Oh boy! this is a difficult situation – what consulting rates? You have got an interested client, you know the business is yours, but how much do you charge? Too much and they walk away and too little and you’re leaving money behind on the table!
Really, you shouldn’t be in this situation, it demonstrates a lack of understanding of the client.
I tend to do value based pricing. During my discussions with the client, I try and gauge what the financial value is to the client of the consulting assignment. Then I try and set my consulting rates so that the client gets at least 100X return on their investment.
Find Out How To Get Top Consulting Rates and Get Clients Flocking
In some cases, I have been in competitive tenders where my fees have been twice the nearest competitor and yet I have still won. It comes down to understanding the value proposition for the client.
How To Decide Fees and Consulting Rates
However, another important aspect is their budget. In some cases, it doesn’t matter how valuable the contract might be, if they don’t have the money in their budget, they can’t afford you. In these cases, I have a price structure where they pay so much upfront and then a larger fee later when they receive their return from your endeavours. I have found that this works well when I am advising the client on how to raise finance. I only get the large downstream payment when they are successful and they raise their money.
If you really don’t know what their budget is before sending your proposal, then a very useful trick is to let them choose their price by offering them a menu of charges. For instance, in your proposal you could offer:
- The base price is $10,000 for which you get A, B, C and D
- Or, we can offer you E, F and G for an additional $5,000 for these further benefits
- Alternatively, we can also offer you H, Y and J for a further $5,000 on top where you will get these amazing benefits too
In these cases, it is surprising how often the client goes for all 3 options because it happens to be in their budget. However, if their budget is constrained then they will just request option 1 or 1 and 2. Also, you must remember to clearly articulate the benefits for each option and set your consulting rates accordingly.
Tags: Fees, Financial Value, Price Structure, Proposal, Tenders, Value Proposition
Leave A Reply (3 comments So Far)
Christian Ward
193 days ago
Another great informative video Raglan thanks.
simonthescribe
194 days ago
Thanks Raglan. I shall work out an invoicing / quoting strategy based on this. But I still feel that when the clients don’t know – what they don’t know – how can they put a value on it? I find myself sometimes ‘sponsoring’ their learning process about web technologies, SEO and publishing.
RaglanTribe
193 days ago
You’re so right about the learning process. Basically, you are teaching your clients for free the relationship between the features of your consulting service and the benefits that they can expect. Now they understand the value, but they may still have doubts about whether your service works or not. Now you need to reassure them, perhaps offer some “Results In Advance”. Hopefully, they’ll then agree to the service. However, your fees should cover all these costs and risks or else you’re out of pocket. Therefore, it’s important that you select the right clients who are prepared to pay for the benefits.