BRX Pro Tip: Pros and Cons of Pay for Performance
Stone Payton: Welcome back to Business RadioX Pro Tips. Lee Kantor and Stone Payton here with you this afternoon. Lee, let’s talk a little bit about — let’s examine both the pros and the cons of pay-for-performance arrangements.
Lee Kantor: Yeah. Over the years, we’ve been offered or people have tried to negotiate in some sort of pay-per-performance fee or either in exchange for or an addition to the service that we provide. And I think that there’s pros and cons of working a pay-for-performance deal. Obviously, one of the pros is that it has a much bigger upside than just the rate by itself. And if you’re truly delivering measurable value, then you should benefit financially accordingly. So, if the person selling a high-ticket item, and you are accepting some sort of pay-for-performance, you should be making a lot more money if that thing goes through than you would if they were just paying for the service by itself, and then they were keeping all the money.
Lee Kantor: Now, obviously, the cost of doing that is that there’s a lot of variables that are outside of your control. So, you might be delivering your end of the bargain perfectly, but if they can’t deliver their end of the bargain, you’re doing a lot of work, and you’re not benefiting at all. So, that’s a big con in my book. There might be a way to do this that’s kind of a hybrid where you’re guaranteed a base fee for your best advice and the service you’re providing, and then you get a bonus when your client closes the deal down the road. If you’re doing that, make sure your base fee obviously covers whatever your costs are, and you make some money from it, so you’re not really losing in any sense. You might be getting less fees, but you’re not losing. So, I think that there’s pros and cons for doing it. And it’s a case-by-case basis. If there’s a big upside, and you believe in the partner, then it might be worth giving it a shot.
