With infomercial budgets in this country ranging between $40,000 to $80,000 for a 28:30 program with an average of four days of shooting, sometimes just salvaging your mark-up is a challenge. (There are some $250,000 to $500,000 shows around, but these are few, far between, and predominantly American.)

So, from a production company perspective, your ability to make these shows pay hinges on how committed you are to doing infomercials in the first place.

Just keeping busy?

Do you want to do infomercials to keep your directors busy and to keep some cash flow going through the old bank account? That’s okay. Your profit will come from your mark-up or producer’s fee and what you can save on the production.

Do yourself a favor and steer clear of any other deals because you’re likely to lose your shirt. If the client doesn’t have enough money to make it worth your while on the front end, run, don’t walk, away.

A ‘hit’ infomercial will do about $3 million to $4 million in North American sales. For investing a healthy percentage of your own money in the production, you can expect somewhere between one and two points of the gross.

Ask for more, but this is what you’ll likely end up with. Now, do the math. Your take-away is between $30,000 and $60,000. And you have a one-in-seven chance of getting it.

Will this recoup your investment? If you ask me, there are easier ways to make that kind of money.

But if you’re really committed to producing successful infomercials and are looking for a way to cash in – keep reading.

This is why God invented the ‘back end.’ This is also known as taking a proprietary interest in the project. Or as a co-production deal.

High-risk proposition

As you’ve seen, back end is not for the wary, the amateur or the faint of heart. It is a high-risk proposition no matter how you slice it.

You play the percentages, looking for a chance to hit the motherlode. A product such as HealthRider in the u.s. has more than $100 million in sales to date. How would you like one or two points of that action?

Habitually, the more involved you become in the back end, the greater the risk you’ll be asked to take on the front end.

The simplest and easiest entree into back end deals is to take little or no production fee upfront in return for a bonus to be paid when the infomercial rolls out.

This deal can also be extended to your suppliers (writers, talent, post-production), which can reduce the front-end cost for you and the client.

This method is fairly cut-and-dried, with little or no ongoing accounting, reporting or fine print. A production company might legitimately ask up to double or triple its regular fee in a deal structured in this manner.

Then there is the ‘per inquiry’ deal.

In this case, your profit is tied to the number of actual telephone inquiries made. Make sure to clarify the definition of ‘inquiry.’ Ask if it means every time the phone rings or only if the caller is making a purchase?

Another way a back end deal can be structured is by taking a percentage of the actual gross sales. Heavy emphasis on gross. But don’t limit yourself to just the Canadian infomercial sales on that specific product. What about the u.s. and international markets?

For how long? (two to three years is an approximate answer to this.) What about upsells? Upsells can make up to 40% or 50% of the total sales. Is the product going to retail? Then ask for a part of that, too. Because the infomercial is creating brand awareness for retail – and so are you.

And don’t forget to check and see if there is a profit ceiling on your participation or a minimum sales clause. A clause like this requires that a certain level of sales be met before there are any royalties paid. This is not necessarily a bad thing – just something you should be aware of.

Monitor reports

If you have a proprietary interest in a program or product, make sure you see the reports. This is an accounting of sales activity, the number of inquiries, merchandise returns, etc. And this is your way to keep track of your investment.

When people talk about the cost of successful versus unsuccessful infomercials, they often forget the cost is only part of the equation.

If the product isn’t great, the concept compelling, and the offer brilliant, it doesn’t matter how much money you save, or how much you spend. It still won’t be a winner.

So let’s take a moment to consider what makes a product a good candidate for back end participation.

– Is the product a winner?

Celebrities, production values can be dazzling, but if the product is a dog, I guarantee your infomercial will be, too. There may already be indicators out there of how well your product will perform.

Has it been on any of the home shopping channels or been advertised via direct response? A product’s performance in these venues is often indicative of how well it will do in an infomercial.

– How well are competitive products doing? Is your product better, different or cheaper than the competition?

– Does it fit into a traditionally successful product category such as health, beauty, kitchen gadgets, personal motivation/ improvement or vanity? If not, know that the risk of failure is exponentially greater.

Can you afford it?

– How much risk can you afford? There’s no such thing as a sure thing. Ask Mike Levy.

Mike is arguably one of the most successful infomercial makers in the u.s.

Earlier this year, he lost the Midas touch and lost several million dollars on a single infomercial. And there are thousands of stories like this.

– 85% of infomercials fail, so if you’re thinking of becoming a player, make sure you’ll be able to cover your costs.

Only you can decide whether to charge fee for service or sharing the risk. There is no magic formula. It’s experience, instinct, and, in a lot of cases, sheer bloody nerve. And it’s commitment.

But if you index your degree of commitment to the industry, the product and the project to your degree of participation, it’s hard to go wrong.

lisa brown is a freelance infomercial consultant and writer whose credits include infomercials for Royal Bank, Dupont, Wealth-Wise and Guthy-Renker.