The Option of Multiple Yeses

by Jay Niblick | Jul 2, 2019 | Blog, Consulting Fees

Always give the prospect multiple options. Not giving options usually means you just increased your chances of not getting their business. Know any stores that sell one thing and one thing only? Giving people options allows them to feel in control, which always increases the odds that they will buy.

As you put your proposal together, give some thought to how you could create at least three different options. Most people like to choose the middle option of three. So make one lower-cost, one medium-cost, and one high-priced option for anything you offer. You can do that by starting with the highest-priced offering and working backwards, and then taking value off as you lower the price.

As you create these three levels, however, be sure to adjust value equally. Always add or subtract value along with price. By doing this you have given three “yeses” the prospect can choose from as opposed to just one. That’s a 200 percent increase in your odds of getting the business.

If you’re offering coaching, the variables you might play with to create multiple options could be:

• Number of calls
• Length of calls
• Length of engagement
• Number of people being coached (e.g., group coaching versus one on-one) If you’re offering training, the variables could be:
  • Length
  • Number of people
  • Individual attention
  • Tools

Get it? Almost anything you offer could be adapted to multiple options, but doing this is extremely helpful in getting more business. Just make sure that, as you create these levels, you don’t create one that doesn’t deliver real value to the client or pay you enough. You don’t want to deliver ineffective loss-leader programs all month long.

The nice side effect of doing this is that you reduce the chances that you will get in a difficult negotiation with a client who wants a deal. With one option, they are free to ask for the same value but at a lower price. When you have another option below, it creates a blocking effect. This allows you to counter the request for lower cost with, “Well for that kind of price let’s take a look at Option C.” It’s much harder for a client to rationally argue, “I like Option B best, but we want it at Option C price.” How often do you think someone walks into a car dealership and asks if they can have the deluxe four-door model, but at the economy two-door price? There is a great deal of psychology behind
having three options, and all of it has to do with protecting your profits.

Lastly, many times we’re in a rush in a negotiation. It’s on the fly, dynamic, and sometimes a little contentious. The last thing you want to do is be rushing to think in your head irrationally about what the best deal is, then find yourself standing in the parking lot going, “Damn, why did I agree to that”?When you create formal options, you do so in the calm of your office, alone, slowly and rationally. You ensure that each deal is optimal for you. Then, when you’re in live negotiations, you can move to any one of these options knowing it is already well thought out and that it will be a good deal. This is why I say multiple options make the buyer feel they are in control. In reality, they are only choosing from options you’re in control of already.

Consulting Proposals as Confirmation Not Negotiation

by Jay Niblick | Mar 7, 2019 | Blog, Consulting Fees

There’s a huge misconception about the purpose of proposals for business consultants. Many business and management consultants mistakingly view them as a sales vehicle. If this is you, listen up.

The mistake begins when the consultant receives an inquiry from a prospective client. They immediately send over a stock proposal that explains their consulting services, what they will provide, and how much it will cost.

Their hope is that the prospect will love what they see and either buy right then and there, or call them in to negotiate a final deal.

The other equally misguided approach is to meet with a prospect, have a great discussion, and then, when the prospect asks, “What would you charge to provide this service?,” you respond with, “Well, let me go crunch some numbers based on what you’ve told me, and put together a proposal and send it over.”

Either tactic is normally the kiss of death.

The only way a consulting proposal should ever be used is as confirmation of what you and the prospect have already agreed to verbally or face-to-face.

Here’s your gauge to know if you’re screwing up and using a proposal incorrectly. If your prospect has to learn the specifics of what will be delivered and how much it will cost by seeing it in the written proposal for the first time, you’re doing it wrong.

The right way would be to discuss all of the deliverables with the client first, negotiate your proposal verbally, and arrive at an agreement. Only then should you draft a proposal and send it to them. Proposals are confirmation of what has already been agreed to, not a sales or negotiation vehicle.

The only exception to this rule might be a formal request for proposal (RFP) scenario, where the organization has to follow rigid rules for requesting multiple proposals from multiple vendors, and the only way you could join the running would be to do as they dictate.

Large government contracts are almost always conducted this way. That said, my question to you would be, “Do you want to be just another vendor”?

I wouldn’t tell you to turn down a large contract, but whenever you are hired as a vendor, you’re a commodity and relegated to the ranks of “whoever provided the minimum we needed at the lowest price.”

Such contracts are also the least secure, because the next consultant to come along with a lower price is likely to take that business away, since your greatest value proposition to such clients is just your price. A good proposal has the following characteristics:

• It is short. Gone are the days of 20- to 30- page proposals. The big boys may still deliver them, but they are proposing immense million dollar engagements to corporations with a team of lawyers who stand at the ready to pour over such massive details. Keep them short (two to four pages) and to the point.
• It is topic specific. By this I mean drop the numerous pages of boilerplate advertising about who you are as a company, what you offer, testimonials from past clients, and any other sales material. If you use proposals as sales vehicles this makes sense, but you won’t ever do that again. Since proposals are confirmation of a sale already mentally agreed to, don’t bother selling the client in the proposal.
• It covers expectations. Be sure to include the specifics of who is responsible for what. Don’t be vague here. Doing this helps avoid the contentious debates that can occur down the road when opinions about who was to do what differ.
• It includes context. When you write a proposal, include the titled sections below that focus on the context of the problem.
  
