3 Steps to Double Your Consulting Fees

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How would you like to increase your consulting income by 50%, 100% even 200% and more…interested?

There’s a very simple way to achieve this and I’m going to tell you how…

Increase your fees.

If you’re currently making an average of $15000 per consulting project, increase your fee to $25000, $40000 or even $80000.

Here are three guidelines for you to make this happen:

1. Charging too little. Many consultants I speak with in my coaching program are charging too little for the results they provide. If you are helping your clients improve sales by $250,000 annually, charging $5000 is too little. If you know you’re providing huge results for you clients and not charging enough – increase your fees right away. That will have a huge impact.

2. Provide greater value. Let’s say you’re currently providing a service to your clients for $20000 and it includes A and B. If you add more value by providing A, B, C and D, you can increase your price to $50000. The key here is that you can charge more if you’re creating more value. This is a very powerful approach. Continue Reading

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

What to Do When Your Client Asks You to Lower Your Consulting Fee?

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First I should say that this request is rarer than you may think.

This may be the type of client that is unsure of herself and will look for any excuse to get out of a project, delay things and make your life unpleasant in general.

If you’ve done a good job of educating your ideal consulting client and have given them plenty of reasons to see the value that you can provide to solve their problem they’ll have few reasons to worry about your fee.

In many cases, but not all, the type of client that asks for a discount on your fee is the type of client you have to worry about for two reasons:

1) That you haven’t done a good enough job of demonstrating what value your client will receive – and that means that they won’t be fully committed to the project if they don’t believe their ROI will be significant.

2) This may be the type of client that is unsure of herself and will look for any excuse to get out of a project, delay things and make your life unpleasant in general.

That aside, if a genuine prospect asks you to lower your consulting fee, what should you do? Continue Reading

Speaking Fees: Establishing Your Value

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Speaking fees, like consulting fees, should be about the value you deliver.

Some of you may think that doesn’t sound right. And I can understand that, especially considering some of the conversations I’ve had with some speakers.

You should focus on the value you will provide the buyer; and not only will you get hired more often; you’ll be able to command higher fees as well.

I’ve heard the following reasons as being most important for a speaker:

  • “To connect with the audience”
  • “Make people laugh”
  • “Get people to think”
  • “Share new ideas”
  • “Receive a high score from attendees when they rate your presentation”
  • “Keep people happy during a specific time slot”
  • “To arouse and inform”

What do you think?

At first glance these don’t seem too far off the mark. But take a minute to actually think about what the speakers are saying here. Continue Reading

7 Ways to Increase Your Consulting Fees

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Increasing your consulting fees is one of the quickest and easiest ways to earn more. But it needs to be done right.

The more ‘new’ value you provide to your clients with the price increase, the less objections you’ll face.

Many consultants experience paralysis around this topic. The idea of losing customers as a result of increasing prices leaves them in a deep chill and unable to move forward and take action.

To help you increase your own consulting fees, here are 7 questions to ask yourself:

1. Is the Time Right?

Every client and industry has cycles. Periods where they are likely to be more busy and stressed. Consider what is going on in your client’s business before you come out asking for an increase in your fees. This shouldn’t stop you from moving forward however…it’s just an important consideration. Entrepreneur writes that you should “choose a time when you’ll encounter the least resistance.”

2. Are You Focusing on Value?

The most critical part of raising your prices is that your clients perceive an increase in value. The more ‘new’ value you provide to your clients with the price increase, the less objections you’ll face.

For example, you can offer a new service or product that your clients will value…and it doesn’t necessarily need to take you much (if any) more time to provide it. It could be some kind of additional reporting, maintenance, or monitoring to name a few.

I read a great study on Social Triggers by economist Richard Thaler. In the study, people were asked how much money they would give a friend to buy a beer for them if they were vacationing and sitting on the beach. In the first situation, it was explained that the place the friend was going to buy the beer from was an old run-down grocery store.

You need to clearly figure out why you’re increasing your price so that you can communicate the reason with your clients.

In the second situation, people were asked how much money they would give their friend if the friend was going to a luxury resort to buy that same beer.

The study found that on average people would give their friend 71% more money when the beer was to be bought at the luxury resort.

Now consider that this was the exact same beer. It would taste the same. The only difference was the perception of value associated with each of the places. Continue Reading

Consulting Fees Positioning Play

Service businesses tend to send an invoice for their services after they’ve put in the time and work.

Would you rather get paid up front or have to wait 15, 30 or 90 days to see the cash in your bank?

This is what your average client has come to expect. They pay their electrician, plumber and real estate agent in the same way.

That same client, however, has no problem paying up front for their bread, detergent or washing machine.

Ask yourself: Would you rather get paid upfront or have to wait 15, 30 or 90 days to see the cash in your bank?

Consultants that get paid before their work begins enjoy better cash flow, less stress…and as a result, typically perform better work.

There are few situations where your client can’t pay you upfront. They simply don’t because you haven’t approached the subject in the right way.

So my friend, what will it be? Where do you stand? Do you currently get paid upfront or wait to see the money?

Some food for thought…

If you want the ultimate guide to Consulting Fees check out our Consulting Fees & Pricing Guide.

 

10 Accounting Tips for Consultants, Things You Need to Know

If you’re going into business as a consultant, you’re going to be responsible for managing your own cash flow and keeping your business afloat.  In a way this is like having two jobs at once, unless you contract your accounting out to a professional (in other words, hire a consultant for your consulting firm!).

