Know-How Exchange : Strategy

Paula,
Don't know that much about the southeast but I can tell you that I base a lot of my pricing on the expected revenue. (It's also project based vs hourly rate.) I find this easier to explain and sell because the goal is revenue production, right?

All the best!

Michael

There's a whole section about pricing consulting services in Rasputin For Hire (https://bit.ly/k3Z7m). The book's subtitle is An inside look at management consulting between jobs or as a second career, so there may be other things in the book you'll find useful too.

And if you order it using the link above, you'll also get a bonus report at no extra cost. The bonus report has a round-table interview with five of the experts/consultants here on the MarketingProfs Know-How Exchange -- with war stories, advice and tips for new marketing consultants.

As for the pricing question, the short answer is to price on a project basis determined primarily on the value of what you deliver to the client. That forces you (and the client) to think through what the deliverable will be, what you'll have to do to deliver against the client's expectations, and what your deliverable should be worth to the client.

Good luck. You're about to take one of the most remarkable roller coaster rides imaginable. I hope it is as rewarding and personally fulfilling for you as it has been for me.

In my middle 30s with a fancy international marketing job at a Fortune 500, and a fancy MBA, I was passed over for a watershed promotion. Instead of becoming the boss, I got a new one. He had just a B.A., no language skills, had never been out of the U.S. His first assignment for me was to get him a passport! So I quit. I went out on my own as a consultant.

I was supremely confident! I stumbled, tripped, fell flat on my face, and crawled. Hungry and desperate, on a project I reluctantly agreed to getting my fees on the basis of "peformance/ results." No, no, I wanted that per diem, like everyone else gets. That "performance billing" was my dark little secret.

But the client was a blabbermouth. And suddenly, overnight, my story changed. My problem shifted from "zero possiblities " to "way too many." I had to learn four things.

1) The first was to say, politely, NO, to engagements where I was not going to be a good fit, not really the right person to make it happen. (Or the engagement itself was a fantasy, chasing a pot of gold at the end of the rainbow.)

2) The second was to insist on a retainer or committment fee before beginning work. That eliminates most of the "golden rainbow" contingent.

3) The third was negotiating "win/win" goals with the client, and associated milestones. As each milestone is reached, further fees are due. The final fee, the major portion of the billing, is a percentage of revenues generated or savings realizued.

4) The fourth was to have a BINDING arbitration clause in my contracts to be sure I did get paid at the end of the day. Arbitration is tricky and you can get snared in non-binding arbitration. Start with the American Arbitration Association, www.adr.org/

There are two MAJOR negatives to this approach. The first is "feast or famine." Successful outcomes are not based just on your input. Your best efforts may come to naught because of actions taken, or omitted, by the client.

The second is the difficulty in growing your business. With this approach, you are not going to have the reliable cash flow you need to hire other people. Still, I have heard of an independent "lone ranger" consultant who, after 20 years, had built his consulting up to $1,000,000 a year with straight project billing (not with Internet or product sales).

My suggestion is to go with "standard" per diem and project billing with one set of potential clients, and try a variation of "peformance based billing" with another set. See what the response is, what works best for the clients -- and for you.

Make sure that the clients realize "peformance based" does not mean "cheap." In fact, you charge premium pricing at the top end of the market -- and are worth every penny. To take away the client´s risk, to demonstrate your confidence in your own abilities, you are willing to defer most of your premium fees to the back end, i.e. on a results/performance basis.

Regards, J. Hamilton

You need to read "Value Based Fees" by Alan Weiss.