Marketing Profs

Some years ago, my wife and I decided to remodel our outdated kitchen. Through referrals and research, we found a contractor and conveyed our vision to him so he could prepare a proposal.

The contractor understood what we wanted and contributed some great ideas. We worked well together and were excited about the project—until we got to the pricing discussions. That's when the contractor's interests diverged from ours; the tense negotiations about price strained the relationship with the contractor and nearly scotched the deal.

Consultants face a similar dilemma. Things will be humming along nicely as you exchange productive ideas with a client. But when you ultimately come to the subject of fees, the interests of the client and the consultant often head in opposite directions:

The Reality of Consulting Fees

Clients and consultants alike usually dread fee discussions. Here are six strategies to help you preserve your profit margins and your client relationships as you work through pricing discussions.

1. Begin with benefits

I once received a single-page proposal from a consultant that contained a one-paragraph project recap, a proposed fee, and a space for my signature of approval. I'm a big fan of short proposals, but this was one for the record book.

I asked how the consultant had derived the fee, and the only answer I could get was, "That's our fee for this type of work." The number—which was a big one—seemed arbitrary and I judged it to be unacceptable.

Instead of springing an unsubstantiated fee on a client, start every sales process by identifying the client's desired benefits, and then quantify them. It's hard work, but it pays off when you eventually get to a discussion of fees. With a credible estimate of benefits, the client has a powerful context to evaluate whether your proposed fee is a good deal.

Most of your competitors rely on the old standbys to justify fees, like their tools, references and illustrious history. Don't ignore these. But focus on how you'll help the client achieve the expected benefits of a project, and you'll leave competitors in the dust.