Pricing Method for Consultants

RETURN ON EFFORT

Effort does not equal results.

As consultants we must pursue greater return on our efforts. Fulfillment is the goal.

We find fulfillment in creating value for our clients. More value, less effort, that’s the game.

The truth is: making an impact has nothing to do with how hard you work.

HOURLY PURGATORY

Seven years after taking the leap as an independent consultant, I’ve charged hourly for my services one time and one time only.

It was my very first consulting gig, and the project took longer than expected.

I was excited because I’d make more money. I was proud of my work, and my client was getting quality service. Value.

Yet all they cared about was it cost them more than they anticipated.

Where’s the fulfillment in that?

And then what? I get better and better, faster at delivering value, and so I make less money?

No, stop it right now!

The truth is we charge hourly because it’s the EASIEST. Clients are used to paying contractors by the hour. We’re scared of not getting the deal, so we take the easy route.

Charging hourly incentivizes us to do more work for the same result.

ANTI return on effort.

ANTI innovation.

ANTI fulfillment.

Innovation is finding better, faster, cheaper ways of solving problems. We need a business model that rewards us for achieving the same results with less effort.

Work with people who pay you to deliver value quickly and easily.

Price premiums live in “quick and easy.”

(PERCEIVED) VALUE-BASED PRICING

The first time I saw a million-dollar strategy, I knew I wanted to be a consultant. It was more than one hundred slides with countless recommendations.

Young Max: “This complex piece of shit is worth a million dollars?”

The truth is that whatever we do is worth what the client thinks it’s worth.

Not you, not me, the client.

The fun part about consulting is that our clients see more value in our work than we do. They lack the perspective we’ve gathered over the years: the exposure to people doing it better.

We mind trick ourselves into thinking we’re not worth it. Like reverse beer goggles telling us we look like junk when everyone else thinks we look like a million bucks.

Price premiums come from perceived value.

The truth is: WHO you’re selling to is more powerful than WHAT you’re selling.

DECISION MAKERS AND ORDER TAKERS

Every consultant would agree that we are strategic partners in our clients’ businesses: decision makers.

But what do clients think?

Do they see us as decision makers or order takers? There’s no gray area.

We’re decision makers at the start. During the sales process our prospects ask for our opinions and ideas. We analyze their pains. We come up with tailored solutions. We create a plan. We coach their team to see what we see and think how we think. If we get the business, it means we were a decision maker—in that moment.

Before consulting I ran an agency. My official title was “Lead Strategist.” During the sales process, prospective clients would introduce me to other members of the buying committee:

“This is Max. He will be helping us with our marketing strategy.”

Yet as time went on, each client would refer to me differently. I’ve been called a blogger, website developer, designer, social media specialist, email marketing guru . . . all of it.

Whatever I was doing at the time was how they introduced me.

IT’S A SLIPPERY SLOPE

When it came time to be strategic again, to be a decision maker, they would fight me. I had lost control. They didn’t see me as a strategist anymore. I was demoted to an order taker.

This is built into business culture: the hierarchy. There are three levels:

1. The top level makes decisions.

2. The bottom level takes orders.

3. The middle makes sure the bottom follows orders.

Our clients have been culturally trained to put us into one of these buckets, and we can be in only one at a time. Remember their goal in life is to move up, which means they need people to fall in line below them.

Thus we are relegated and seen as the lowest-value task that we take on. It’s easy to go down, extremely hard to go up.

The truth is: if we want to charge a price premium, we have to be in control, and we have to be decision makers. We can’t say yes to everything.

Strategy, consulting, and planning are where decision makers live. This is where price premiums survive in even the most saturated markets.

Value is the key to price premiums. Replicability is the enemy of price premiums. We need to sell what is most valuable and difficult to replace.

THE PRICE IS NEVER RIGHT

Two years into doing my own thing I mustered up the courage to raise my prices. I went from $10,000 to $15,000 for what at the time was my standard three-month “productize your service” offering.

I was nervous.

The first time I pitched the $15,000, I got a no. I then asked a question I got from my dad.

“What does this need to look like to make it work for you?”

Turns out they were waiting on a big payment from one of their clients. They couldn’t cut me a check for $15,000. We landed on half up front and half when they got their big client payment (net forty-five days).

Allow me to unpack this experience, because it changed my life.

First discovery: the only thing you learn from “yes” is that you’ve left money on the table. “No” is the START of a sale, not the end. Until then you’re just blowing kisses to each other from across the room.

Second discovery: the first price you quote is the value they assume it’s worth, regardless of their willingness and ability to pay it. Now you’re negotiating from a position of power.

How the f* is Louis Vuitton so expensive? I have no idea, but I assume it’s good quality based on the outrageous price.

We all make assumptions based on price.

The truth is: the price is never right; it’s either too low or too high . . . and too high is the start of you making more money for the same effort.