What spoils an advisory relationship most is not the price but the vagueness of what it buys. The client buys an outcome; the adviser sells time and expertise; and the gap between the two is the source of most disputes. This article is written by an advisory house about its own fees, not others', because IAD Business Services Group believes a client who understands how fees are built buys better advice and demands more precise accountability.
The statutory frame of the profession
Advisory work in the Kingdom is a regulated profession, not a free activity without a frame. The Companies Law in Article 197 defines a professional company as “a company established by one or more persons licensed by law to practise one or more liberal professions”, and requires registration in the commercial register and the necessary licences before pursuing its objects under Article 10. Advisory fees are a service subject to value added tax at 15% according to the Zakat, Tax and Customs Authority, so a proposal that does not state whether its price includes the tax hides 15% of its cost. The Group is registered with the Saudi Business Center under commercial registration number 7053884529, which is the first thing a client should verify about any advisory house.
Three models, each with its place
| Model | Form | Fits | Does not fit |
|---|---|---|---|
| Monthly advisory retainer | A set number of days a month: board adviser 4 days, executive adviser 8 days, enterprise adviser 12 days | Recurring decisions and continuous presence beside management | A task with a clear beginning and end |
| Fixed-scope program | A known deliverable with a delivery date and a fixed price: a ninety-day plan, a governance charter, or a restructuring diagnosis | Tasks with a written deliverable | Matters whose scope changes every week |
| Outcome-linked | Part of the fee tied to a measurable outcome | An outcome genuinely within the advisory work's control | An outcome that depends on the market or on parties outside both sides' hands |
The third model is the most attractive and the least used, for good reason. Linking fees to cutting days of collection is reasonable because the advisory work owns its tools; linking them to 20% revenue growth is not, because revenue depends on the market, competitors and the season. An adviser who accepts a link to an outcome they do not control either does not understand their work, or knows the number will not be measured seriously.
How to read a fee proposal
A good fee proposal is read from the end: what is the deliverable, when, by which measure it is judged, and then how much it costs. A proposal that opens with the firm's history and reaches the price on the last page with no named deliverable sells time; one that opens with the deliverable sells an outcome. The difference between the two prices is not the difference between the two proposals, and the cheaper may be dearer if it does not name what will be delivered. IAD Business Services Group writes deliverables on the first page of every proposal, by name, date and page count when the deliverable is a document, because a client deserves to know what they will hold in their hand before what they will pay.
Three signs in a proposal deserve a pause: a scope written in general verbs such as “support” and “accompany” with no deliverable, a team named by titles rather than names, and fees tied to an outcome the adviser has no tools for. The three do not necessarily mean a bad proposal, but they mean questions to be asked before signing rather than after, and a serious adviser welcomes them because they also protect the adviser from a mandate they cannot fulfil. A proposal that answers them in its first version spares both sides a full round of correspondence.
Why pricing is by the day, not the hour
Serious advisory work is not done in scattered hours. The full day is a more honest unit of measure: it allows immersion in the matter, prevents invoices swelling with fractions of hours, and makes proposals comparable, since ten days at one price against ten days at another is clearer than a timesheet nobody understands. The number of days declared in a monthly retainer, 4, 8 or 12, is not an estimate but a commitment the adviser is held to at the end of each month.
A worked example: what the client actually buys (figures disguised)
A family distribution company with revenue of SAR 90 million contracted a fixed-scope program to bring days of collection from 100 to 70 within ninety days, at an illustrative fixed fee of SAR 240 thousand before value added tax. The calculation the client should run before signing, not after: SAR 90 million a year is about SAR 247 thousand of sales a day, so every day cut from collection releases about SAR 247 thousand of cash.
| Item | Value |
|---|---|
| Fee before tax | SAR 240 thousand |
| Value added tax at 15% | SAR 36 thousand |
| Full cost | SAR 276 thousand |
| Cash released when 30 days are achieved | About SAR 7.4 million, once |
| Annual funding saving at 8% | About SAR 590 thousand a year |
| Fee recovery | Under six months from the funding saving alone |
The table shows why price is not the first question. The full fee of SAR 276 thousand is recovered from the funding saving alone in under six months; but if the outcome is not achieved the fee is a total loss however low it was. The right question, then, is not “how much” but “what is the probability of achieving the thirty days, and who has the tools that achieve them”, which the seven questions below answer.
Seven questions before signing
- Who will actually work on the mandate, by name and level? And who will attend the meetings?
- What are the written deliverables, and by which dates?
- How many other mandates is the team working on at the same time?
- What falls explicitly outside the scope?
- Who owns the documents and templates after the mandate ends?
- What is the change mechanism if the scope widens during the work, and at what price per additional day?
- Will a single recommendation be given and defended, or a list of options left to us?
The last question is the most important at IAD Business Services Group. A proposal that ends in a list of alternatives without a preference shifts the burden of decision to the client, which is precisely what they came to buy advice for. An adviser who refuses to prefer protects themselves from error at the expense of the client who pays them to share that risk.
What raises fees and what lowers them
- Raises them: a scope that changes every week, decisions nobody in the company owns so the adviser is waited on to take them, data not delivered on time, and meetings without minutes in which decisions are retaken.
- Lowers them: one owner for the mandate inside the company, a data room ready before day one, a success measure agreed in the contract, and a quick decision on the recommendation when it is given.
Most additional days in advisory mandates go not to analysis but to waiting: for data, for a decision, or for a postponed meeting. A client who appoints one owner for the mandate on their side cuts its days materially without negotiating the day rate.
Five clauses in the contract itself
- The scope, what it includes and what it does not: one sentence per excluded item spares a whole dispute.
- Deliverables by name and date: not “a report” but “a twelve-page investment committee memo dated so-and-so”.
- The team by name: and who replaces whom if someone is absent.
- The change mechanism: how new scope is added, at what day rate, and who approves it on each side.
- Ownership and confidentiality: who owns the templates and documents after the mandate, and what is never mentioned to anyone in the client's name.
When we decline a mandate
A serious advisory house declines mandates as often as it accepts them, and the reasons are stated. IAD Business Services Group declines a mandate when it is wanted to confirm a decision already taken rather than to take it, when the required measure is outside the advisory work's control, or when nobody in the company holds the decision on the recommendation when it is given. Declining in these cases saves the client a full fee, and saves the adviser a reputation, which is the most valuable thing they sell.
Conclusion
Clear fees start from a clear unit of measure, a model that fits the nature of the task, and a return calculation the client runs before signing. The three spare most invoice disputes, and the seventh question spares most disappointments. A client who asks these seven questions usually gets an adviser who likes to be asked.
The client buys an outcome and the adviser sells time and expertise. A good contract names the gap between them.
Sources
- Companies Law, Royal Decree M/132 (1443H), Article 10 (company objects) and Article 197 (definition of the professional company).
- Value added tax, Zakat, Tax and Customs Authority.