Infomercial Business Plan

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There are, however, definite budget parameters for a successful negotiation. Costs of celebrity acquisitions may be determined using one of the following compensation packages: (1) a guarantee fee with back-end participation, or (2) a straight buyout.

GUARANTEE & PARTICIPATION. Here you will be required to pay the celebrity an up front fee plus a percentage of your gross or net sales. The up front guarantee can range anywhere from $5,000 to $20,000. The back-end percentage may be between 1% and 5% of either your gross or your net sales.

In this type of compensation package, however, the celebrity's guarantee fee is actually part of the back-end participation. The guarantee fee is actually a deductible advanced guarantee which is subtracted from the cumulative value of the back-end percentage.

For example: You hire Celebrity X for a guarantee fee of $10,000 plus 5% of your gross receipts over a campaign period of one year. If you generate gross sales of $500,000, Celebrity X's total participation fee will amount to $25,000.However, since you already advanced $10,000, you will only owe difference of$15,000 at the end of the year.

STRAIGHT BUYOUT. This compensation package is a one time fee you pay a celebrity for appearing in your infomercial. Among other factors, the length of time you want to use the infomercial and its geographic distribution (local, regional, or national) will determine how much you pay.

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