Which type of compensation is typically linked to the outcome of a project's revenue?

Value-based pricing is a compensation model that directly correlates to the perceived value of a project rather than the costs incurred or the time taken to complete it. This approach means that the fees charged are aligned with the outcome generated for the client, such as the revenue produced by a project. When a project's revenue is a key factor, value-based pricing allows professionals to charge based on the benefits that their services deliver to the client, incentivizing them to achieve the best possible results.

In contrast, lump sum or fixed fee arrangements typically set a predetermined price for the project regardless of the final outcome. Time-based fees are often calculated based on the number of hours worked, which may not directly relate to project revenue. Direct personnel expenses focus on the costs associated with the team's labor and overhead, rather than the value delivered to the client in terms of revenue enhancement. Thus, value-based pricing uniquely connects compensation to project outcomes, making it the most suitable choice for linking compensation with revenue generated.