If you’re a consultant, you’ve probably been approached by small and startup businesses asking you to do something for them in exchange for a success fee. This means, if you produce results, you get paid.
Often it’s helping to raise funds for a startup (which requires you have a license to do that by the way). But sometimes it’s helping them sell or license a product into another, larger organization. Sometimes it’s just an introduction and they take it from there.
Any way you look at the situation, you are not being paid to do your job and provide your expert skills otherwise unavailable to your potential client. Although, if they are not paying you are they really a client?
Basically, what the company is asking you to do is assume their risk. Well, that’s fine if you are on their board of directors, or a major shareholder. But otherwise, why should you?
A hybrid solution to this negotiation is working on a retainer fee with a success fee attached. That way, you are being paid for your skill and efforts no matter what the outcome. If the outcome is successful, then everyone wins.
Now if you are the company doing the asking for services in exchange for a success fee, think about these two situations. The first is, how would you feel if the tables were turned and you were asked for work for a success fee? Second, would you give your product to customers and only ask them to pay for it if it worked for them? No way, you’re probably saying.
And therein lies the attitude that puts off the people you are trying to contract.
So both sides try to remember that successful business means a win-win for all parties involved.
Sandra Holtzman teaches CEO 035: Licensing.