One of the most exciting things about having a home business as a marketing consultant — besides the fact it is easy and inexpensive to learn to do, no matter who you are — is something called “contingency” deals.
Contingency deals are where you come in, help the client make more sales and convert more customers — which many times takes doing only a few, really minor things so simple even a high school kid could do it if they knew how — and then getting paid on the percentage of those sales.
In other words, you come in and help Mr. Business Owner earn an extra $100,000 and you get a fat 15% (or whatever number you negotiate) — or $15,000 in bonus commissions.
Unfortunately, while contingency deals are great…they can also be very dangerous, and you have to watch yourself.
Why can they be dangerous?
Simply because they can take a long time to pay out.
And if you have a mortgage to pay or some other kind of financial responsibility, and you’re doing all contingency deals, you could find yourself in for a heap of hurting.
I found this out the hard way when I was just starting out.
I started my home business as a marketing consultant almost 20 years ago with the legendary marketing genius Jay Abraham’s famous “If I Could Bring Your Business A Dollar, Would You Be Willing to Pay Me 25 Cents for the Increase of The Business?” marketing consulting training.
And while he was a spectacular trainer, I found there was a slight flaw in his model.
And that was, he was training us to do pure contingency deals where the money would come fast and furious…but not for several months later.
Like I said, I found this out the hard way.
I came home from his training and I ran an ad of that very nature (i.e. “If I Could Bring Your Business A Dollar, Would You Be Willing to Pay Me 25 Cents for the Increase of The Business?”).
And I got phone calls and I put it out there into a small business magazine that was being distributed to businesses, and it said that very thing. And again, I got several phone calls.
Then, I found out what the problem was with that model.
Jay was able to do it because he had already made hundreds of thousands of dollars and had hundreds of thousands of dollars in the bank, and so he could afford to do a contingency. He could afford to wait 6 months, a year or however long to see the results.
You see, many of these contingency clients take a lot of time to make work and it can take a while before you see the sales. Plus, it takes money to make the marketing work, and they don’t have the money.
Which is why people called guys like us (those of us using Jay Abraham’s model) because by doing a pure contingency deal — where we got no up front fees — we made it almost a “can’t refuse” offer.
Only problem is, if you are starting out and don’t have enough money to wait out the time it takes between when you get a client and see some money from sales…you’re basically in trouble. Especially if you have a house or car payment or kids or anything else that you need to have cash flow for.
And so today, I tell my students who are training to start home businesses as marketing consultants not to do straight contingency deals.
At least not a first.
Instead, do it smart. Charge per step. Charge for each step of the process as you go along. Break up the work you do into different phases and only charge them for the phase you are working on.
That way your fee is almost like manageable payments for the client and he doesn’t worry about blowing all this money up front before he’s seen results. And you get paid along the way at the same time.