Got a small client in Omaha — single OPPD account, about $1,800/month. Tiny account but the owner is persistent and wants an audit. At 40% contingency the potential fee is probably $300-500 based on what I'd likely find. That barely covers my time to pull the data and run the analysis. Would 50% be out of line for a small account like this?
Is 50% contingency ever justified?
I charge 50% on accounts under $2,000/month. My engagement agreement has a tiered rate: 50% for accounts under $2K/month, 40% for $2K-$10K, 35% for $10K-$50K, 30% above $50K. The higher rate on small accounts compensates for the fixed time cost of data collection and analysis regardless of account size. Most small account clients don't question 50% because they understand they're getting something for nothing if there's no finding.
I do the same. 50% on small accounts is fair because the work effort is nearly the same as a larger account. You still have to get the LOA, collect 24 months of bills, read the tariff, and do the analysis. The only thing that scales with account size is the recovery amount. If the client is getting money back that they never would have found on their own, 50% of something is better than 100% of nothing.
The tiered approach Greg describes is industry standard and 50% on small accounts is absolutely justified. The economics are simple: your minimum viable engagement requires a certain number of hours regardless of account size. On a $1,800/month account the realistic recovery might be $3,000-8,000. At 50% your fee is $1,500-4,000 which is reasonable compensation for professional work. Clients who balk at 50% on small accounts usually don't understand the work involved. Explain the process and most will agree.
Quoted 50% and the client signed without hesitation. Found $4,200 in tax exemption refunds. My fee was $2,100 for about 6 hours of total work. At 40% it would have been $1,680 — not a huge difference but the principle matters. Small accounts deserve fair compensation.