Lehman scale

The Lehman Scale is a traditional schedule of business broker and advisers’ chargeable fees. The scale is based on the transaction size of the deal, and is normally payable by the vendor(s) of the business once the purchaser's funds have cleared.

* 5% on the first $1,000,000, plus
* 4% on the second $1,000,000, plus
* 3% on the third $1,000,000, plus
* 2% on the fourth $1,000,000, plus
* 1% on everything above $4,000,000

The Lehman Scale was widely used in the 1970s, 1980s and 1990s. Its popularity has waned recently, mainly because there is little incentive for the adviser to "go the extra mile" in achieving a higher sale value.

Given this, many firms use a variant of the scale, often starting at 1/2 of the scale and increasing payment for factors such as time and effort, value added, work above and beyond the norm, and other "extra mile" efforts. The increased payment or incentive can range from increased scale to stock vestment,contract and earnings based bonuses and other creative incentives that are possibly based on the value added and reflect the duration of the value added.

An example might be one wherein someone that builds a system is usually paid a wage on an hourly or contract basis determined on time and costs involved(such as material costs), but instead opts for a Scale based payment with performance and service after the sale based bonuses. Highway contracts are often structured to pay the contractor extra for ahead of time completion, under budget completion and other performance based bonuses, and they may also be fined for lane closures and other performance reducing situations. A software contract or system builder contract could use similar benchmarks: that is to say that items that add value, such as ease of use or uptime enhancing additions, would create a greater bonus and problems which congest performance or cause downtime create penalties or reduce bonuses. Longer term value added bonuses may deal with source code and upgrades to same, upgrades, maintaining and updating and continued troubleshooting as well as working with outside developers and those who add widgets, tools and other performance and user satisfaction enhancing developments. A good rule of thumb would be to tie bonuses to economic value added, added traffic or usage, added promotional values insofar as a simple direct formula or wherein there is no direct correlation, survey or popularity assessments of value enhancement. Something like a paperless ticket that is used by all the passengers on a transit system but adds a promotional or perceived value may need to be tied to a surveyed result for an accurate determination of value added. A non-survey assessment might be based on letters received, comment cards and other simple measurement tools.