Repeat clients and long-term clients are going to be your bread and butter, but never come to rely too much on any one client.

Keeping track of your budget is absolutely critical if you’re going to be profitable, which in a way makes accounting just as important as whatever it is you actually do to make money.  If you protect your earnings and do your job, your profits should take care of themselves.  Here are some tips to get you going on the right path

  1. Before you start your consultancy business, make sure you have a basic budget planned.  You should know exactly what your monthly expenses are going to be both for your business and for your personal needs.  If you’re a sole proprietor, the IRS will not treat your grocery bill as a business expense, but you can’t work if you can’t eat, so you need to treat it as one.  You will need to make enough money each month to compensate for all business and personal expenses to come out profitably.
  2. Learn about taxes starting from Day 1.  Many business owners are surprised come tax day when they owe a lot more than they thought they would.  Figure out how to calculate your quarterly taxes before you start your business, and consider taxes yet another business expense to calculate into your budget.
  3. Don’t wait to do your taxes.  You are going to owe quarterly installments to the IRS and if you pay them late you will pay a penalty.  If your income varies a great deal throughout the year, calculate your taxes each month so that you can pay the appropriate amount when it is due each quarter—and be prepared to do extra paperwork at the end of the year.
  4. If you have employees, remit your payroll taxes when they are due as well in order to avoid more penalties—or worse.
  5. Don’t put all your eggs in one basket.  Repeat clients and long-term clients are going to be your bread and butter, but never come to rely too much on any one client.  All good things can fall through eventually and things change constantly, so diversify your investments, including your client accounts. Continue Reading

Daily Rates for Consultants And What You Need To Know

I spoke with a consultant the other day, we’ll call him Terry. He had a question for me, “what should my daily consulting rate be? I’m a manufacturing consultant.”

My answer, “I can’t tell you.”

Terry: “Why not?!”

Me: “Because I don’t know.”

Terry: “What? Really? Why don’t you know? Isn’t there a standard rate?”

Me: Well Terry, there is a standard rate. A standard rate for people that don’t know what they are doing. And a standard consulting fee for those that do know what they are doing. Which one are you? Tell me more about you and your business and then we can get into more details…”

When the problem you are solving is causing a lot of problems for the client, and if your solution is valuable you can and should be setting your rate using value-based fees.

Terry went on to tell me how he’d been in the manufacturing industry for 20 years. He had worked with some of the top companies. And now, he was going out on his own and wanted to know what to charge.

From what Terry told me it was clear he could definitely help the companies he was going after.

So there wasn’t a question of whether a need existed…

…Whether he was solving a problem that existed…

There definitely was.

But I still couldn’t tell Terry what he wanted to know.

Actually, I should clarify. I could offer him a range of what consultants charge and go on with my day, but I didn’t feel comfortable doing that.

Here’s why… Continue Reading

Consulting Fees: How Should You Package Yours?

A consultant is someone who, when asked a question, provides an answer and recommends action.

In simple terms, they recommend or even tell people what to do. The role of a consultant is to provide advice geared at solving problems or geared to the consulting client taking advantage of an opportunity.

The Consultants Role

The role is not to be confused with business coaching or that of a contractor.

In basic terms, a business coach is one who explains a principal or process; asks the client what they think they should do, and then gets the client to take action. A contractor is someone who is told what to do and does it. Coaches are generally retained on a monthly basis and contractors are invariably retained at hourly rates.

In my opinion, the key is that a consultant is paid to provide advice, and their fee is directly related to the importance of the topic.

In my opinion, the key is that a consultant is paid to provide advice, and their fee is directly related to the importance of the topic.

Avoiding Confusion

Confusion into charge rates occurs when the consultant also sells a product. Here the clients sees the advice given as part of the sales process and will object to being billed for time unless there has been an upfront agreement to accept the charge.

Those new to consultancy will frequently fall into the trap of giving their advice and intellectual property away during the initial meeting and discovery sessions. This obviously must be avoided in the consultant intends to stay in business! Continue Reading

Consulting Fees: Do You Charge What You Should?

In my previous article, “Are You Really A Consultant?” I proposed that a consultant is someone who gets paid for providing advice. I assume that if one is getting paid, one is a professional; in other words, seeking to make a livelihood from one’s activities.

Many consultants start out working from home. They do so either for lifestyle choice, or to reduce their overhead. Their reasoning is simple; no need to pay rent for an office, no need to spend time commuting, no need for additional computers or phone systems, just buy a desk for the spare room and hang out a shingle; “Consultant”.

Now the first reality bite hits; “Who am I going to consult to? I need some clients.” So you join get some cards printed, join a networking group, maybe do a little website and some adverts and suddenly you have an enquiry. Someone wants to buy your expertise!

The next reality bite comes when they ask about your fee structure. How much to charge? The answer to this question will have a profound impact on the future of your business and this is where most new in business make their biggest mistake; they charge too little.

Instead of charging a commercial fee, they charge a domestic fee. Let me explain…

If you do a simple profit and loss statement for your business as part of your business plan, you would start by calculating how much profit you want from your business after all costs, wages and taxes. Next, as you’re the principal (and probably the only) consultant, you need a wage. That wage is probably the single biggest cost your business has to cover.

Consider now that your wage has to compensate you for all three roles you perform for your business, the roles of Finding, Minding and Grinding. Finding is the time you spend actively looking for clients, Minding is the time you spend Continue Reading

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