Professionals that provide business services, whether in the legal, financial, management or marketing sphere, do not work on a commission, percentage, contingency or success fee basis. The exception may be personal injury attorneys who take part of their cases on a “no cure, no pay” basis. In our line of work as international business development and marketing consultants the phenomenon “success fee” has no bearing. There are a number of reasons for this.
The first and foremost reason is that it is unethical to accept percentage-based compensation as payment for a job that is supposed to be unbiased and objective. This standard is also asserted by the major consulting firms, which have set the norms in this field. Percentage-based compensation can encourage abuses (like manipulating outcomes), imperils the integrity of our profession, and undermines the very values on which our independence is based. Percentage-based payments are not in the best interest of our clients, nor are they consistent with the trust that clients are expected to place in our professionalism. The payment of agreed fees to compensate for our consulting endeavors is an appropriate way to balance our client’s evaluation of risk and affordability with our professional integrity and competence.
In addition to the ethical issues, paying for consulting services when performed acknowledges the value and merits of the provided services. We feel that the “fixed fee” concept recognizes the value of our professional advice and achievements independently of our client’s ultimate business success, which, of course, we cannot guarantee.
Another major issue is that as outside and independent consultants, we cannot rely on the quality and capabilities of a client’s technology, product, management, employees, financial strength, value proposition, business model, exit strategy, etc., aspects we have no control over. No matter how well we do our job, our clients still have to do theirs. We simply cannot wait and have our remuneration depend on our client’s capability to perform. We cannot run the risk that we may financially suffer, if our client’s business eventually fails.
The “success fee” concept originates from personal injury attorneys, who take some of their strongest cases on a “no cure, no pay” basis, though only if such a case will bear fruits rapidly. Somehow this concept has been creeping into the consulting world. Consultants, however, cannot be responsible for the eventual attainment of their clients’ success. These propositions are used by companies that expect others than themselves to take financial risks. Entrepreneurship means running a business and assuming all risks and rewards that operating a business venture entails, not to have outside consultants do the work and have them take the risks.
Our consulting services not only offer pre-determined deliverables and results to our clients, but they also help develop our clients’ business capabilities for many years to come. Some believe that, if no immediate revenues are achieved, then nothing has happened. This is far from reality. Companies will be better positioned for growing their business, be better organized, better prepared to further develop their business, and introduce and penetrate new markets, and become therefore much more attractive to obtain further funding, enter into strategic partnerships, and realize an attractive exit.
Last, but not least: consultants simply cannot take consulting assignments on a “buy now, pay later” basis, because their business and living costs need to be settled when purchased, like those same costs of their clients. There is not one retailer, be it the supermarket, bakery or petrol station, willing to defer payments until an unknown and uncertain day in the future, let alone the taxman, banks, electricity, water and phone companies.
As Oscar Wilde said: "Experience is one thing you cannot get for nothing."
GlobalStrategists, founded in 1992, is a consulting boutique, specialized in international business development and marketing for the MedTech, BioTech, CleanTech and AgriTech industries.
We operate in the APAC and EU countries, Israel and the USA.
© Copyright 1992-2017