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In an incentive-based agreement, the key danger lies in the lack of transparency regarding costs. While such contracts allow compensation based on revenue generated, it's essential to recognize that revenue figures do not reveal underlying costs incurred by the company. For instance, a person might bring in $100,000 and receive a percentage of that as payment; however, the total costs could significantly reduce the actual profit. Consequently, without knowledge of these costs, individuals may not fully understand the financial implications of the agreement, which can lead to unexpected losses or disputes. Understanding this risk is crucial before signing such contracts.
