We’re back with Alan Weiss, the Million Dollar Consultant. We’re carrying on from Part 1 of our Alan Weiss Interview.
Mike: Many people use the term these days of value based fees but far fewer actually understand what it means. Can you give us the proper Alan Weiss explanation?
Alan: Yes. I tell people my fee basis is this: I charge a fee based on my contribution to the value derived from their project which represents a huge return on investment for them and equitable compensation for me. I take a look at the tangible benefits they get times their annualization. I take a look at the emotional and intangible benefits times their impact. And I take a look at peripheral benefits and then I provide a series of options, the least of which, the lowest fee of which, will give them a ten to one return or better.
I was convinced that the problem that consultants had was lack of capitalization
Mike: We probably agree that most consultants tend to undercharge. Why do you think that is?
Alan: Lack of self esteem. When I began coaching in this business in 1996 and I moved to mentoring and coaching consultants and boutique firm owners, and now that’s a huge program I have, I have master mentors in place and so on – I was convinced that the problem that consultants had was lack of capitalization. I was completely wrong. I’m always surprised at how stupid I was two weeks ago. Consultants, as many service professionals, have terrible self esteem and they’re afraid to act as a peer of the client. They go with their hat in their hand. They go in as a supplicate. They will deal with the human resources department. All that is crazy.
Mike: What’s the biggest mistake that you would see consultants making these days when it comes to establishing value based fees?
Alan: They do two things wrong. One, they fail to meet with a real buyer, an economic buyer. That is someone who can sign or authorize a check. They content themselves with people at lower levels because they’re afraid to go farther. Second, when they do get an economic buyer, they don’t form a relationship where they can get conceptual agreement, a trusting relationship, where they can get conceptual agreement about objectives, measures, and outcomes. If you have a true economic buyer in front of you, you don’t need to leave the room, you don’t need to do needs analysis, you don’t need to interview people, and you don’t need to go anyplace. That individual can give you the objectives to the project, the metrics, and the value to the organization of gaining those objectives. But you have to have a relationship that makes the buyer comfortable in sharing that with you.
Mike: How do you suggest that consultants meet with the person at the top, with a true buyer?
Alan: One thing you don’t do is cold call. The way you meet with buyers is the same way I got that first piece of business. You get referred. You have to draw people to you. I call this concept marketing gravity. You have to be publishing. You have to be speaking. You have to be networking. You have to have a website, a blog, a newsletter. You have to make appearances. You have to be interviewed, so that people are drawn to you. Because buyers do not make – now these are corporate buyers – corporate buyers of consulting services do not make decisions based on social media. They don’t make the decisions based on cold calls. They make their decision based on two things. A peer-to-peer reference, somebody they respect, a peer saying, “Get Alan Weiss, you have to use him” or someone who they’re attracted to because of their intellectual property. They’ve published a book. They’ve spoken somewhere. What you have to do is create a gravity that draws buyers to you.
Mike: Alan, you’re telling me a thousand Twitter followers isn’t enough?
Alan: Twitter doesn’t matter. I’m on Twitter. I’ve got 2500 followers. I’ve got a thousand friends on Facebook. I got 16 million connections on Linked In. If somebody can teach me how to make 50 cents from each one, I’ll split it with you. That’s just playing around. That’s not serious marketing.
Mike: When should consultants use retainers and what’s the best way for them to introduce the concept of a retainer to their client?
Alan: Usually a retainer is best introduced after you’ve had a series of successful projects with the clients and they love you. It’s seldom that you can start with a consulting retainer. But a retainer is payment for access to your smarts, and it’s based on three things. How many people have access? What’s the scope? In other words, is it by phone, by email, are you supposed to show up? Do you have to be available on West coast hours, East coast hours? Then finally, what’s the duration? Is it for three months, a half a year, or a year? But that’s what a retainer is all about.
Mike: What’s the main reason that some consultants are making $60,000 a year while others are making $200,000, $300,000 and more? Is there a characteristic, approach or activity that separates one from the other?
Alan: Once you want to get to, say $500,000 and above it takes a different mindset. You have to think bigger. You have to think in terms of results. You can’t think in terms of deliverables or tasks. That’s very important. Also, you have to make sure that you propose a large enough project by asking why. Too many consultants who are making the $50,000 and $70,000 are told what to do by the buyer. The buyer says “we want a three day leadership retreat. We want two days of coaching.” Those are just arbitrary alternatives. The question is why do you want them? When I buy a Bentley. I don’t go in there and tell the Bentley people how to build the car. I pick out options.
I don’t tell them, “I want the engine in the back of my head.” They know how to build a high performance car. Nobody should be telling you or me how to consult. We’re the experts.
Mike: What about the people that are at the $80,000 range but want to get to $200,000. Is that a big shift that involves big changes?
Alan: No. The shift from 80 to 200 isn’t big because those folks are leaving $100,000 on the table every year, anyway. They just have to stop leaving it there. They have to have better proposals. They have to have tighter objectives, measures, and values. They have to stop working with people who aren’t buyers. Most consultants who are making $75,000 should be making twice that because they’re leaving money on the table.
Once you want to get to, say $500,000 and above it takes a different mindset
Mike: Many consultants out there have been programmed to think “status quo”, and for them asking clients for a large fee is scary. Why do you think that is?
Alan: Low self esteem. Why would anybody be scared of asking for a large fee? You know, “Hey it’s $5,000,000.” See, I can do that no problem.
People need to stop being so scared of themselves. What they’re scared of is themselves. They’re scared of failing. They’re scared they’ll be seen as an imposter, that they’re not really qualified. You have to get over the self esteem issue. That’s the biggest, single barrier.
Mike: What’s your recommendation? You’re making it sounds easy though I know it’s a challenge for many people. How would you suggest that they work towards improving that?
Alan: You need to join communities. I have consulting communities that are global. You need to get in with peers and you have to exchange information and practice, and you have to work with a mentor. I’m a mentor and I have other mentors who work for me. You have to get that kind of coaching. But the most important thing within all that is you have to build your skills. And the most important skill to build is your language skill. If you can command language, you can control the discussion. If you control the discussion, you control the relationship. And if you control the relationship, you control business. It all starts with language and consultants don’t know how to use language well.
Mike: That’s a great point. Some consultants list their fees on their website and then in their marketing materials. I know you recommend against this. Why is that?
Alan: Because it’s stupid. How do they know what their fee is going to be for any given client? What they’re promoting is simply packages and programs and commodities. It’s stupid. It’s dumb. It’s beyond idiotic.
Mike: Great point Alan, that’s certainly a no BS way to say it.
In part 3 of our interview with Alan Weiss we talk proposals and how to deal with bad clients. Don’t miss it.