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Lately I've had a few conversations with coaching students about how to add performance-based deals into their service mix.
The type of deals where you get a percentage of the profits your work brings in.
There are a bunch of ways you can do these types of deals.
But some are better than others.
Today I thought I'd talk a bit about my thoughts on these arrangements and how you can leverage them to increase your per-client revenue and provide a tonne more value to your clients.
The most common way of structuring these relationships is the old Jay Abraham "pay me 25c on the dollar" type thing. (Where for every $1 you increase your client's revenue, you get 25 cents.) Unfortunately this is generally one of the worst ways to go about it.
Why? Couple of reasons...
First, the client has no skin in the game. They have nothing on the line, no investment, no emotion attached to whether the project ever gets finished or not. It becomes "nice to have" rather than "mission critical". In many cases the project dies on the vine because other more urgent projects take their attention.
Second, you get nothing up-front so any time or resources you invest getting the project into the black are your own expense. This may not be a big deal if you're just making some basic copy changes but can quickly become serious when you start building websites and driving traffic. It's not unusual to not see a dime for 3-6 months.
Third, people are often drawn to this setup because they think it lets them off the hook having to sell and ask for money up front. But in my experience it takes just as much effort and skill to sell someone on this idea as it does money-up-front. Because as I talk about in the High Value Client Training, money is rarely their biggest risk in the deal.
So what's a better way to go about performance-based deals?
Glad you asked!
It's pretty simple but has some nuances that make it extremely effective:
Project fee + target-based performance incentives.
Tomorrow I'll go into more details about why this arrangement works so well and why clients go crazy for it.
Talk soon,
Kyle Tully