Know-How Exchange : Strategy

Thanks all for your comments.

Below is the proposal I received. Any specific advice is welcome. My partner actually negotiated the proposal down to $4,000 with payments to be made at the beginning and at the end of the month, instead of upfront. We are getting back to the consultant with edits to the text and dollar amount. Any specific recommendation??

Let me know if you have any thoughts or comments. thanks!

Engagement Scope & Deliverables

The engagement proposed in this document will focus on 3 areas of pressing concern for X:

Marketing Plan
 Goal: to develop a full, actionable marketing plan
 Deliverables: competitive assessment, detailed marketing programs recommendations (including potential types of partnerships), purchase decision funnel definition, budgets, timelines, benchmarks and metrics for measurement and success assessment, USP’s development, general look and feel/logo design recommendations, market research needs
 Time investment: 50% of the firm’s hours
 Comment #1: the Marketing Plan development does not include approaching and negotiating with potential strategic marketing partners (which would be the role of a Business Development senior person)
 Comment #2: deliverables do not include the design or implementation of market research programs, which would be part of a second phase (which could itself be a continuation of the retainer proposed in this document)

Product Plan
 Goal: to develop a thorough product plan
 Deliverables: product features specifications, customer acquisition funnel definitions, business requirements, pricing strategy, potential technology partners identification, external product needs (e.g., business databases), timelines, budgets, product development partner identification and selection (support), market research needs
 Time investment: 40% of hours
 Comment #1: the Product Plan will be directly influenced by the information gathered during and the decisions arrived at through the development of the Marketing Plan but will at the same time impact the type, frequency and cost of most marketing activities
 Comment #2: deliverables do not include development supervision or support (SOW negotiation, wireframe development supervision or consulting, project management, etc.) , which would be part of a second phase (which could itself be a continuation of the retainer proposed in this document)
 Comment #3: deliverables do not include the design or implementation of market research programs, which would be part of a second phase (which could itself be a continuation of the retainer proposed in this document)

Financial Plan Assumptions
 Goal: to generate all key basic assumptions for the building of a subsequent financial plan
 Deliverables: financial plan assumptions including (but not limited to): CPA (cost per acquisition), CPL (cost per lead), conversion rates, average revenue per customer, personnel costs, other overhead costs, customer acquisition volume and rates, marketing costs (CPM/CPC)
 Time investment: 10% of hours
 Comment: a lot of these assumptions will be derived from the work done for the Marketing Plan and Product Plan and will be directly driven by them

The scope for this engagement includes working very closely with and educating X’s founder through involvement in the development of the deliverables above and frequent and consistent personal interaction (email, phone, in-person meetings).

The deliverables above are expected to be provided within a 6- to 8-week period but many of these components (especially implementation of recommendations and market research, which are not part of the deliverables above) should and are expected to be ongoing throughout the development, private beta and public beta phases of the product launch.

Client Requirements

The deliverables and timing/time investments described in this document are dependent upon the firm having full access to x’s founder for discussions, education, meetings, question answering and upon such interactions to be open and honest so as to provide the best possible plans.

Timing & Fee

Based on our respective travel schedules as well as the holidays, it is unlikely that this engagement could start before January 2, 2009. I would like to propose that my firm be hired by X on a monthly retainer basis, starting January 2009.

The monthly retainer fee would be $5,000 (five thousand dollars) and would cover approximately 40 hours of work over the course of the month. If and when actual hours worked (a log will be kept) near 40, X will be alerted of that fact and will be able to decide whether to purchase additional hours at the same hourly rate ($125/hour). The monthly retainer fee will be due in full at the beginning of each calendar month.

Although not expected, any out-of-pocket cost will be submitted to X for approval prior to being committed to and will be charged back to X at cost.

Duration

This engagement will be month-to-month and renew automatically every month and will be cancellable by either party with a 30-day notice.

I've charged more for less and less for more. The key to determine if you feel it will be successful. Likely pervious clients will tell you of this person's capabilities.

IF you spend $5K and get $500K in return, does it matter?

Michael

Before giving advice, there are three things I would like to know.

#1. is the consultant any good?

#2. does your proposed business model make any sense?

#3. how much money do you have, and whose money is it?

If the consultant is good and honorable and experienced, that person will probably be helpful regardless of the way they are paid. If they give lousy advice, it will not very much matter which way you pay them.

If your business model makes no sense, then it makes no sense to hire a marketing consultant for $5,000 no matter how brilliant they are.

And if you have limited funds, it would not be wise to spend all your money on a wonderful plan you will never be able to implement.

I know very little about your situation, as you can see, but I do see one red flag. If this person is willing to put half of his or her time into your project, but it sounds to me they are hungry for business. I know from personal experience that when a consultant is hungry for business they will tend to take on risky projects, even if they are not sure they will be successful, because they need the money. It might be less risky for you to hire a seasoned and very busy consultant who will be quick to tell you the pitfalls with your approach, since they are not dependent on your money.

There are many fine consultants here at marketing profs who would love to help you on one sort of retainer or another. A year ago, I would have thrown my hat in the ring myself. Today I'm not able to do so.

However, I would be happy to learn more about your potential business and offer you my assessment of your chances for success at no charge. If you would be interested, please send me an e-mail. You can find my e-mail address by clicking on my username at the right part of your screen.

The best of luck to you.