Got a potential client here in Milwaukee who wants WE Energies bills audited going back 5 years. They're looking at maybe $180K in potential savings but want to cap my contingency at 25% instead of my standard 35%. It's a manufacturing plant with some complex demand charges. Anyone else run into clients trying to negotiate down the percentage? I'm torn because it's still decent money but sets a precedent.
Client wants to cap contingency fee at 25% - thoughts?
Linda, I've had this come up a few times with larger clients in Dallas. My take is if the potential recovery is over $150K, I'll consider going to 30% but not below that. The work is still the same complexity whether they save $50K or $500K. Have you done a preliminary assessment of their rate schedule yet? Sometimes the bigger the potential savings, the more leverage you actually have.
I had AEP Ohio customer try this same thing last year. Wanted to cap at 20%! I told them my fee structure isn't negotiable below 30% for commercial accounts. They went with someone else who probably missed half the errors I would have caught. Don't undervalue your expertise Linda. If they're shopping on price alone, they might not be the right client anyway.
Have to agree with Jim on this one. I've learned the hard way that clients who nickel and dime you on the front end usually become problem clients down the road. That said, Linda, what's the time frame they're looking at? If it's rush work, I'd actually charge a premium. For PG&E commercial accounts in California, I rarely go below 33% unless it's a referral from an existing client.
Thanks everyone. The timeline is actually pretty reasonable - they want it done within 90 days. Jim, you're probably right about the price shopping thing. I'm leaning toward countering at 30% and seeing what they say. If they walk, they walk. I've got enough other prospects right now that I don't need to chase this one.
Linda, one thing to consider is building in a minimum fee clause. I learned this after getting burned on a Rocky Mountain Power audit that took 40 hours but only found $800 in savings. Now I always include language that says minimum fee is $2,500 regardless of recovery amount. Protects you if the audit doesn't pan out like expected.
Connie makes a great point about the minimum fee. I use $3,000 as my floor for commercial accounts. Also Linda, make sure your engagement letter is crystal clear about what constitutes "savings" - ongoing vs. one-time refunds, interest calculations, etc. Had a client try to argue that a $15K refund check didn't count toward fee calculation because it was a "credit" not savings.
Update: Countered at 30% with a $2,500 minimum and they accepted! Thanks for the advice everyone. Sometimes you just need to stick to your guns. Already found a $1,200 monthly error in their demand billing just from the preliminary review.