Value-Based Fees, 3rd Edition

CHAPTER 6The Sublime Nature of Trusted Advisor Relationships: It's the Smarts, Stupid

There is a difference in my book (and this is, of course, my book) between value-based fees and retainer fees. While both are in the same ball park, the view of the field is different in this regard.

• A value-based fee is compensation paid by the client in exchange for the consultant's contribution to the ultimate value (improved condition) that the client agrees will be derived from a partnership on a project. Value-based fees concern projects of finite scope.
• A retainer fee is compensation paid by the client in exchange for access to the consultant and the consultant's talents for a specified interval. Retainer fees concern time periods of finite duration.

Just to keep the record straight, a contingency fee, which I don't favor for reasons cited earlier in the book, is compensation paid by the client as a fixed percentage of a stipulated financial outcome at a certain point in time. Contingency fees, often called “performance fees,” concern percentages of monetary gain. And an attorney's “retainer” is simply a deposit from which the attorney subtracts primitive hourly billing rates. “We've retained counsel” actually means “We've paid a lawyer a deposit so that they'll show up because they don't trust us to pay them after they show up.” If that is what you are intent on doing, go back to Chapter 1 and start over.

Trusted Advisor Versus Coaching

A coaching client is someone who had specific ...