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Caution: Be aware of “consultants” requesting upfront fees
I just wanted to let you know that there is someone on this forum that claims to be a consultant and asks for a $2200 base fee and then requires a retainer prior to signing an NDA.In my 20+ years of business experience, I have never known any legitimate company to request a fee for an NDA and it just seemed like red flags to me.
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8 Replies
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Hmmm … that is a highly unusual business practice. I’m wondering how is it possible that a consultant could even quote a $2,200 base fee prior to the signing of an NDA as you certainly would not have divulged enough detailed information pre-NDA for the consultant to even know how to price out the development of your product.
There was a situation about a year ago with a few people complaining that they had paid a consultant on here who failed to deliver prototypes/product.Always a good idea to check references prior to signing a contract. But, never, ever is it a good idea to pay someone prior to executing an NDA and that consultant having a clear understanding of your product development requirements. -
When I have taken consulting jobs for people with no experience/reputation in the cosmetic industry and/or no business experience at all, I have charged an initial fee for a phone consultation, because I have had way too many 2-3 hour free phone calls that did not turn into a paying gig.I could certainly understand charging a small fee to prepare a NDA as well, since I need to be paid for my time, and again, there have been too many that have gone nowhere. I’ve found that being a nice guy about this does not put food on the table, and some clients will take shameless advantage of my good nature.It would also not be out of line for a consultant to say that his/her minimum fee is about $2,000, which entitles you to x amount of time/labwork/samples.I would probably put things differently than charging a “retainer”, though. I think I’d say that my small initial fee for preparing the NDA, and the subsequent (larger) fee for a phone consultation (which comes with a written summary) are either considered part of the minimum fee, or will be refunded if the project cost goes beyond the minimum fee.I forgot to mention that paying for a phone consultation does not obligate any of my prospective clients to the minimum consulting fee. -
Another explanation for making such terms is that the consultant really didn’t want to work with the client. This way the client is rejecting them rather than them telling someone no.
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I would find it highly suspect if a consultant wanted to charge me for the preparation of an NDA, which any consultant should have on hand as a standard document. I have a canned NDA, which is the only one that I will sign, unless it is a corporate client, that can be filled and signed digitally. Takes me all of 2 minutes to prepare an NDA.
No problem with letting a client know what your minimum fee is for any particular project. I usually ask the client to provide in writing enough information for me to scope out the project before I would even consider signing an NDA and I give them the cost estimate upfront, but after I have an understanding of what they want developed. If they have an issue with my fee then there is no need to sign an NDA and no need for me to spend hours on the phone with the prospect. -
@MarkBroussard - everything you say seems reasonable enough to me.
Of course once you sign an NDA you may be bound to secrecy about the project which could jeopardize you from working on other projects that might be similar. There are not a lot of truly unique ideas in cosmetic marketing. -
For me, asking for a small fee for an NDA is mostly a selection/exclusion method, particularly for those people who flat out refuse to disclose even the tiniest bit about their projects without one. If they’re not willing to pay $20 for me to fill out paperwork, I tend to make the assumption that they are also going to give me a hard time about paying the rest of their bills - and I can do without that.
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@BobZ:
Understood. Your point is well taken. We all have our methods of doing business and our methods of evaluating whether a client is a viable prospect or a dreamer without the financial resources to finance a development project. I prefer to just tell the prospect the project cost once I feel I understand the project and leave it up to the client if they want to proceed to an NDA/Contract. Most of the time, I can decipher this without anyone revealing any proprietary information. And, oftentimes, there really is nothing really proprietary about what the client is looking for.If someone refuses to disclose any specifics about what they would like for me to develop, I just punt, since I won’t sign an NDA that may cause me future problems unless I am quite confident the client will move forward with a contract. But, if you have not received any compensation in exchange for entering into an NDA, it is easy enough to take the position that the contract was never valid … For a contract to be a valid, binding contract, both parties must receive some sort of consideration. Your signature on a piece of paper, in and of itself, is not consideration. Regardless, I am very, very cautious about entering into NDA’s. -
@perry and others thanks for your responses- FYI he was not trying to politely decline- he reached out to me and subsequently sent me 3 emails.
I have an extensive business background, specifically in financial services and have dealt with many consultants as well as attorneys in the past 20 years and this particular “consultant” was very pushy and alerted a red flag for me. When I did some of my own research I was informed to watch out for this particular guy/firm as they have been shady in the past and have not fulfilled on their promises leaving people with money out of pocket and no product.I did not have a negative experience other than being turned off by his aggressiveness and persistence to provide a retainer I just wanted to caution others out there.
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