Band managers are very handy to have around, but up and coming artists often forget one thing in their hunt for a manager: once you get one to work with you, they're going to want to be paid. Knowing how to negotiate payment with your manager is important.
After all, not only is your manager going to help you start making money, you will be splitting your income with them. It pays (get it?) to be sure you understand exactly how your manager expects to be compensated for their work.
Band Manager Compensation
Although sometimes a manager may accept a wage, the vast majority of management deals are based on commission. That means that your manager takes a percentage of the income you generated. The percentage they receive is negotiable—but first, you should understand the usual payment amount for managers.
The norm is around 15%, although some artist representatives want 20%, particularly in the case of a new artist. Newer artists require more work upfront before any money is seen. Often, this is a percentage of your gross income—your total income before any other deductions (taxes, social security, other deductions or fees) are taken out. This means that even if you do not make enough get paid, your manager will—because they are one of the deductions.
However, some managers will accept a percentage of your net income (the amount remaining after all deductions and payments).
What this means is if the costs of a show are greater than or equal to the revenue generated, your manager doesn't get paid for that event (neither will you). Sometimes, managers get a gross percentage of some income and net percentage of others.
Other times, the percentage changes as certain earning thresholds are met. For instance, if a new artist agrees to 20% when they hire a manager, once they make a certain amount of money, the manager may agree to scale it back to 15%.
Negotiate for Different Income Streams
Just as there is a wide array of ways the percentage can be calculated and applied, there are a number of ways to divvy up the streams of income. Some managers get a percentage of all income, period.
Other deals are structured so that a manager gets a smaller percentage—or no percentage—on certain kinds of income. For instance, if the manager only represented you as a recording artist, but not as a songwriter they would receive nothing from your songwriting income (as long as it was negotiated this way).
There are no standard rules for manager compensation. It is a matter of negotiating an arrangement that is acceptable to everyone. Keep in mind that managers will want to maximize their earning potential by tapping into as much of your income as possible.
Even when management gets a cut of all of your income, there are certain things they don't touch as a matter of course. Your manager shouldn't get a percentage of monies paid by to you by a label to pay for some other activity such as recording, producers, touring, or opening acts. This isn't income, you're an intermediary for that money, making sure it gets into the hands it is supposed to.
Compensation for Your Manager Is Advantageous
While these approaches may at first seem greedy, managers absolutely should be compensated for the work that they do. Managers allow you to focus on the part of your job that you love, taking care of your recording deals, concert schedules, transportation, publicity events, etc.
There are lots of different flavors of manager payments out there. The only rule of thumb is that you need to come to terms before any work begins, so there isn't any confusion.
One last note—many managers work on a handshake deal rather than a written contract. However, if that scares you, there's nothing wrong with writing up at least an informal agreement so that everyone knows where they stand.