Can you please help with our revenue model?

Hello, we have a bit of a problem with our revenue model and I'm hoping someone might be able to help. I'll try and keep this as concise as possible. I'd prefer not to give the details of the business away so I'm going to use vague terms like 'buyers' and 'suppliers'.

We have a website that connects buyers and suppliers, an intermediary as such. Essentially the buyer comes on the site, enters their requirements, which is sent to all of the applicable suppliers. The suppliers then put in their price based on the requirements of the buyer. All prices submitted by the suppliers come back into the buyer's dashboard. This price could average between £1,000 and £3,000. The suppliers generally require some form of payment up front because the service that they provide is generally a few weeks/months in the future. The size of this up front payment varies with different suppliers. It could be 20% with one supplier and 45% with another. Once the buyer decides they want to go ahead with a supplier's offer they confirm it by clicking on a "Accept Now" button on the website. We then send the buyer's contact details to the supplier who can make contact with the supplier. There is no payment made by the buyer on the site and the payment up front or pre-authorised credit card is generally sought by the supplier upon us sending them the buyer's contact details.

Our revenue model is currently based on us invoicing the supplier for a commission. So for example when the buyer uses the service then we will invoice the supplier for our commission. We haven't got to this stage yet with our website as it's only launched in the last two weeks and we're in the process of getting enough suppliers on the site to make it viable for the buyers to go ahead and accept the offer. Currently there is great demand from buyers for the service we are offering but we need more suppliers on board.

However, we have been told by several people recently that we may find it difficult getting paid as the suppliers that we are targetting are regarded as very slow payers. We have been advised to take our commission at source if at all possible rather than invoicing. Does anyone have any suggestions on how we can get paid from either the buyer or the supplier? Ideally, we would like to take the suppliers up front payment and our commission from the buyer on the website. For example, if a supplier comes back with a quote of £1,000 and they want a 20% up front payment then we would like to take £300 in payment from the buyer on the website (£200 for the supplier and £100 commission for us). We have spoken to some payment providers recently and they say there's too much risk involved in this.

Any suggestions on a better way to get paid would be greatly appreciated.

Thank you.

It's relatively simple if I understand correctly.

If the buyer wants to use the supplier they should pay you the deposit, which should be at least equal to your commission, through your site.
You simply keep the commission element and forward the rest if any.

The buyer has made a commitment, the supplier knows that they are unlikely to get burned and you receive payment in advance.

There are several Paypal type services out there who will supply you with a code to put a button on your website which will direct the buyer to a secure site where payment can be made securely direct to your chosen bank account.

I don't see any risk.

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Interesting one. We have a partner called Service Magic whose model I think is to charge the supplier once they have a confirmed client. The user puts in a quote for whatever work/tradesman they want which is then supposed to be sent to 5 different suppliers.

Tradesman sign up for free, but pay an upfront fee once they can see there is a job request relevant to them.

The biggest problem they have is getting suppliers on board, and we tend to hear complaints form time to time about poor quality leads, or no replies from tradesmen when a user submits a job or quote.

Or maybe provide an escrow service if its staged payments? Keep the money in your account and take a small commission for each payment? Releasing payment when the customer is satisfied.

I should imagine you have deep pockets to get this off the ground and get enough suppliers on board, best of luck. Be great if you let us know how you're getting on!

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I have over the years signed up to many of these types of sites, in my opinion they are misleading both customers and traders.
The problems are (1) misleading the public, by saying they check / vet the trader, the only checking that is ever done, is to make sure that the tradesmans credit card details are correct. (2) There are far too many of these types of sites around, so the consumer that uses these type of sites will generally register with 2 or 3 sites and get around 10 quotes, but the trader will think he's only quoting against 2 others. (3) Most traders that use these sites will not be registered for VAT and only work for cash. So if you operate / trade legitimately you cannot possibly compete in an unfair market. (4) From experience I find that most consumers that use these types of sites are time wasters, with maybe 1 in 20 chance of securing the work compared to 1 in 3 when a customer visits / calls direct.

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I have to say I would be surprised if this business model would be very effective.

Some very good points have already been made about trust and the money issues, and for my part, although in principle it seems ok in practice I cannot see it evolving into a workable business arrangement.

You have already encountered problems signing up suppliers, I don't think that will change. Many have already signed up to this kind of service and found it to be a waste of their time. I can tell you now, I'm one of them. Even if it did work, with margins getting tighter, a 10% commission would take away any benefit of having a new customer. Suppliers could't add the commission to their prices to mainytain a decent profit as they would become uncompetitive.

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