Raising Your Consulting Fees
- December 7, 2015
- Posted by: Rochelle
- Category: Fees + Revenue
Whether you’re happily contemplating boosting your fees or dragging your feet knowing it’s time to make a change, this post is for you.
First things first: let’s put fee-raising in the proper context.
The true value of your services is in the RESULTS you achieve for your clients. Translation: it doesn’t matter what the market rate is for what you’re doing—if you can’t make the magic happen, you’re going to struggle building a thriving, profitable business.
You also want to avoid viewing your fees in isolation. They are always part of something bigger—as in your entire business and revenue model.
Take “Victor”. Three years into his consulting business serving corporate clients he was making low six-figures. His revenue model was simple: charging hourly and project rates for his services. But his system was entirely based on time—he charged the same whether his work resulted in huge savings for the client or modest incremental changes.
Time for a tweak.
Victor had become quite adept at knowing which projects had high potential for earth-moving results for his clients. So he agreed to try just one small change.
The next high-potential client appearing on his radar got a new proposal—one that was value-based and explicitly showed the client the value of the work vs simply the steps to get there. He created three pricing options, all linked to specific results and BASED ON VALUE, not time.
First client out of the chute bought the high-end option, which brought Victor three times his old hours-based fee. Which the client was happy to pay because it was so clearly linked to results.
Happy client, thrilled consultant.
Now it’s your turn.
Here are a few suggestions from tweaking to downright overhaul:
Hike your hourly or retainer fees at least annually. You may prefer working on an hourly basis, especially if your work is time-intensive and challenging to scope properly. If you continually serve the same clients, you’ll often feel limited to small cost-of-living bumps.
But let me encourage you to push that envelope. There is often far more room than you think to adjust your rates. And if you have clients that no longer fit or who are highly challenging? You can raise your rates more aggressively to reflect your sweet-spot and the others will start dropping away over time.
Introduce project fees. Most clients prefer project fees—they know going in what it’s going to cost and it gives them some comfort and sense of control. The key is not to base your project fee just on time, or it becomes an even bigger trap than hourly fees. Try a Victor—especially with a new client who has no other frame of reference with you BUT the value that you show you can achieve for them.
Value pricing. This is when you can really create deep bonds with your clients. With a few noted exceptions (think consultants doing large-scale cost-savings projects), pricing linked to specific results requires mutual trust and an open, candid working relationship between peers. In my own business, I used to represent clients for high-impact speaking engagements. I didn’t charge up front, but took a fee on business that we closed. Essentially, I worked on spec—so I only considered that with someone I’d done deep strategy work with, whose work was ready for that scale and who I trusted implicitly to do the right thing.
Examples: linking all or a portion of your fees to a percentage of savings/revenue increases; establishing progress fees related to specific client milestones; taking a percentage of a defined goal.
Profit-sharing and/or ownership interest. This is rarified territory and yet there are possibilities here to really stretch your revenue. The key—like with results billing—is deep trust on both sides of the equation. And your advice has to have a direct, visible impact on your client’s bottom line or you’re both wasting time with this approach. Word to the wise: if you feel the necessity to have a 20-page document outlining how this works in all situations—walk away. This approach is not for you.
Examples: your fees include a percentage of the profit (net after expenses); you take an ownership interest in return for reduced fees.
These are just a few ways you can work within your existing fee structure to better leverage the time and energy you’re spending with your clients.
For an even deeper exercise, you’ll want to look at ALL aspects of your business and revenue model—including leveraging through employees or contractors; developing books and products; and creating multiple options and price points for your niche audiences.
More on that in a later post.
In the meantime, please take a good hard look at how you’re billing. Are you being properly compensated for the value you add to your clients?
You have pushed / nudged me again to make the move. It is the right time of year for a positive change to be made.
Yes! Just yes. Okay, you’ve convinced me. 2016 will be amazing!
I shared this thoughtful commentary last week with the CPA and attorney colleagues with whom I regularly discuss free and who always egged me — successfully — to increase fees.
I charge by project, (annual) retainer and hourly bases.
I prefer retainer and formulate the project rate to induce a client to consider the retainer.
Hourly generally applies to some legal work; even there, I start with a minimum fee covering several hours.
Since success often involves a government action I hesitate to suggest or state that hiring me guarantees the client success. I promise vigorous, thoughtful and strategic advocacy. I also share past work/ projects and the results (many posted on my website and other media).
Great post Rochelle – TY