A success fee is a payment that falls due only when a deal closes. It is usually set as a percentage of the deal's value. The idea is simple, but the detail in the agreement decides how it works in practice. These are the terms to read closely.
The percentage
The headline rate varies with the size and type of deal. Some agreements use a single rate. Others use tiers, where the rate changes as deal value rises. What matters is that the rate is fixed in writing before work starts.
The definition of deal value
This is the term that causes the most disputes. Does deal value mean the first-year contract value or the full multi-year total? Does it include renewals, earn-outs, assumed debt or deferred payments? A good agreement answers these questions directly, ideally with a worked example.
When the fee is due
Common triggers are signature, closing or receipt of payment. For contracts paid over several years, the agreement may spread the fee to match the payments.
Retainers and expenses
Some engagements combine a success fee with a retainer or an agreed expense budget. If so, the agreement should say whether the retainer is credited against the success fee.
Term and tail
Agreements normally run for a fixed term. A tail clause covers the period after the term ends: if you close a deal with a party the adviser introduced during the engagement, the fee still applies for an agreed number of months. Check that the tail is limited to named parties.
Before you sign
Ask the adviser to walk through a worked example using your likely deal. If the two of you calculate different numbers from the same wording, the wording needs more work. Have your lawyer review the agreement before you sign it.
This article is general information, not legal or financial advice.