Recently I got a new client to work on a specific part of an M&A transaction where he was selling his business. It was a very complicated issue and needed resolving with the other side. I’ve done this a lot and was able to provide a fixed fee. However, because of that, I was very specific and clear about what I would be doing, the timing and the client’s responsibilities, and what was not covered for the fee quoted. Soon after I started, the client called me expressing doubt about the transactions and asked me questions, indicating a nervousness about selling. This started out pretty simple but quickly escalated into a regular stream of calls.
He provided as a reason for the calls my experience and professed expertise in these types of transactions. At first I was somewhat flattered, but the frequency of calls and time it was consuming, along with disruptions to my work day, started mounting up until I realized that these are all on my dime. I did not build excessive calls into my fee and did not expect them.
These calls were conveying great value to the client that I felt I should be compensated for. I came up with three ways of dealing with this and determined a fee described as follows, along with two sample invoices.
1. Time-based fee: Time might have been the better way since scope, time and effort was completely unknown and could not in any way be reasonably estimated. However, I am loath to bill this way and do not like being accountable for my time to the client. I also feel that relating the service to time injects a barrier to calls and interactions.
Sample invoice: Added consulting and advisory services will be billed at the completion of the project based on my hourly rate applied to the time spent.
2. Fixed fee: I determined a fixed fee by estimating the approximate time, number of disruptions, the “on demand” nature of the calls, the size of the overall transaction, and the value to the client of the information, advice, calming influence, insights and the feelings of control or security propping up the client. I did not relate this fee to the project I was engaged for. It was a different type of service, much more intense and unique. At this time, I was the only person the client felt could properly and adequately perform these services. I also feel that a fixed fee removes the sound of the cash register ringing each time the client wants to call or speak with me.
Sample invoice: Added consulting and advisory services to be performed through the closing date but in no event beyond Jan. 31, 2022: $XX,XXX payable 2/3 upon acceptance and the balance at the earlier of the closing or Jan. 31, 2022.
3. Do nothing: Take the calls, spend the time, do not upset the dynamics, and hope it results in a further relationship, i.e., consider it an investment.
Sample invoice: None. However, I am in a business and not a hobby and not getting compensated for valuable work done does not appear to be the way to run a business. I also feel clients do not mind paying if they know the cost and feel there is value. I have also found that when clients do not know the cost, they are somewhat leery when they encroach upon our good nature and on some unconscious level hold back from fully opening up to us.
In the long run, none of this would make a difference one way or the other. However, it is a representation of how you run your business, and I believe this is something that should be considered.
Do not hesitate to contact me at
Edward Mendlowitz, CPA, is partner at
