Value-Based Fees: How to Charge—and Get—What You're Worth: A Guide for Consultants, Second Edition

3.3. QUANTITATIVE AND QUALITATIVE MEASURES AND CRITERIA

Fees that are based on true outcomes and client results require that some metrics be established for those results so that you and the client can relate the improved client condition to your involvement and not the fate or actions of others. (One thing about deliverables is that the client knows when you've delivered them, but that's hardly justification for basing fees on them.)

There are two kinds of metrics to assign to the desired client outcomes: quantitative (improvement by an objective yardstick) and qualitative (improvement by an agreed-upon subjective reference point).

3.3.1. Quantitative or Objective Criteria

The objective measures of client improvement are clear and obvious. They include areas such as market share, revenues, profits, response time, customer ratings, employee ratings, return on investment, return on sales, return on equity, return on assets, retention of clients, retention of employees, numbers of new sales, margin per sale, product to market time, and installed systems—the list could go on and on. However, there are several critical aspects to even such clear and objective measures.

First, the nature of the measurement device must be agreed on. Will it be the monthly sales reports, the sales call sheets, the finance department's weekly profit report, or the six-month review of retained business? In many cases, clients will think they are measuring objective data, but they are really relying on ...