Have you ever negotiated a consulting proposal or a new job? If so, you might have heard the (untrue) problem that there is not enough money for your proposal or what you want for salary.
There is almost always enough money. (Self-funded startups might not have enough money, but those companies rarely want to hire consultants or new people.) Instead, this is the problem of management priorities, not funding. No one is too expensive—not if they will solve the problem(s) the managers have.
Too often, consultants trigger that trap with time-and-materials-based fees. While managers think of employees as time-and-materials-based “assets,” the best employees are not. (I will have a lot to say about that in future posts.)
Consultants do themselves and their clients a disservice when the consultant offers time and materials as a fee. (See Consultants: Get Better Clients with Better Fees for more information.) Worse, when consultants offer time and materials, the consultant looks like a commodity.
I am not a commodity, and neither are you.
Instead of time and materials, consider how you might create a project-based value-focused fee for your next proposal. That starts in the discovery call.
Discuss Boundaries in the Discovery Call
Imagine this scenario: You're at the end of the discovery call with the client. You've already discussed the signals and problems the client sees. Now it's time to discuss the boundaries of the engagement. And, sometimes, available money is part of the boundaries.
I asked one client about the boundaries, including money for this engagement.
He did not answer my question but asked, “What can you do for $1000?”
I said, “Not much. I can't even offer a personalized presentation for your specific needs for that little money.”
He said, “What can you do for $5,000?”
I knew where this was going. I shook my head and said, “I do not negotiate on fee before I even create a proposal. We can only negotiate on which problems I will solve with you. I will then offer you three choices so you can choose the fee for the value you want to receive. That way, you are in charge of the money you want to spend for the value you will receive.”
“But I need to manage the money!”
That's when I said, “Let's discuss the three parts of value. That value will help you manage the money.”
The Three Parts of Value for Consulting and Clients
I first introduced the value part by explaining the three parts of value:
- Tangible value: the direct money or time the client will save. Consider all of these pieces: increased revenue, faster throughput (to achieve increased revenue and more customer satisfaction), fewer delays (leading to lower Cost of Delay), and more.
- Intangible value focuses on how people feel and their resulting actions. Listen for these kinds of signals and problems: “I'm afraid my best people will leave,” or “Morale stinks,” or “No one seems to want to work hard.” Those are all about intangible value. As part of your proposal, you can explain the real costs when people leave, or when morale is low, or when people seem to just put in the time instead of being excited about their work. While you might have to guess at the various salary, release, and product costs, you can ballpark those costs as part of the value you bring.
- Peripheral value focuses on indirect benefits. That might include cost avoidance. For example, how would one person leaving affect everyone else on that team? Would that trigger a cascade of resignations? Preventing those resignations offers value. How about if one team learned how to see their bottlenecks and delays? How would that affect their ability to release more product faster? How would people feel after they start releasing faster?
I often allude to these three parts of value during the discovery call, so my client realizes the value I bring to their problems. However, I save those terms for the proposal. That allows the client and me to agree on the problems and the value of solving those problems.
Create Project-Based and Value-Based Fees
On the discovery call, I “test” some of my offerings with the client. I often say something like this: “I can imagine a short project with some consulting and meetings, a longer project that includes a workshop, and a more extensive project that includes both pre-workshop consulting, the workshop, and post-workshop coaching and consulting. You can look for my proposal in the next 24-48 hours.”
I have now primed my client to expect three options with a project-focused fee.
Some clients want a fee now. I say, “I can't give you an accurate fee now because I have not created boundaries around these possible projects. Would you start a project with no boundaries?” (See Consulting Tip #9: How to Answer the Fee Question With No Context for more details.)
If the client persists, I ask, “What is the most money you might consider for any of these projects?” I ask because the first person who mentions money anchors the money conversation. I want the client to anchor that conversation. If the client offers an impossibly small anchor, I ask, “Would you do this work for that little money? I don't think so, because you value your time and your income. So do I.”
Now, I have bought myself more time to think and create fees that work for both of us. (And yes, if the client looks like they will be a pain in the tush, I will increase the fees for the aggravation factor.)
“Too Expensive” Thinking Traps Both the Consultant and the Client
Very few independent consultants are too expensive for the client. Too often, the consultant is not expensive enough—their fees are too low for the client to believe the consultant is worth it.
Instead, consider all the value you bring to the client: your years of experience, all the ways you've solved problems like this before. Now, think about all of your value applied to solving your client's problems: the tangible, intangible, and peripheral value.
Create a proposal with projects and fees that reflect all of that value. That's how you can stop the “You're Too Expensive” trap.
This is one of an intermittent series of consulting tips.