How To Price And Perceive Your Services As A Long Term Act?

Summary: Before pricing your services you should be clear about the general market trends and the perceptions of your client. Assess yourself in terms of services you offer and try to find out where you are in market or what special services you offer are different from similar consultants.

Still Need a Lift?



If the concept of pricing your services still scares you, consider the inspiring words of Alan Weiss, author of How to Maximize Fees in Professional Service Firms (E. Greenwich, RI: Summit Consulting Group, 1994), "There's nothing intrinsically unethical, illogical, impractical or illegal about trying to maximize the fees you charge clients. If you raise fees beyond the value that clients perceive in the relationship, market forces will drive them away. Conversely, if they perceive even more value for your services than you're charging, there will be no reciprocal pressure from the market to drive fees up. You must control this dynamic, or you will chronically suffer from the lack of control."

In addition, Weiss offers some creative ideas about whether to raise fees or maximize income, such as:

1. Never base fees on time units. There are a limited number of hours in the day, but no limit to the potential value you bring to a client. Base fees on fulfilling value, not performing tasks. (I haven't broken out of the per diem mode yet, but I sure like the reasoning here!)
2. Never negotiate fees, only value. If you reduce a fee without a reduction in perceived value, you're indicating that your fees are inflated and not value based.
3. Be visible. Are you sitting by the phone or using it? Reading the paper or being quoted in it? Listening to dull speeches or delivering sparkling ones? In addition to putting you in front of clients, these activities substantiate your expertise and, therefore, boost your value.
4. Set fees within market ranges. Identify where you want to be with each service. There's nothing wrong with deliberately seeking to be in the lower range of the market as a strategic decision. But if you want to be perceived as delivering higher competence and better service, your fees must reflect this pursuit. Buyers actually adjust evaluation of performance based on their association of higher quality with higher fees.
5. Differentiate fees based on the client. Unless you provide increased value to existing clients, pressure on fees will always be downward. And unless you're willing to charge higher fees for new clients, there will be no relief on that end, either. Don't accept referral business on the same basis as the referent. Maximize value and fees in all new business.
6. Raise fees for difficult business. Recognize that because some business is acceptable only at a premium fee, you must be mentally prepared to walk away from difficult assignments. This attitude will help you demand an appropriate fee structure; raise fees until your level of discomfort is alleviated.
7. Cull low end business. Abandon any business you've accepted in the past that's at fees more than 15 percent below your firm's average.
8. Control payment velocity. Try simply stating that terms are full payment in advance. Or, use a mild incentive: usual terms are 50 percent payment on initiation, 50 percent within 45 days, but 10 percent off for full payment in advance.
9. Focus on innovation, not fixing. Don't view yourself as merely a problem solver. Try to bring higher value through improvements, not just repairs, and charge accordingly.

How Can You Lose?

Ron Tepper, in addition to selecting the top 10 consulting fields, also cites 10 reasons why many consulting practices fail:

1. Improper research.
2. Overselling but under delivering.
3. Poor listening habits.
4. Inadequate marketing.
5. Building business, not relationships.
6. Lack of business skills.
7. Under capitalization.
8. Ill conceived and poorly written proposals.
9. Communications gap.
10. Failure to properly explain fees and expenses.

Write these common mistakes down on an 8V2 X 11 piece of paper and stick it on the wall where you'll see it regularly.

What It's Like Long Term

Will consulting be just an umbrella during your current employment storm? Will it be a medium term bridge in your career, but still not a permanent way to work? Is it possible for you to remain happy and grow your income as a solo forever? Dr. David Weimer, the consultant mentioned earlier, offers valuable insight on these questions based on his 18 years in the field.

I interviewed David for Consultants News in 1989, 12 years into his solo consulting career, to find out what he liked best and least about consulting. Six years later, I asked him the same questions. The similarities and differences in his outlook tell a great deal about consulting as a long term career.

Now 60, David spent 10 years in engineering program management, plus 8 years in federal defense contract research, before starting his own consulting practice in 1977. At the time, he charged $250 to $275 per day; by 1989, his rate was up to $975 a day and he was billing for an impressive 220 days per year at that rate. Today, he charges $1,250 a day (very much on the low side, given his experience) and is still ringing up about 180 consulting days a year (he's begun turning down some short term engagements). He's still on his own, consulting to companies that do business with the government, assisting in market development and implementing growth strategies.

In 1989, what David liked best about consulting included the opportunity to help solve new problems, help companies compete successfully, make new friends, grow as a person and enjoy professional and financial independence.

When asked what he likes best now, without prompting him by repeating his earlier answers, David hit the first item squarely again, "I still enjoy the excitement of a new assignment with new problems. I've never been on an assignment that was exactly the same. Recently, in fact, I had a two day assignment on a review team something I've done a hundred times. I really thought I had seen and done everything in this area, but guess what? There was a new problem involved, and not an easy one. My energy level went up 400 percent!"

David's other favorite aspects of consulting have changed, however, at least in order of importance. While he still enjoys helping clients, making friends, growing as a person and being self sufficient, today with a few more years under his belt he gets special pleasure helping young managers and feels he's a much better tutor than he was earlier in his consulting career. He also enjoys a general improvement in his own confidence level as a solo consultant, and takes special pride in engagements in which he's paired with a large consulting organization and is able to hold his own.

In many cases, he says, the other consulting firm starts out quite skeptical about what he might contribute, then finds that he offers a great deal. This is one of David's greatest rewards, he says.

With a bit more perspective, David finds pleasure in the fact that consulting can accommodate his less than aggressive personality. "My mode is about 80 percent corporate chameleon, in which I kind of blend in, not just parroting the party line, but listening, receiving." While conventional wisdom might say this approach is insufficiently active, it suits David well and ends up being a big part of his ability to contribute effectively. Today, he pursues this style with ease.

A lot of what David didn't like about consulting in 1989 has also changed. He used to worry about his inability to make long term plans, clients who didn't acknowledge his contributions, extended travel (about 180 days a year) and financial in security. Today, his chief dislike is travel. He's still away as much as ever, and though he's worked out ways to bring his wife with him more often, he finds more than ever that he's "pretty grumpy" walking through airports on Sunday evenings.

But he doesn't worry about long term planning anymore even though he had his worst year ever as a consultant last year. With his extensive experience, he knew that business would bounce back and it did. Today, he can count on long term income projections and not become distracted or discouraged by brief shortfalls.

David also is less concerned when his contributions aren't acknowledged. In its place, however, is a similar concern he wishes he could change about consulting: insufficient support from top management at the outset of an engagement.

"The perception is that you're always hired by the CEO. You sit in his office while he smokes a pipe and ponders the future based on the great changes you'll help him bring about. Then he writes a letter that introduces you as 'his boy' and sends you out to do your work," David observes. "But in reality, you're usually hired by a second or third level manager and you have to earn the confidence and support of top management by doing great work without a real mandate from them. It makes the job a lot tougher."

Then again, that may be another of consulting long term rewards: The knowledge that you can overcome these kinds of obstacles and still achieve positive change.