  
  • The Problem. Restate the problem the client is suffering from and its literal impact on their organization (e.g., “Background: Acme Manufacturing is currently experiencing decreased sales costing $500,000”).
  • The Cause. Specifically state the cause behind the problem (e.g., “Cause: It has been determined that this decrease in sales is the result of ineffective hiring practices leading to poorly qualified sales staff, and poor management skills of existing sales managers.”)
    
    

  • The Solution and Objectives. Describe the overall approach you will take to correcting this problem and your overall objective in doing so (e.g., “IMX Consulting will work with hiring managers to identify the key traits of effective sales professionals and introduce the ability to measure for those in all new hiring situations. The objective of this proposal is to increase sales by 50 percent in the first year, resulting in a $250,000 increase in sales.”)
    
    

  • The Specifics. Under “the solution” I stick to the higher-level overview, not including many specifics. In this section of the proposal, I cover the tiny details. If you are careful to include the Who, How, What, Where, Why, and When, then you are covered.

  Except for some of the minor details, all of these things should have already been discussed and agreed upon before you write the proposal.

The Fastest Way to Increase Consulting Profits

by Jay Niblick | Feb 12, 2019 | Blog, Consulting Fees

If you’re still charging by the hour and are happy trading your time for money then skip this article. Best of luck to you.

But if you understand that value-based fees are the single fastest way to exponentially increase your income without having to work longer hours, then read on.

First, understand that value-based fees take you out of a task-oriented relationship and into a value-based relationship with your client. Your value is tied directly to the results the client receives, not the effort you put in.

This fee structure is all walk-the-talk by tying consulting fees to results, not effort. In the end, the average business owner doesn’t really give a damn about how hard you worked, only what results they receive.

In value-based pricing you outline the scope of work you propose to your client in the exact same way as any pricing model, but when you give them your fee you give them one fee and one fee only.

You should include all the tasks and materials you will provide in a bulleted list (e.g., training, coaching, teaching, investigating, meetings, reports, profiles etc.), but you will not place a price on any single item in this list, ever. At the end of the proposal you give the client one price for everything. The items on the list aren’t up for debate.

If you show price, you open yourself up to negotiations you don’t want, like “If we take the personality profiles off, how much would that save us?” The answer to such a question would be, “Nothing because I’m not charging you anything for profiles. They are an important tool I need to deliver the overall objective, which is what I’m charging you for.”

One type of value-based fee structure is Project-Based Fees.

Project-based fees are where you charge a single overall fee for the entire deliverable. One of the trickier aspects to this type of pricing is accurately projecting the amount of hours you will need to put in to deliver results. To be safe, when you’re new and not sure how long it will take you, calculate your best guestimate, then add at least an extra 30 percent to your estimate to cover overages.

Using the true hourly base rate, your task in this model is to break down all the things you will need to do to deliver the objectives. Determine how many hours it will take you to complete that work, multiply those hours times your true hourly base rate, and arrive at what you should consider charging your client. Even though you’re using your true hourly rate, it is only for your purposes.

Never share that with the client or report hours spent back to the client during the project, as it shouldn’t matter to them in this model. Likewise, don’t include hours to be worked in these proposals. You will work however many hours you need to make sure the objectives are met. The focus is on getting results, not what tasks you do to get there.

The following are points to make to the client as to why they want a project fee:

• It always leaves the focus on results, not activity
• There is a cap on their investment. They know exactly what they will spend up front, no surprises
• There is never a “meter running.” They do not have to worry what it will cost each time your help is requested
• It is unfair to place them in the position of making an investment decision every time they need help. They shouldn’t have to make a budgetary approval decision before they ask you to handle some unforeseen problem
• It’s very easy to judge what their return on investment will be compared to the cost of the problem
• This is the most uncomplicated way to work together. There should never be a debate about what is billable (travel, report writing, phone calls, research) or what should be done on site or off site

The argument to the client is that they will never find a proposal with less risk. This is, in effect, a 100 percent commission-based structure. You eat what you kill. They get your expert services for nothing out of pocket up front. If you fail miserably, they pay nothing. If you win big and deliver tons of new revenue, you get to keep your fair share. Yes, there is still risk to the client in investing time and resources, but they will need to do that with whatever solution they decide on, so I consider it a wash.

Where this becomes sticky is if the client doesn’t agree that you delivered 100 percent on the objective. Then you’re left in a black hole of subjective definitions about who thinks what percentage has indeed been met, and what percentage of payment that justifies. And that can be a very ugly place to be! This is why it’s only a good model to take when the results you will deliver are easily quantifiable (sales numbers, human turnover, reduction of costs, etc.).

It can work with things like leadership development or strategic planning or even executive coaching, but you must tie your fees to measurable outcomes of those leaders or processes, not intangibles like “They’ve improved as a leader dramatically.” Feel free to provide any solution, but always tie your fees to the overall end results in the company that are absolutely measurable. That is either going to be money made, or money saved. Top or bottom line doesn’t matter, just as long as those are the only two metrics you use to determine the success of your work.