Conditional Contracts: Aligning Payment with Progress to Reduce Risk and Build Trust
This post outlines how conditional contracts work, why they’re powerful, and how you can adopt them to close more deals and build better partnerships.
For startups, closing your first deals is always a challenge. You don’t have much of a track record, so potential customers don’t know if you can deliver on your promise.
Many startups try to address this through (nearly) free pilots with the hope of converting to a paid customer. This is a high-risk approach for the startup. It requires a ton of upfront effort, and the customer doesn’t have any skin in the game. Also, it doesn’t provide investors much confidence that people will actually pay for your product or service.
Instead, we encourage our clients to offer conditional contracting. (If I remember correctly, I learned this concept in a robotics conference from Kiwibot co-founder Felipe Chavez Cortez.) Also known as success-based contracts, this approach allows us to create more equitable, lower-risk engagements by tying payment to clear, measurable outcomes. It’s a structure we’ve seen work at multiple levels, from partially deferred coaching fees tied to milestones to success-based pricing for startups piloting new services.
What Is a Conditional Contract?
A conditional contract links payments to specific, predefined outcomes. Instead of requiring clients to pay everything up front, you break the contract into milestones with payment tiers triggered by the level of success achieved.
For example, let’s say you’re offering a $25,000 service. Rather than charging the full amount upfront, the contract might look like this:
$10,000 upfront to get started
$5,000 if a minimum level of success is reached
Another $5,000 if expected results are met
Final $5,000 if “home run” outcomes are achieved, measured by agreed-upon, objective metrics
This structure gives both sides skin in the game and removes ambiguity from the relationship.
Why This Works for Everyone
It De-risks the Deal: For the client, there’s less risk of paying for something that doesn’t deliver. For the provider, it’s easier to close deals with skeptical or resource-constrained partners.
It’s Easier to Start: Clients don’t need to commit the full contract value upfront. They can get started with a smaller investment, while you get to prove your value incrementally.
It Reduces Negotiation Later: Because the levels of success and payments are pre-agreed, there’s no need to renegotiate once results start coming in. Everyone knows exactly what happens if milestones are hit (or missed).
It Encourages Alignment and Clarity: You’re not just agreeing on work, you’re agreeing on what “success” means, in specific and measurable terms. That’s a powerful clarity-builder in any client relationship.
Key Elements of a Good Conditional Contract
This isn’t just a tactic. It’s part of a deeper philosophy of how to operate.
Clear Tiers of Success: Define what “minimum,” “expected,” and “exceptional” outcomes look like in measurable, objective terms.
Pre-agreed Payment Triggers: Tie each outcome level to a specific payment amount. Make it binary: if X happens, Y is paid.
Clarity in Writing: Document it all upfront. Use contracts or deal memos that both parties sign off on.
Shared Commitment: This model only works if both parties are aligned. It’s not about hedging; it’s about building trust.
How We've Seen This Work
This isn’t just theory. We’ve seen this framework in multiple formats:
For Early-Stage Startup Projects: Instead of “pilot projects” that pay poorly and lack commitment, we advocate for conditional contracts with a clear success ladder. This ensures both commitment and upside for both parties.
For Coaching Clients: We often defer part of our fee until the client hits key milestones, like reaching a revenue goal or raising a round. Once that milestone is hit, the payment is automatically triggered.
For Long-Term Engagements: Some deals have tiered outcomes baked into quarterly reviews, allowing payments to scale with actual value delivered.
Philosophical Grounding: Fairness and Reputation
This isn’t just a tactic, it’s part of a deeper philosophy of how we operate.
Our Co-founder, Charles Jolley, often says, “You want clients to be happy to pay you.” If the client feels great about the value you’ve delivered, they’re happy to fulfill their end of the deal.
Another Co-founder, Chu Shin, describes deals like this as wholesome because they’re good for both parties, sustainable, and built for the long term.
And there’s a timeless principle we admire from the Quaker tradition:
“If it’s not a good deal for you, it’s not a good deal for me.”
This is how we want to work, with honesty, clarity, and long-term trust.
Reduce Risk, Build Trust, Win Together
Conditional contracts are more than a clever pricing model; they’re a new way to build trust-based relationships in environments where risk is high and track records may be short.
They help founders close deals faster. They help clients de-risk innovation. And they make it easier for both sides to focus on what really matters: outcomes.
If you’re a coach, consultant, or early-stage founder, try using conditional contracts as a tool to open doors, align incentives, and build long-term credibility.
Because in the end, the best deals are the ones both sides feel good about—before, during, and after.