Why a 10% Drop in Consulting Fees Leaves You With 33% Less

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Imagine offering a client a 10% discount to win the project only to find out you actually took a 33% hit. Ouch!

If you’re engaged in time based consulting work you may be surprised to learn that offering your buyer a modest discount can actually reduce your gross profit by a much greater margin.

I was reading Ori Weiner‘s book on Advanced Fee Negotiation the other day. And I found a great example that clearly illustrates how dangerous discounts can be.

This is an adapted summary of Ori’s explanation on page 26:

At first glance, this makes sense…

  • You’re a consultant that has just offering your client a 10% discount on your rate for the project.
  • You expect the project to be about 1000 hours at your rate of $500/hr.
  • If your costs on the project are $350, that leaves you with $150/hr profit (that’s a 30% gross margin).
  • Your total profit from this project would be $150,000.

Here comes the pain…

  • Your 10% discount would equal $50 off your regular rate.
  • That means your hourly rate drops to $450.
  • Your costs will remain the same ($350) unless you’ve negotiated otherwise (key point!).
  • That means your profit falls to $100/hr.
  • Your total profit is now down to $100,000 from $150,000.
  • That’s a decline of 33%, not the 10% you first bargained for! Continue Reading

How a 20 Year Old Works with a $70 Billion Consulting Client

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I was in my early twenties when I was chosen to consult for a $70 Billion dollar Japanese company.

My client had no idea I was so young. Some would have called me foolish if I told them I’d go after such a large client.

It wasn’t easy to win that project. I had to align myself with the right people, position myself as an expert (or at least someone who could provide intelligent and valuable insights). And I had to do all of this speaking in Japanese and presenting to the CEO and a table of VPs.

Take a good look at your marketplace. Identify which companies you want to work with and then build your strategy to make that happen.

I could have gone after smaller projects. People would likely call that the “conventional” and “safe” route.

Sure, I could have stayed in my comfort zone, never moved to Japan, or gone after working with billion dollar companies.

But here’s the thing: playing outside of your comfort zone has big rewards.

After winning that first project my confidence soared and my consulting income leaped.

I started getting calls from other multi-national companies throughout the country and even from overseas. Continue Reading

How We Can All Profit from Pain

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Have you identified your ideal buyer’s true pain?

Michael Bosworth, author of Solution Selling, writes that “[only] once a buyer admits pain to a seller, the real selling begins.”

Your job, before you even begin marketing, is to figure out the most pressing and painful issue your ideal clients are facing.

Many consultants focus on value. And value is critical. But if you’re providing value where it’s not needed and appreciated most, it often is a waste.

Your job, before you even begin marketing, is to figure out the most pressing and painful issue your ideal clients are facing.

Let me offer you an example…

Tom is a business owner. He’s hungry and determined to grow his business. But right now, he’s in great discomfort. Tom has a bad back and it just went out on him. Anyone who’s experienced this knows how much it can hurt.

Now imagine that Tom is watching TV. Commercial #1 comes on. It’s for a new marketing automation tool that has been proven to increase sales. There’s even a free trial offered.

Now commercial #2 comes on. It’s from a massage clinic in Tom’s local area. They specialize in helping patients with extreme back pain and they’re offering a free initial consultation. All Tom needs to do is call them and discuss his situation. Continue Reading

Wishing You a 2014 Full of Health, Happiness and Success!

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A big happy new year to you!!

May 2014 be a year of great health, happiness and success for you and your family.

We have a lot of exciting programs and trainings planned for you this year. As always, our goal is to help you land more clients, increase your productivity, make more money and have more fun doing it.

Get ready to tackle your biggest challenges. Move your obstacles to the side. Dig in. And roll up your sleeves. This is going to be a big year for you. Let’s make it a great success!

Chasing a Lost Dragon

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The Chasing Dragon Cafe opened up several months ago. Their story is one you need to learn as a consultant and marketer of your own services.

The cafe is on a very visible street corner. Tens of thousands of cars and likely hundreds of thousands of people see the cafe each day.

It pays to specialize. When you do, you’ll be known and remembered for something, instead of nothing.

When you walk in the decor is simple, calming and pleasant. It’s a breath of fresh air in a landscape surrounded by national and global coffee chains.

The space is large, great for meetings, to read a book or get some work done.

The coffee and tea are above average. The staff are knowledgeable and friendly.

You might think that this new cafe has all the ingredients to be a success.

You’d be right, many of the critical factors of business success are here. But the Chasing Dragon has one major flaw…

It doesn’t know who it is.

The Dragon Cafe wants to be everything to everyone.

It’s called a Cafe, which in this city means a coffee shop. A place you can go to get a great coffee, tea, pastry or sandwich.

The problem is first visible before you even enter the café.

The sign outside the door got my marketing ‘warning bell’ ringing. Continue Reading

How to Get Clients in a New Market with No Connections

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Here’s a consulting question I received as part of the “Ask Michael” series:

“My target customers are mid-sized manufacturing companies.  I don’t have any connections in my networks to the decision makers of such companies.  Besides cold calling, how can I reach the decision makers of my target group? “

This is a common question. Many consultants find themselves in when they are new to consulting or have moved to a new geography.

