Selling Outcomes

Outcome / Performance-Based (Success / Contingency / Gainshare)

Definition (short). You only get paid (or get most of your pay) if a predefined outcome is achieved—e.g., a hire is made, a lawsuit is won, a deal closes, a KPI target is hit. You trade certainty for upside: lower or zero base fees, larger “success fees” when you deliver.

Recent example. Contingent recruiters typically charge 15 – 25 % of first-year salary only if the candidate is hired (e.g., $20 k on a $100 k role). Personal-injury lawyers in the U.S. commonly take 30 – 40 % of the award on a “no win, no fee” basis. Investment banks collect “success fees” of ~ 1 % on mid-market M&A deals, falling as deal size rises. Performance marketing/affiliate programs pay only on conversion or sale.

Historical example. Real-estate brokers since the late 19th century have been paid a 5 – 6 % commission on sale price (split between buyer and seller agents). Maritime “no cure, no pay” salvage contracts go back centuries: salvors only get paid if they save the ship or cargo (Lloyd’s Open Form).

KPI Definitions

Expected Value per Engagement (EVPE). Pseudo: EVPE = (Success_Rate * Fee_per_Success) − Cost_per_Opportunity. Why it matters: A CEO needs to know if the portfolio of bets is positive EV; high EVPE means your pricing and screening compensate for failures. Benchmark: A healthy contingency recruiter might target EVPE ≥ 2× direct delivery cost per search, given ~25 % fill rates and 20 % fees.

Success Rate % (SR). Pseudo: SR = Successful_Engagements / Total_Engagements * 100. Why it matters: Low SR means wasted effort; high SR indicates strong screening or execution. Benchmark: Contingent recruiters report 20 – 30 % fill rates; plaintiff lawyers often claim 60 – 90 % win/settle rates.

Average Fee per Success (FPS). Pseudo: FPS = Total_Success_Fees / Successful_Engagements. Why it matters: Together with SR it defines revenue potential; larger FPS can offset lower SR. Benchmark: Recruiting: 15 – 25 % of first-year salary. M&A advisory: ~ 1 % on mid-sized deals. Legal contingency: 30 – 40 % of settlement.

Cost per Opportunity Closed (COC). Pseudo: COC = (Sales + Delivery Costs for that Engagement). Why it matters: If COC creeps up, your EV per engagement shrinks; it’s the denominator for pricing. Benchmark: Top recruiters keep delivery cost < 25 % of expected fee.

Total Opportunities Undertaken (OPP). Pseudo: COUNT(engagements_started). Why it matters: Volume drives total revenue potential but can dilute focus and SR if you take weak deals. Benchmark: A single recruiter handling 5 – 10 searches at once is typical.

Average Cycle Time to Outcome (CT). Pseudo: mean(end_date − start_date). Why it matters: Long cycles tie up resources and delay cash. Faster cycles improve annualized EV. Benchmark: Recruiters aim 30 – 60 days to fill.

Client Value Delivered $ (VAL). Pseudo: Σ client_value_metric. Why it matters: Validates fee size and proves ROI; helps negotiate better splits. Benchmark: Gainshare consulting commonly takes 10 – 30 % of measured savings.

Provider % of Value (Split %) (SPLIT). Pseudo: Fee_per_Success / Client_Value * 100. Why it matters: Ensures pricing aligns with delivered value; too low = leaving money on table; too high = client pushback. Benchmark: Typical splits: 10 – 30 % for gainshare consulting, ~ 5 – 6 % realtor commission.

Acquisition & Delivery Cost / Opportunity (ACQCost). Pseudo: Total_S&M + Delivery_Pre-fee / Opportunities. Why it matters: This feeds the EVPE equation; if ACQCost rises faster than FPS or SR, your economics deteriorate. Benchmark: Growth-stage firms watch that ACQCost stays < 50 % of EVPE.

Risk Screening Score (RISK). Pseudo: score = f(evidence_strength, client_commitment, precedent, achievable_value) Why it matters: Good screening improves SR and EVPE; bad screening floods pipeline with losers. Benchmark: Top contingency firms accept only < 10 % of inbound PI cases.

Qualified Pipeline % (PIPE). Pseudo: Qualified_Opps / Total_Opps * 100. Why it matters: Focused pipelines save cost and maintain SR. Benchmark: Many high-end firms keep ~ 30 – 50 % of inbound leads.

Work-in-Progress Load (WIP). Pseudo: COUNT(active_engagements) or Σ hours_in_progress. Why it matters: WIP must match team capacity; overload reduces SR and elongates CT. Benchmark: Recruiters handle 5 – 10 live searches.

Client ROI Multiple (ROIc). Pseudo: Client_Value / Fee_Paid. Why it matters: A solid ROI story justifies your fee structure and helps renewals/referrals. Benchmark: Gainshare deals often promise 3 – 10× client ROI.

Cap / Floor Clauses % (CAP). Pseudo: Deals_with_cap_or_floor / Total_Deals * 100. Why it matters: Caps can limit upside; floors protect downside—balance both. Benchmark: Recruiters often have minimum flat fees (~$10 k).

Top-5 Clients Revenue Concentration % (CONC) (aux). Pseudo: Rev_top5 / Total_Rev * 100. Why it matters: A whale leaving can crush EVPE and SR. Benchmark: Aim for < 50 %.