Prospect loves the contingency model but wants to cap my fee at $25,000 regardless of how much I find. Their concern is that if I find a massive error, my percentage fee could be "disproportionate." My standard fee is 40% of first-year savings. If I find $100,000 in annual savings, my fee would be $40,000 — they want it capped at $25,000. Should I agree?
Client wants to cap my fee — should I agree?
I'd counter with a sliding scale instead of a hard cap. Something like: 40% on the first $50,000 in savings, 30% on savings between $50,000 and $100,000, and 20% on savings above $100,000. This addresses their concern about proportionality while still rewarding you fairly for larger finds. A hard cap at $25,000 removes your incentive to dig deep once you've found $62,500 in savings.
Karen's sliding scale is the right compromise. Never agree to a hard cap because it limits your upside while your downside (finding nothing and earning zero) stays the same. The sliding scale is fair to both parties — the client pays a lower marginal rate on larger findings, and you still have an incentive to find every dollar. If the prospect insists on a hard cap despite the sliding scale offer, they're telling you they don't value your work. Walk away.
Proposed the sliding scale. Client agreed immediately — said it made more sense than the cap. Thanks for the suggestion Karen. Would have left money on the table with the cap.