Ray F from Detroit, MI. DTE Energy territory. Signed a 50% contingency agreement with a plastics manufacturer. Found a meter multiplier error that had been running for 4 years. DTE agreed to rebill — refund came to $67,200. My fee per the agreement is $33,600. The client CFO called me and said he had no idea the refund would be that large and wants to negotiate the fee down to 30% — about $20,000. He said $33,600 is too much for what he described as finding one mistake. I am furious. We have a signed agreement. But this is a major employer in my area and I do not want to burn the relationship.
Client saw the $67K refund and wants to renegotiate my fee down
Ray, this is unfortunately common when findings exceed client expectations. The CFO is experiencing sticker shock because he is looking at your fee in absolute dollars rather than as a percentage of value delivered. You found $67,200 that would have remained lost forever without your work. Your agreement is legally binding. But how you handle this defines your reputation.
Ray, do not reduce your fee. If you cave here, every future client will try the same thing once they see the refund. Your agreement was fair when it was signed and it is fair now. The CFO would not have offered to pay you MORE if the refund had been $5,000 instead of $67,000. The risk was yours. The reward should be too.
I agree with Terry. I had a client try this exact same thing after a $42,000 finding. I told her respectfully that the fee was agreed upon before the work began, that I invested significant time and took on the risk of finding nothing, and that the agreement would be honored as written. She paid in full and referred me to two other businesses. Standing firm earned her respect.
Angela, that gives me confidence. Terry, you are right about the precedent. If I cave, word gets around. But I want to preserve the relationship because this manufacturer has 3 other facilities I have not audited yet.
Ray, here is how to handle it. Call the CFO. Acknowledge that the refund was larger than either of you expected. Remind him that you took the risk — if you had found nothing, he would have owed you nothing. Then offer a goodwill gesture: propose auditing his other 3 facilities at a reduced rate of 40% instead of 50%. That gives him a discount on future work without undermining the current agreement. He gets the relationship value. You get the full current fee plus 3 more engagements.
Randy, that is a smart approach. Give on the future, hold firm on the present. Calling him today.
Called the CFO. Used Randy approach almost word for word. He was quiet for about 10 seconds and then said that is fair. He paid the $33,600 in full and scheduled a meeting to discuss auditing the other 3 facilities at 40%. Sometimes the best negotiation is one where both sides feel like they won.
Well played Ray. You held firm on the contract, preserved the relationship, and opened the door to 3 more engagements. If those facilities have similar errors, the 40% rate on 3 more $50K-70K findings is another $60K-84K in fees. The CFO short-sightedness would have cost you $33,600. Instead it cost him a 10% discount on future work.
Mike, exactly. And for what it is worth, the first of the 3 other facilities had an even bigger error — wrong rate schedule for 6 years. Refund was $89,000. My fee at 40%: $35,600. The CFO has not complained once.