Agreements · Legal

Can profit sharing agreement and retainer fees can be charged to the same company?

Abhishek Sinha Co-founder @ ESIC

February 22nd, 2021

We are a digital solutions studio that provides technology solutions to SMBs.


We are building a technology product for one of our clients who has offered us profit sharing on this product. We are also charging him a basic retainer fees for our development costs in future. Can retainer fees and profit sharing can be done with the same company?

Paul Garcia marketing exec & business advisor

February 23rd, 2021

You can do whatever you want in a contract so long as it isn't breaking laws. I don't know why you'd necessarily want this kind of relationship. It sounds like they're asking you to take risks, but then also paying you? Just how big are these risks?

Manavendra Gokhale FOUNDER AND PRINCIPLE CONSULTANT/CEO at CEREBRAPLUS CONSULTING

February 23rd, 2021

You need to understand the context a bit differently. Retainership is fine and ok as the client feels the need to give you some money upfront.

Rest as a profit sharing client has a different viewpoint possibly

1. How sure are you of getting the product done and tested ...ready to use/market

2. Whats your skin in the game ??Are you willing to get upside on success?

3. Is the client wanting to demonstrate domain expertise using your name ?

4. Pl do due diligence on the clients tack record on new product development. If not approach the same assignment with full documentation and emails on record.

hope this helps .

you can send me a mail on cerebraplus@gmail.com if you need to talk further on the matter.

Tony B All knowledge is self knowledge. Keep learning. Stay hungry.

February 26th, 2021

The short answer is yes. There is nothing wrong with the circumstances you are describing when it comes to how you do your billing. Sometimes clients have specific needs or restrictions they want to maintain to meet their current objectives. Paul makes a good point though. This seems a bit unorthodox.


The thing to consider here is if you are taking a low equity stake to make a larger retainer, or a smaller retainer to maintain a larger equity stake. This is where your risk and efforts are guided by your capacity to risk long-term goals over short-term cash flow to grow your own business.


What's in this for you at the moment, either success or failure?

Jemar Souza An aspiring entrepreneur and change agent trying to make a few things happen at a time

March 1st, 2021

Hi Abhishek,


I'm actually working with lawyers to create a contract that I think accomplishes your goal. If you'd like to see an example of what we have so far, feel free to email me at jemar@baumideas.com.


Best,

Jemar