A success fee bracket is not a percentage

Ask three people in a deal team what the success fee on a five-million transaction is under a 5/4/3/2 bracket, and you will get two answers. One of them is wrong, and it is usually the one that ends up in the spreadsheet.

A bracket, sometimes called a Lehman scale or a scaled fee, does not apply one percentage to the whole amount. It applies a different percentage to each slice of the amount, and the fee is the sum of the slices. That is the whole point of the structure: it rewards the first million heavily and every next million a little less, so that both sides have an incentive that does not break at any price.

Where it goes wrong in practice

The mistake is rarely in the mandate letter. It is in the tooling around it. A CRM field called "fee %" invites someone to type "2" because that is the last number in the bracket, or "5" because that is the first. From that moment on every forecast, every pipeline value and every partner report carries the error, and nobody notices until the invoice is drafted.

The second mistake is the base. The fee should be forecast on the highest bid that is still in the process. A bid from a party that has dropped out is not a base for anything, however flattering it looked in June. And the minimum fee has to stay in view: when the best remaining bid drops below the point where the bracket produces less than the minimum, the minimum applies, and the forecast should say so.

What the software should do

• Store the bracket as brackets: from which amount, which percentage. Not one number.
• Calculate forward on the highest active bid, and recalculate the moment a bidder drops.
• Show the calculation, slice by slice. A number without its derivation is a number nobody trusts.
• Keep the minimum fee and the retainer next to it, because the client will ask about all three in the same sentence.

None of this is complicated. It is just precise, and precision is the product. A client who sees the slices on screen does not need to redo the sum on paper. That is the difference between a tool the deal team tolerates and one they open first.