In response to this question, I would ask:

  • Have you attended any trade shows for this industry?
  • Have you written any articles for the publications that the decisions makers in this industry read?
  • Have you put on any talks or workshops for this industry?
  • Have you run any type of webinar or online program for these executives?

Cold-calling can work. But it takes a lot of work.

The approach I prefer is:

  • Figure out who your ideal consulting clients are
  • What their biggest problem(s) are
  • Offer them something of value to show them you’re an authority and expert
  • Then you’ll be well placed to have a discussion with them about how you can help them

This is a quick outline of a much more detailed process you’ll learn in the Marketing for Consultants program.

5 Insights Into the Role of a Consultant

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A colleague and client, Andreas Dittrich in Germany attended an event where two professors and a typical client of his industry got to together to discuss the role of a consultant. Below I’ve adapted the key lessons Andreas shared with me in an email:

1. The three most important characteristics constituting a consultant’s brand are: first of all the value created for his client, followed by his visibility and reputation. Creating value is the central momentum from which everything else emanates.

You can strategically position your fees to remove or eliminate any doubt or hesitation a buyer may have in working with you.

2. Specialization is the essence of proper positioning. When asked why she (HR Manager) contracted a consultant the answer was a) the guy had good references b) he had stayed persistently “close to the ball” over a considerable period of time and – that above all – he was in a position deliver the “tailor-made suit” needed at that time.

3. How to find the right consultant? “Whenever we need a consultant for our business or a project, I call a colleague in the same industry and ask how he/she solved that problem and who supported them”. Referrals through a network are the most important source for consultancy contracts since they may minimize the risk of grabbing the wrong one, enhancing the chances of getting things done and solved. Continue Reading

The Unprofessional Professional

Casual-Consultant

I’m feeling a bit bothered by this.

I’m a big believer in having respect.

First, for respecting yourself. For who you are, how you handle yourself and what you’ve accomplished.

Second, for respecting others. Those around you and that you do business and have relationships with.

Your clients and prospective clients aren’t dumb. Once they get a whiff that they can’t trust you or that you aren’t dependable is the day they start considering your competitors.

Now, not too long ago I started offering four free strategy sessions a month. This is for my coaching program where I help consultants build marketing systems and plans that allow them to attract their ideal clients, and grow their business beyond just relying on referrals.

Because I have limited time, I ask anyone interested to submit a form to see if they qualify and might be a good fit for the program.

Once someone qualifies we send them a link where they can book a time and day that is convenient for them (it automatically shows when I’m available for the calls).

This is where things can start going downhill.

I’ve had several people who have signed up (that means filling in the form), received an email from me or my team with the scheduling link, and have then selected a day/time for the call. We also follow up with a reminder to each person before the call.

Many of these people don’t show up for the calls! It’s not that they send an email and say “sorry, I’ll be late” or “my apologies but can we reschedule” ahead of time. That would be understandable. People get busy and things do come up. Continue Reading

5 Steps to Get Your First Consulting Client

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Today I’m answering two consulting questions I received as part of the “Ask Michael” series:

“Hi Michael. You’re advising someone starting out in consulting who has some expertise, but nobody knows it. What would be the three biggest impact actions they could take that would likely result in them attaining a first client and/or a steady stream of clients thereafter?”

Here are a few ideas for you:

1. Be clear on who your ideal client is
2. Figure out what their core problem is
3. Create a free material that addresses their core problem
4. Get that material in front of them
5. Use your existing network and let people know about the types of companies you can help and ask them if they know anyone that fits that criteria

You can find more information about this marketing process for consultants here.

Here’s another question I received…

“I am frustrated, I have the credentials, the training, and the knowledge to help individuals and organizations. But what I don’t have….the clients. I get in front of people who need change but are not willing to pay. They are great taking all the free advice I can give them, but don’t see the value to pay…..help.”

It sounds like you’re going after the wrong market.

Figure out who in your marketplace has a problem that you can help solve and that they will be willing to pay for.

Once you have a clear understanding of who your ideal clients are, then you can build your marketing system to start attracting them.

How Much Detail to Include in a Proposal For Consulting Services?

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Here’s a consulting question I received as part of the “Ask Michael” series:

“Hi Michael, Firstly thanks for you and all your members…….its so helpful knowing that there is a place to hear from experts.

My question is: When putting together client proposals, what is the guide lines regarding level of detail for inclusion. I have read articles and see examples of proposal guidelines which are not too detailed however I am frequently asked to provide lots of detail so the client (especially small businesses) understand and know what exactly you are going to do which worries me as I in essence are I am laying all my cards on the table.

Thanks,

Jayne McIntosh”

Jane,

Your proposal shouldn’t do the selling for you. It’s merely the document that outlines everything you and the buyer have talked about in your meetings.

Here’s a winning consulting proposal template.

There should be nothing new, except your fee and a few other details in your proposal that the buyer hasn’t heard or seen from you before.

If the buyer is asking you for more detail, instead of putting it in the proposal, that’s a sign that you haven’t done a good enough job answering all of the buyer’s questions (whether they asked them or were thinking them).

So it’s time to go back, meet with them or get on the phone and answer their questions.

Then when they are confident you’ve answered their concerns…you’re ready to send them your proposal.

Most proposals, except for government bids and a few other situations, require nothing more than a 2-3 page proposal.

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