Should You Trade Risk For Money (And If So, How)?
- April 1, 2019
- Posted by: Rochelle
- Category: Running Your Business
On some level, every consultant trades risk for money—your client is hiring your expertise to reduce an aspect of their risk.
Their worries could be as diverse as their leaders not being prepared for a business re-boot to their website blowing up.
The bigger the risk you shoulder, the greater your opportunity for impact and profit.
More risk = more revenue + impact.
That’s why extra pair of hands consulting—freelancing—tends to hold down your earnings. When you trade time for money in a linear fashion, there will always be a cap on what you can earn.
Why not look for opportunities to take on MORE risk for your clients?
The key is to price that risk correctly and build it into your business model.
Case in point.
“Samantha” was making a low six-figure income selling leadership development consulting to Fortune 1000 companies.
She tracked and billed her time by the hour, but parsed it into project phases with caps on her fees. She had two complaints about her business model:
Because she worked intensely with a client or two over about 18 months, it was a constant battle to ensure she’d have new clients when she finished a project.
And when she did fill that pipeline with new clients, she would sometimes have to turn down past clients who wanted the follow-on help she really enjoyed delivering.
She rarely lost work because her fees were too high—in fact she wondered if perhaps she was selling herself short.
This is the perfect situation to decide if you have an opportunity to trade risk for money.
Start with this core question: What is the typical presenting problem when your best clients—your sweet-spot—hire you?
Buried in there are clues to risk you might assume in exchange for higher fees. If you’re a web developer and you scratch a tiny bit below the surface, your clients might be telling you they want a bug-free website that works 99.9% of the time.
For Samantha, her best clients’ concerns circled around what happened when her initial consulting and training was over. How could they ensure that those early results would keep building?
As an experiment, I convinced Samantha to try reworking her hourly billing model with her next proposal.
On that client call, she presented multiple pricing and delivery options.
Option 1 looked like what she’d always proposed. Let’s call it $100,000 for the sake of this example.
Option 2 said she would complete Option 1 but come back to deliver follow-on work on a specific schedule. We priced this as $150,000 (for fans of leverage, this is an easy way to sell your ongoing services right up front and increase the value of every client engagement).
Option 3 said that she would ensure that their most valued outcome—that specific leaders would improve their skill sets—would occur. We priced this one at $300,000.
The client chose the highest price tag, because they valued the outcomes far more than the money.
Before you give me 47 reasons why this couldn’t possibly work for you, just take a moment.
How does this sort of guarantee—trading risk for money—feel on both sides of the table?
The client gets a clear choice on outcomes and can make the decision that best aligns with their goals (FYI—the $300K was not a number plucked from the air, but based on an assessment BY THE CLIENT on the value of a fully functional leadership team).
The consultant has opportunities to do the deep work that her vision entails while being paid for the extra risk required to fully meet the client’s desired outcomes. (Side benefit—the extra revenue means she can have a little down time without panic between clients.)
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