How To Charge On A Performance Basis?

Best way to charge your client on a performance basis

The burning question… “How to charge on a performance basis?”

Speaking to my students each day really does open my eyes to the struggles we all face in lead generation at one time or another, and I love sharing how we can solve these problems!

Because there is always a solution!

I was chatting to one of my students this week who wanted advice on how he could charge his client based on a performance basis.

To give you some context, here was the situation.

The client was spending $40k a month and was making a hefty $150k from that ad spend.

My student had been paid upfront for the set up which is great! But he wasn’t sure how to get paid his worth if he increased performance.

Here’s where you’d normally charge a certain amount per sale etc………..

BUT What if their CRM goes down?

What if their sales team isn’t performing for a week?

You get paid significantly less…

Don’t get me wrong this can be a really good money earner, but what if you charged further down the funnel?

Hear me out…

Say you are spending $40k ad spend and generating 200 leads a week. These 200 leads are leading to a $150k turnover for the client.

Well, what if for the same ad spend you are able to optimise the account to generate 300 leads per week? It stands to reason they will be making significantly more money.

You should get a slice of that pie. You should charge on a PERFORMANCE basis.

You should be negotiating to get 50% of that extra revenue.

For example, if they turn over $50k more at the same ad budget, you should be getting $25k. And they will bite your hand off because that’s still $25k more than they would usually be getting!

I go into detail on how this “charging on a performance basis” tactic would work in the video above.

I hope you enjoyed this blog post!

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Video transcript

Hi there everyone, it's Dan Wardrobe here from Flexxable.

I wanted to talk to you today about a student of mine who was asking me advice basically, on how we should get charged on performance basis.

So the client in particular, he was talking about, I think is spending 40,000 US dollars a month on a lead generation for his education style courses.

And I think that person is turning over, that client is turning over about 150 grand from that 40 grand ad spend, which is, you know, pretty nice margin, obviously that doesn't include overheads and everything else that he's got going on, who knows what that's like.

But anyway, that's beside the point, my student was asking me, how should I charge this client on a performance basis?

And I think what he'd already negotiated is to be paid upfront for any kind of setup costs and work that needs to be done, which is great.

But he was asking me, what do I do?

How do I charge for anything above and beyond you know, that setup fee, how can I get paid what I'm worth?

How can I get paid on performance?

And the obvious solution I think, well, that he thought of, and that I initially thought of as well, as just to get paid above and beyond that $150,000 that the clients client's generating, right.

But the more I got thinking about it, the more I was like, well, you know, that's all good, but what happens if there's a lag in sales?

What happens if the client is, you know, not having a good day with their sales team and something, the CRM breaks or whatever that might be.

And it just affects, you know, the amount of sales they can make from that ad spend, what happens if they're just having a bad month or what happens if it's over Christmas or whatever that is?

So it got me thinking about the ways that we charge some of our clients and it's much kind of further up the chain.

So I dug a little bit deeper and I found out that they generate the majority of their leads from like an e-book kind of resource guide that the consumer downloads, and then they're converted by an auto responder sequence and also over the phone.

Okay, so I was kind of like, well probably the best way to do this is to figure out from that $40,000 ad spend, how many downloads of these resource guides has there been over the past month and how many sales have come from the autoresponder sequence and how many sales have come direct, IE, from I think there's also a way for the consumer to buy direct from the landing page, but majority coming from autoresponder, the autoresponder sequence in the sales team.

So I think it was better.

I think it's better for him to be paid on a performance basis further up the chain then based on the sale.

So let's say out of that $40,000 spend, the website downloads 200 resource guides or whatever that is, with the same spend, if he can get up to 300, then that should automatically, those extra 100 downloads should turn into a certain amount of extra sales, and he should be paid on that uplift of those resource downloads.

And the split would be 50% above and beyond what the client was getting paid. Sorry, that 150 grand.

So let's say that extra 100 downloads is forecast to generate an extra $50,000 in revenue.

He should be split 50% of that revenue, because it's above and beyond what the client is already getting for the ad spend they already have.

All right, so my advice in situations like this is to just look a little bit further up the funnel to see there's a way you can get paid with more certainty and faster, because sometimes the lag in sales and everything that goes on there can really affect payouts and there's arguments and all sorts of messy stuff.

So keep it as simple as you can on a performance basis.

I hope that helps, I'll see you in the next video.