Anyone have success with Performance Based Consulting?

by the finder 11 replies
Hello all, this is my first post. I am considering doing some side work as a consultant and since I am new to that field, I read that setting a pay structure to be based on performance or results can help a new consultant get some first clients.

I have been thinking this through and trying to find resources that would deal with the downside to not getting a flat fee.

Does anyone have any idea of how to construct a consulting contract that would enforce a performance-based deal?

And what about non-disclosure agreements? I have read that it shouldn't be too loose, but not too tight either.

Any guidance or resources on these topics would be HUGELY appreciated!

Jeremy
#main internet marketing discussion forum #based #consulting #performance #success
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  • Profile picture of the author JohnMcCabe
    The downside to not getting a flat fee is that you may do a lot of work and never actually get paid for it.

    Here's an example, not directly consulting, but close enough to make the point:

    Affiliates promoting Clickbank products use a special link to send interested parties to a vendor's sales page. That link contains the affiliate's ID, so that if that person buys, the affiliate gets credit for the sale. Less ethical vendors have many ways of getting around that credit. (I'm not listing them here, but it's been discussed many times.)

    Even though the affiliate performs, they don't get paid.

    With most consulting gigs, you're in much the same boat. Unless you have some way to verify performance, you may not get paid for your work.

    As for contracts, if you can't trust someone to live up to their word, collecting on a breach of contract suit is going to be long and expensive. And the client will often simply declare bankruptcy and start up under another name.

    That said, a fee plus royalty or bonus arrangement can work well. Many of the top copywriters work on this basis.

    Another downside to purely performance based fees is that you seldom get things right the first time. How many times do you want to do the same project for the same client before you get paid?

    And for some types of consulting (SEO comes to mind), it's not possible to promise a given result because the actual result is out of your control.

    Nondisclosure agreements are usually pretty straightforward. I've signed several over the years with no problems.

    Noncompete agreements can be trickier. You may find clients that want to prohibit you from working with any similar company forever. That's not reasonable.

    Requiring that you not work for direct competitors while working with a client is reasonable. For example, working with a real estate broker in Tampa should not mean you can't also work with a broker in Los Angeles. Even without the noncompete, working with multiple competitors at the same time raises ethical concerns. Your intentions might be purely honorable, but you'll have a hard time not using something learned from one client to benefit another.

    Kind of long-winded, but I hope this gives you a start.
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  • Profile picture of the author Jason Kanigan
    You have to trust the client. Will they pay you the percentage promised? Or will you have to go to court?



    Copywriters run this kind of arrangement to get a % of gross.

    Too many uncontrollable elements for my taste, however. You have to have full freedom to do what you need to do, and clients rarely allow that. I remember a manufacturer I was working with who wouldn't let me put an opt-in box anywhere but over on the top left (where nobody saw it.) That simple kind of thing can kill your results.

    Better to work on your own funnel and have full freedom.
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    • Profile picture of the author Randall Magwood
      Originally Posted by Jason Kanigan View Post

      I remember a manufacturer I was working with who wouldn't let me put an opt-in box anywhere but over on the top left (where nobody saw it.) That simple kind of thing can kill your results.
      I was on the phone for 3 minutes with this lady who couldn't understand why i would suggest her putting a hover ad over her homepage, and an opt-in form on every page of her site. She owned a "self-defense weapons" site. She kept insisting that everybody "NEEDS" these products. Then she said none of her competitors are using a hover ad or opt-in form, and they are making a killing.

      I said, "How do you know they are making a killing?" She said "because my Alexa score is 15,000,000, and their Alexa score is 1,000,000.

      I didnt take her on as a client. Then that's when i realized that i need to go into "ebook consulting".
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  • Profile picture of the author DIABL0
    In the long run, I would never do anything based solely on performance. You don't want to have to hunt people down or take them to court to get paid.

    You will also need a way to be able to verify the performance that occurred. Is it possible / trustworthy?

    If at the beginning you feel doing it will benefit you in some way, even with the potential risk of not getting paid, then do it. Otherwise, I highly suggest that you don't.

    What type of consulting are you wanting to do?

    The reason I ask is it really the best way to make money from your skill set. With consulting you are trading your time for money. Maybe there other things you could do that would be a multiplier.
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  • Profile picture of the author the finder
    Thank you John McCabe, DIABL0, Randall Magwood, and Jason Kanigan!

    I got a lot of valuable info there.

    I really enjoy helping people and being a coach and teacher. The consulting is more of a passion and hobby of mine that I would like to turn profitable as a side hustle and as a way of broadening my horizons into different industries. So for me, there is an upside beyond just getting paid.

    As such, I was only planning on offering my services to people in my network who I do trust and letting it grow somewhat organically and ask my clients for qualified referrals. However, I do want folks to take me seriously... so I felt there should be a contract but when I sat down to write it I start thinking that I don't want the client to feel I don't trust them but I do want to look serious and set some criteria on how payment should work, what I am committed to do, and what not.

    John McCabe, thanks for non-compete bit too!
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    • Profile picture of the author JohnMcCabe
      Originally Posted by the finder View Post

      As such, I was only planning on offering my services to people in my network who I do trust and letting it grow somewhat organically and ask my clients for qualified referrals. However, I do want folks to take me seriously... so I felt there should be a contract but when I sat down to write it I start thinking that I don't want the client to feel I don't trust them but I do want to look serious and set some criteria on how payment should work, what I am committed to do, and what not.
      I've always used simple contracts, although I never called them that.

      I called them "letters of agreement", which spelled out in plain English what I was to do, what the client was to do, the payment terms and the timetable. It isn't a matter of trust. It's a matter of memory.

      Both sides signed them, any upfront fee was paid, and I got to work.

      Originally Posted by the finder View Post

      John McCabe, thanks for non-compete bit too!
      De nada...
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  • Profile picture of the author the finder
    I like that! Thanks again!
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  • Profile picture of the author Tsnyder
    My entire business is built on them paying a small one time fee
    up front for basic expenses followed by 100% compensation
    based on results. I've been doing it a long time and it has paid
    me very well.
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    If you knew what I know you'd be doing what I do...
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    • Profile picture of the author the finder
      Tsnyder, that's very interesting!

      If you don't mind sharing...

      By results, do you ask for a % of gross?

      Have you ever had any problems with getting payment, if so how did you handle?

      Another thing that comes to mind is that something that I may help them with may be a transformational factor that could affect their revenues for the rest of the life of the business....

      So what kind of term do you usually place on the agreement?

      Thanks!
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      • Profile picture of the author Tsnyder
        Originally Posted by the finder View Post

        Tsnyder, that's very interesting!

        If you don't mind sharing...

        By results, do you ask for a % of gross?

        Have you ever had any problems with getting payment, if so how did you handle?

        Another thing that comes to mind is that something that I may help them with may be a transformational factor that could affect their revenues for the rest of the life of the business....

        So what kind of term do you usually place on the agreement?

        Thanks!
        I get a % of gross sales in perpetuity. Understand, these are businesses that are
        built from zero.... not established businesses looking for help. I've consulted with
        established businesses for a fee... sometimes a %... but the bulk of my business is
        working with startups and coaching them to success.
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        If you knew what I know you'd be doing what I do...
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        • Profile picture of the author the finder
          Thanks a lot! I like that! It's a lot like my vision for what I want to do.
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