Consulting Fees: Communicating Your Value to Clients

question is do you ask the client how much profit they make on each customer this could come up in an attempt to explain how much value your work is going to be for the client for example you can expect 10 percent equation customers with your work therefore you will make XYZ profit after paying for your work great question so let's set the context here what this person is asking is how do you determine value in a sales conversation when someone has reached out to you or you've reached out to someone and you're trying to decide if there's a good fit between the business outcomes that they're trying to create and the skill set that you have whatever your expertise is and if you're gonna price your work based on the value to the client you have to figure out how much it's probably gonna be worth to the client and then you you know set your price at a fraction of that value so if you determine that the project that you've been asked to quote is roughly in the hundred thousand dollar range then you're pretty safe if you send in a quote for ten thousand dollars you're pretty it's pretty much a done deal that you're gonna get that and if you can accomplish that in the client is not gonna care how long it takes to accomplish that the faster the better so if you can do the project for $10,000 and it only takes you a weekend and they're highly confident that they're gonna that this is like $100,000 win for them they're gonna say yes all day long they're not even probably not gonna look around for somebody else so how do you figure out that value this is definitely more art than science but the way that I do it is I go into the sales meeting so we've communicated over email or something initially we've agreed to have a phone call and see if there's a good fit we get on the phone and we start off by you know I'll just trigger like a brain dump type of thing from that will say well what tell me everything you can about this project what's the situation what do you think you need done and for 15 20 minutes they're gonna tell me everything about the project you know well we started the business in 1975 and then you know sold it to the Sun and ba-ba-ba-ba-ba on down to fun and now finally this new thing and we're getting like 90% drop off in our mobile conversions and and the desktop site is doing much better conversion wise but as time goes on we see more and more of our traffic is on mobile so we're scared and I'll say ok let's back up for a second and you know why do I do this now I mean did you just find out that this was happening you know is this is this something that has been going on for a long time or did you just discover it and they'll say well no we've been watching it for a while and just seems to be getting worse it seems to be picking up and I'll say well why can't you wait why can't you wait a little longer to do this why not study it for six months and then do it you know later and let's say none this is it's really looking scary this it's really starting to spike up we're getting complaints one of our competitors just redid their website and it's really sweet on mobile we're imagining that they're they're eating our lunch ok so now I've determined from them by by asking them why do this now that it's important it's an urgent project for them and I'll say well why why do it like this why you know you you've sort of prescriptively instructed me to do a bunch of very specific things you know over email and in this conversation previously isn't there some other way you could solve this you know isn't there some some off-the-shelf service that you could use you know and just sort of migrate your entire web presence over to it might be a lot cheaper than hiring somebody expensive like me to you know manually handle this for you or to manage your team on a rebuild or redesign and I'll get at why they think they want to solve the problem in this particular way what other things have they considered are there any cheaper options that they've already ruled out that's the thing I'm really looking for so what cheaper options have they already ruled out or really what what all else have they ruled out so that's why do this specifically and then the last thing I'll ask is why have someone like me do this why not you know why hire an outside consultant you know I'm gonna be really expensive this projects gonna be probably pretty big it's gonna be at least a big investment for you guys why not do it internally you mentioned in our in your brain dump that you have some internal developers why not just have them do it and they'll tell you why you know they didn't not think of that they will say well we thought about that but they're super busy building features for our customers and we don't want to pull them off of that to sort of redo our marketing experience okay well why don't you outsource it to a low-cost a place that has low cost of living and get cheaper developers oh we tried that in the past and the time zone thing was a real problem it took five times as long as we hoped it would and it cost twice as much so we didn't really end up saving anything in the long run we want to do this right the first time it's a very risky project and we need to get it done quickly so we want someone that's in the same time zone that speaks the same language that there's not going to be any communication breakdown nothing lost in translation and they'll tell you all these reasons whatever they are so what you've done there you've just had a Y conversation why this why now and why me and you've gotten answers to every single one of those questions say okay I think there's a good fit here you've kind of tried to talk them out of working with you and you are now convinced that there's probably a good engagement here they have convinced themselves that they should hire you at this point the only thing that's outstanding is they don't know how much is gonna cost or perhaps when you can do it so the next step is to say okay well what's you know you've already gonna you're already going to know the objective of the project the objective of the project is to like to achieve some business outcome make the increased mobile conversions in this case but you'll have determined some some business outcome an outcome that the CFO is going to understand an outcome that the CEO is going to understand not not something that only the lead developer is gonna understand like technical debt or something like that they're gonna understand a business outcome for this engagement so you say okay we all know that we want to increase the the conversion rate on mobile we know that's critical for your business we know you need to do it right now because your competitor is is hot on your heels you've tried out so seen before you don't want to do that you need to nail this right away right out of the gate okay so how are we going to measure progress as we as we exit keep the project how we're gonna measure measure progress so that we know we're getting closer and closer to the