Does anyone use a performance based model

1 replies
I understand how selling leads or renting sites might work but does anyone use a performance based business model?

I feel that it would be easier to sell my services if all risk was removed from them but it this just too risky to use. i.e. if using profit as a gauge other factors might undermine your services.

Please go easy if I've said something stupid
#based #model #performance
  • Profile picture of the author Claude Whitacre
    This is an answer that may help. It certainly helped me.

    I sometimes go in with the approach of "I'll increase your sales, for 30% of the gains the first year". Now, do I really want that? No. Because only one of three things can happen;
    1) I get enormous results, and the client starts resenting that he's paying me every month for something I built in the past.
    2) Same as #1 except the client wants to cheat in some way. This is bad.
    3) I don't get the results expected, and I make little money for lots of work.

    Then we do the math. The client estimates (based on what I propose) that 30% will be between $15,000 and $100,000. (I always try for the lower conservative figures)

    And then I give the option of $4,000 up front and much less every month.

    The contrast is stark. I'll even finance the $4,000 if needed.
    You can hear the sigh of relieve as they write the check.

    Why is this approach effective?
    Because they are ready to give you a percent of profit gain. To them, it's sold. Converting them to an upfront fraction of that is now easy.

    And the question in your mind right now should be "How do I justify my willingness to discount like that?"

    Here's how. "Bob, I think I have an even better way to save you some money.
    Your increase in income is all in the future. My work is nearly all done upfront.
    To help both our cash flows, here is the idea all my clients, so far, have gone with...." And at the end "Which plan do you like better?"

    There have been times when I know I could have quoted an upfront fee of $20,000 and they would have said "Yes". The only thing stopping me is a ..what do you call it....oh yeah, a soul.

    Of course, your percentages and fees would be completely different. But the approach works like gangbusters.
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