Legal · Contracts

How to protect a finders fee?

Jason Gorham Corporate Executive Recruiter at Aflac

October 22nd, 2015

Has anyone created or currently run a business just based on finders fees?  If so how do you protect yourself before you divulge your findings (not work or consulting or a product that is delivered) to the person and want to get paid for those findings?  

What type of contract do you have the person sign to recoup your money based off of your findings?  Would it be power of attorney...fee agreement?  Once you divulge your findings and the person doesn't agree to pay do you move to litigation?  

Bruce Specter Real Estate Investments and Aquisitions at Intero Real Estate Services

October 22nd, 2015

I have found the fee agreement the best legal tool for securing your position, whether consulting based on your subject matter expertise or connecting people/companies/projects.  There are numerous templates and how to's on the net, just search.

To your last question, just because you get a contract executed (signed) doesn't mean a guarantee of payment.  It's not over until the check clears.  Sadly, litigation or collection is the next step.

Find a good business attorney that can craft a fee contract that spells out specifically what you want and get their legal advise on protecting your interests as much as possible. 

Bill Keating COO at Seebright

October 22nd, 2015

Usually we use a non-circumvent or non-circumvention agreement to protect our finders fees. Bill (650) 722-3333

Burke Franklin

October 22nd, 2015

Great questions Jason. We address these with a couple of templates included in our sample business contract template collection here. You can read them without purchasing. Scroll down to the Consultants / Business Advisors collection -- there are 2 Finder's Fee agreements, plus the Referral Acknowledgement (this is the one that seals the deal). Hope this helps!

Steve Everhard All Things Startup

October 22nd, 2015

I agree with Bill that a non-circumvention clause is the appropriate approach. It recognises your intermediary role as a facilitator of contacts. I would add that the more value you inject into the relationship the more likely you are to get paid. Circumvention usually happens because the intermediary is adding no value and so both sides are reluctant to pay for a simple introduction, say an email or phone number exchange.

Understanding the needs of both parties means that a degree of due diligence is possible by you, which lubricates the early stage of the other parties relationship and cements your value. You might also consider a range of fees that recognise the extent of your involvement and the difficulty of the assignment. The more you are the trusted intermediary then the more valuable you are to both sides.