Negotiating a business finder’s fee

Ask FSB’s experts offer advice for a wine importer starting up a new line.

I. Safdie, Miami, Fla.
I introduced a South American wine to the person in charge of importing food to his Caribbean island. He has a sample of the wine, and agrees that it’s good. I have no capital of my own, so am unable to import the product to the U.S., where I know it would do very well. I did all the research and used my personal contacts and references to get this person an appointment with the winery. This person has now offered me a finder’s fee, should the wine pass the initial compliance inspections necessary for his country, after which he will offer it for sale there. How do I validate this, and what do I charge as the finder’s fee? And if I looked into importing it myself into the U.S., what are the first steps I should take?

By Lenora Chu, Fortune Small Business contributor
Dear I. Safdie: Any time you’re brokering a deal between a buyer and seller you should aim to protect your interests by clearly stating your terms before introducing the two parties, the experts say.

However, since the introduction has already been made, you’ll need to rely on the word of the person you’ve assisted, says George Mylonakis of the Boston-based international trade-consulting firm Go Global Logistics.

You could also ask the winery to notify you when the person has made a purchase.

Essentially, the finder’s fee is up to you and the buyer to negotiate, says John Heimsath, president of the Houston-based customs consulting firm ACM Logistics.

Some factors to consider include the quantity the buyer will purchase and the relative difficulty of procuring the wine.

“If the winery is somewhat exclusive or only sells to certain customers, you would obviously want to ask for a larger fee,” Mylonakis says.

A typical fee might be 5% of the value of all shipments sent within the first year, according to Mylonakis.

Because tracking the total value of shipments can be tedious, an alternative would be to estimate the value of the first year’s total shipment. You could then ask that a percentage of that estimate be paid up-front as a flat fee.

“It all depends on the relationship with the buyer, how much risk you’re willing to take, and how much time you want to spend tracking orders,” Mylonakis says.

Remember that whatever terms are agreed upon should be laid out in a contract, Heimsath says. International attorneys are an expensive but vital necessity in this case, he says.

As for importing the product into the United States, Mylonakis says half the battle is already over.

You’ve already done the legwork and found a quality product and supplier. “Many importers never make it this far,” he says.

When you have no capital, there are ways to get creative, he says. For example, you could pool your customer orders in advance and try to collect deposits.

The winery may also work with you on payment terms, such as allowing you to pay for the wine after it has been imported and sold.

“Try to think outside the box – or in this case, outside the bottle,” Mylonakis says.

You should be aware that alcohol is one of the few types of products for which you need an import permit, which in your case would be issued by the Alcohol and Tobacco Tax and Trade Bureau.

Once you secure the permit, you’ll still need to clear U.S. Customs and the FDA, as well as meet all labeling requirements. A customs broker or third-party logistics firm can help you manage the process, Mylonakis says.

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