Last updated on 22 June 2022
Starting a business together is definitely awesome, and in some cases, you even get to work with your best friend. However, it gets a little complicated when it comes to split profits on Shopify.
Every day, I’m seeing many people working together — whether you have a dropshipping business or simply need to pay your collaborators, you need an easy way to do so. Today, I’ll show you the best methods to share your profits — this way, you won’t have any problems, misunderstandings, or lost time.
Deciding on How to Split the Profits
Before actually paying people, you need to decide how that’s going to happen.
1. Agree to a set of terms
The first step is to discuss with your partner or collaborator and see what your expectations are. It’s not always a 50/50 gig, so you need to lay out the ground rules.
You can decide to split the profits based on the assets you bring to the company or simply choose a fixed flat fee price.
Once you have decided on the terms, you can follow the next step.
2. Find an app to automate payouts – CollabPay
As soon as you start making sales, you’ll need to start sharing the profits — of course, some may be reinvested (and that should be in the agreement if that’s the case).
I’ve seen many people going through all kinds of complicated calculations and multiple processors, but that doesn’t always end up good. The numbers are not always right, and if you hire a professional, you may end up paying a lot of money.
In my experience, is best to have everything as simple as possible. After searching for something super easy to use but still effective, I discovered CollabPay.
What is CollabPay?
CollabPay is the easiest and safest method to split profits between product creators. If you created a product with someone else and you want to automate the calculations and payouts of the percentage they are owed, this is the app for you.
Benefits of using an app for splitting payments
There are many reasons why it’s best to allow an app to automatically calculate and send payments. Here are some obvious reasons why it’s a good route to go:
- Perfect calculations every time
- No headaches doing it yourself
- Save valuable time and work on things you love more
- Easily trackable
- Cheap compared to paying accountants for payroll
What platforms does CollabPay work with?
Currently, it’s only available on Shopify, but they’re working on new integrations with the biggest eCommerce platforms such as Etsy, Amazon and Magento. This means that you have an easy management system on any eCommerce platform.
- WooCommerce (coming soon)
- Squarespace (coming soon)
- BigCommerce (coming soon)
- Etsy (coming soon)
- & much more in the pipeline
How does it work?
The process is fairly simple:
- Install the app from the Shopify app store
- Set up the settings
- Invite your collaborators to link up and set their percentage cut or flat fee
CollabPay is really easy to set up. Your account will be activated via your Shopify store billing system, this is the way Shopify works to give you the best security.
You can decide if you want payouts to take place daily, weekly or monthly, it’s up to you as a store owner. To keep transactions down for splitting payments, I would suggest doing it monthly. Saves your accountant going through more work!
Sale split payments example:
If the store owner decides to collaborate with someone to create a product, there are going to be costs involved. I will show you an example below if we have the settings set up to deduct the cost of goods before the split takes place:
- Sale price: $50
- Discount: 10%
- Tax: $10 (20% VAT rate)
- Shipping: $5
- Share: 20% to the collaborator, 80% to the store owner
- Total the collaborator gets: 50 – 10 – 5 – 5 = 30 profit. Then 20% of 30 = $6
- Total the store owner gets: 80% of 30 = $24
CollabPay can automatically calculate these deductions before the percentage split is calculated. But it’s up to you.
Settings you can change:
- Tax: You can allow the commissions to be calculated before or after the tax has been deducted from the total
- Shipping: You can allow the commissions to be calculated before or after the shipping has been deducted from the total
Pricing & features:
|Freelancer plan||Startup plan||Business plan|
|3 Collaborators/vendors||12 Collaborators/vendors||Unlimited Collaborators/vendors|
|3 Payouts per month||Unlimited payouts per month||Unlimited payouts per month|
How do we get paid?
The best part is that it uses PayPal as one of the payment systems, with Stripe being released very soon.
The ways you get paid are quite straightforward:
- The store owner keeps their cut held in their accounts, so no payments take place
- The collaborators are paid their cut directly to their PayPal account
One thing to note, you will need to get access to PayPal Payouts on your account. It’s currently not available as a standard for any PayPal user. You can contact support and ask them to allow you to use Payouts, and they will give you access.
There is a detailed guide on how to get access to PayPal Payouts here.
How many collaborators can we have on a single product?
You can have as many as your plan allows and as long as you assign the right percentage between them. For example, 100% can only be split into a number of chunks.
You can have 20 collaborators on a single product if you wanted with each one getting 5% of the sale. You would just need to keep in mind if there are shipping charges and tax rates to account for.