. The relationship benefits both parties because the Introducer is paid a Commission for introducing clients and the business (Supplier) has the opportunity to increase sales. The agreement sets out how both parties will benefit from this arrangement.

A Commission Agreement is in some ways an agency agreement, where the Introducer is independent but acts on behalf of the Supplier. The Introducer cannot sign contracts on the Supplier’s behalf and does not sell their products or services. The relationship is purely about making the introduction and once this has happened the Supplier takes over the client relationship and makes the sale.

The Commission Agreement sets out the nature of the relationship between the Introducer and Supplier and clearly states the rights and obligations of both parties. Under this Commission Agreement the Introducer is only paid once the new client enters into a contract with the Supplier. It allows flexibility in how Commission will be calculated, which is generally based on the income that the Supplier receives from the new client during a specified period of time, known as the Introduction Period.

The Commission Agreement will cover introductions made when the agreement was in force even if the contract is later terminated. This means that Commission cannot be reneged on, which protects the Introducer. The Agreement also ensures that payments are only made to the Introducer on income that is actually received by the Supplier, which protects the Supplier in the event that they do not receive any or all of money due.

This Commission Agreement, written in plain English, provides for a complete statement of the limits of the Introducer’s authority and sets a boundary between the two parties so that the Supplier avoids any unexpected obligations under the arrangements. It also makes clear what the Introducer’s authority will be when marketing to potential clients, e.g. within a certain sector or geographical area. This avoids situations where the Introducer oversteps their authority and also prevents competition with the Supplier’s own sales or marketing initiatives.

The Commission Agreement contained in the business folder on our website protects Suppliers and ensures they are fully compliant with existing legislation, particularly with regards to non-competition, confidentiality and anti-bribery, all of which are essential these days in protecting Suppliers and ensuring compliance with the law, including the Bribery Act 2010.