goal how are we gonna steer this car as we go along you must be tracking some metrics because you know it's in a bad way right client you know that your mobile conversions are bad whatever reason they know they have a problem is because they measured something so you say okay what can we measure along the way to determine that we're getting closer and closer to the desired outcome so then they'll know they'll tell you they'll say oh this say okay that's what we're gonna track along the way and what's that at now like like what are the actual numbers involved so we know when we're getting close and they'll start telling you dollar amounts they'll tell you specific percentages and you're gonna get a sense of the overall value to the organization of this thing at least in your mind so it perhaps they can have a skewed perspective of it but in in terms of top-line revenue you're gonna get a basic sense through a conversation like this that well they get 10,000 visitors per month they're losing 10,000 abandoned shopping carts per month average cart size is $40 you do the math in a month you you know if this works then they're their revenue not their profit but their revenue is gonna jump way up if you can move this needle at all so then you say all right what would be a homerun for you guys if like I want to knock this out of the park for you guys so what would be a homerun percentage change and they'd say something like oh man if you get conversions even up 10% we're gonna send you Christmas presents for the rest of your life or whatever we're gonna build a statue of you in front of the building if you could get those conversion rates up 10% so by this time you're gonna know everything you need to know or as close as you need to know it to come up with a roughly a rough ballpark order of magnitude idea of what the annualized first year value to the business is of this project that they want you to do and then you say okay if I set my price at like a fifth or a tenth of that they're almost certainly gonna say yes because after this phone call they're gonna they trust me even more than they did for they contacted me so I feel like I have a rapport with the people they're gonna believe they believe that I can do it I know they believe I can do it so you know can I do this job for 10% or 20% of what I guess is the value and if you can then it's a slam dunk you say all right you know in the proposal you say look based on our conversation I don't know for sure but I'm estimating roughly that you're gonna increase your revenue by you know $10,000 a month and at the end of a year that's $120,000 I can do this project for you for $12,000 I can start in two weeks and it should be done probably in two months they're not gonna ask you how many hours you're gonna put in they're gonna be like twelve thousand dollars yeah definitely so the flip side of this is how long is it gonna take you to do it so what's interesting about giving fixed prices and pricing based on value is that you can get really creative about how you achieve that stated goal that desired outcome you don't have to be like oh well I actually do you know this many layouts and this many database tables and I have to do this many fields in each table and I have to set up on bump above Papapa none of that matters I mean it doesn't not matter but it doesn't matter in terms of setting your price if you think that you can do something to get all of this done for them and achieve this outcome for them in a weekend they're still gonna give you that $12,000 so okay let me look back at the question quickly make sure I actually answered it yeah okay Allah I'll add one last thing I usually don't get super explicit with my questions about dollar amounts because I don't have to because usually by going through a Y conversation like I just described they're gonna reveal that information anyway it's gonna kind of have to like you need to ask questions like well how much traffic is the web server going to get you know things like that it's reasonable to ask those things so you're gonna end up having probably an idea if you get to the end of the conversation and you have no idea what the value is then you can say something like look guys I would love to do this project with you I'm confident that I'm I am that what I'm trying to say I'm confident that I can do it I'm qualified to do this for you I've got lots of experience doing this and especially in your industry or whatever but I just don't see how I don't see why you would do it I'm not seeing the business case for you guys to pay me a million bucks to do this project for you guys and I specifically would say a million bucks and even though I would never I've never charged that much for a project just to throw a really high number out there to get them thinking like wow this could be expensive and then get them to sit back and think well I mean they'll say a million bucks look well I'm just saying it's gonna be an expensive thing to do it's gonna take a lot of money and it's gonna take a lot of time your internal employees because it's gonna be a collaboration and we'll probably have to hire some outside parties to manage it I mean to work on it while I manage it so I just don't see the business case can you help me understand why this makes any sense to invest you know all what is going to be a lot of time and money into this project and that might shake loose the answer that you're looking for well they'll say something at that point that was so obvious to them but totally unclear to you that they'll just sort of vomit out like this oh well we're losing a million dollars a day you know or something like that if all else fails and you still don't have a sense of it you can pull out the sort of emergency you break glass in case of emergency and just be like look you guys I don't I'm not seeing a business case here I'd love to work with you on this I'll put a proposal for you together but what do you like how roughly how much you're looking to invest in this because that'll help me scope the proposal in a way that's not gonna waste our time going back and forth so you can basically come out don't ask them for the budget ask them how much they want to invest in solving this problem or capturing this opportunity how much do you want to invest I don't really care what the budget is you just ask how much they're willing to invest in it and and I've only had to do that once and it was actually with someone I was really close with a client I was really close with and I was like Jim can we just cut to the chase like how much do you guys want to invest in and I'll just tailor what I do to get as close to the goal as I can for that much money he's like all right it's its X and that works too so a couple of different strategies for you there

Channel: The Jonathan Stark Show

Views: 11,808

Rating: 4.9449539 out of 5

Keywords: consultant (industry), Consulting rates, Project-based fees, Value-based fees, Consulting fees

Id: LLPTnucqAEc

Length: 13min 34sec (814 seconds)

Published: Fri Oct 05 2018