5 Steps to Getting the Price RightJun 12, 2017
When you are trying to figure out how to price your consulting, you’re really asking three related but very different questions.
Sure you want to know about the nuts and bolts about pricing.
You also want some insight into how to increase your fees and make more money consulting.
But ultimately, you want to know the answer to one key question: Am I getting paid what I am worth?
There are several reasons why you need REAL answers to these essential pricing questions. When you know how to price your consulting and can truly own the value that you create, you will be able to:
- More confidently market yourself
- Ask high-paying clients to work with you
- Avoid the time-for-money trap
- Get out of the labor intensive projects that suck all of your time (and are infamous for boundary-creep
- Sidestep those low-paying "one off's" that make you feel little more than an order taker
So, in this article, I am giving you my 5 Steps to the Getting the Price Right. But before I jump into the tactics, I want to get a few guiding principles straight:
- Pricing is not a separate activity from your overall business strategy and brand. How you price is an integral part of your consulting offer. You establish your brand with potential clients through your marketing messages, how you interact with them, what work you pitch for them and how you frame that work as well as what you charge AND how you charge. Therefore, your pricing strategy is an essential aspect and extension of your consulting brand.
- Pricing is not a separate activity from your overall contracting process. What takes place in your initial discovery meeting with your client defines the direction that your proposal can take. If you ask your future client about their request and don't pivot the conversation into business performance needs, you will cap what you can offer and your earning potential.
- When it comes to consulting sales, you want more than a signature on the dotted line of a contract. You want to establish your strategic partnership with your client. I call consulting sales Partnership Set Up because what you do in every aspect of this process determines if you are going to be able to position yourself for maximum credibility, contribution and compensation or if you will be stuck in the time-for-dollars, order-taker trap.
- Fee ranges are project driven NOT market driven. It doesn’t matter what others out there are charging by the hour or the day. Consulting fees should relate more to the incremental value that the consultant’s differentiated expertise creates for a specific client with a specific business performance need.
- Whatever you charge, you have to always keep the 10x rule in mind which means: whatever investment you are asking your future client to make has to yield them at least a 10 to 1 return on that investment. This is how you you are able to justify your fees AND create hordes of satisfied clients who will continue working with you (and refer you to others)
- You won't establish your thought leadership positioning and be seen as a highly valuable consultant if you undercharge. Too many smart consultants ask for way below their worth (and they know it) because they are afraid that they won't land the business when the reality is that the opposite is true. Your clients don't want the lowest price. They want the best price/value. They want a return on their investment.
Let's now look at the Five Steps To Getting the Price Right:
1. When you first get the call from a future client who expresses interest in your consulting, you have to be fully aware that the handoff from marketing to sales took place. That initial phone call or meeting is your first step in the Partnership Set Up process. By the end of your initial Discovery Meeting(s), you and your client need shared agreement on four things:
- The business performance gaps that your client wants to resolve (NOT the methodology that they want to implement but the real business objectives that are driving their need to reach out to someone like you.)
- The business case for bridging those performance gaps - whether they work with you or not. The business case is what translates the goals into tangible dollars which both encourages action in your future client and begins to set your future fee rangers.
- The incremental outcomes that working with you is supposed to create (vs. doing the work on their own)
- The business case for working with you - which is translating the increased project speed to completion, project quality, objective point of view or whatever else they want in a consultant to tangible dollars and intangible but significant value.
2. Once you have this directional agreement in place, you are now ready to proactively recommend the better solution your client can employ to resolve their business performance gaps and options of differing ways your client can work with you to deliver that solution. This part of your proposal provides a key way to offer on-the-spot value to your client because you are showing them the roadmap to solving their challenges.
3. Create at least three options for how your clients can access you and your expertise at differing levels of involvement that will translate naturally to differing price points. With your options, you are demonstrating in a tangible way the value that you can create for them that they would not receive on their own.
4. There is an art and science to pricing. I want to give you a formula to help you think about the science. Review the flow chart below.
The project that your client is about to engage in should achieve a financial return on investment (ROI). For example, if you are trying to help your client improve their net promoter scores, that translates to some serious project benefits in terms of revenue from new customers and reduction in marketing costs among other benefits.
And there is a huge return on your approach (ROA) that adds to the overall financial story. This information gives you a sense of what your fee range should be because it shows you the 10 to 1 return potential.
5. Layer in the art to your pricing. You have to consider your fees also from the point of view of your client and what is truly involved in the offer contained within each option. Your client is expecting a positive price/value so you have to make sure you are offering significant value in your options that will warrant the fees you ask for. It has be transparent enough that you can explain how you got to your numbers in a way that will make sense to your clients.
A lot of your pricing comes down to your mindset. If you always have the mindset that you not an expense that needs to be managed but rather an investment that yields a return, you will be well on your way to always getting the price right.
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