The vast majority of consultants and consulting firms I work with charge too low. This is a serious issue, since raising your fees is the fastest way to increase your revenue and profit that goes into your pocket.
The number one reason for leaving money on the table is not understanding pricing, and charging either fixed fees or by the hour. If that's your case, you can read here our series on value-based pricing to understand what it is and how to adopt it.
If you already price your services based on value but still struggle to increase your average project value, two things might be happening:
- You haven't established the right metrics for the project; and/or
- You are not solving big enough problems.
Let's look at each one of them.
Highlighting The Right Metrics
Your proposal probably includes the deliverables, key tasks that will be performed, and how often you would communicate with the client. But if the client doesn't know what are the short and long-term effects of the engagement to the company, the price will look like an arbitrary number, and you will see objections.
When the client can't understand the return, they are not able to estimate the ROI of the project. It's your responsibility to educate and clarify to the company what are the savings or improvements that are being generated.
To justify your fees, most of your metrics should be measurable. They can be short or long-term metrics, but most all be directly linked to the implementation of your project. Here are some examples:
- Short-term: Monthly sales calls, customer acquisition cost, conversion rates, number of new followers, number of new customer feedback forms.
- Long-term: New or recurring revenue, customer satisfaction, utilization rates, customer retention, total fixed costs, employee retention.
There will also be specifically important metrics for your client (that you should have identified during the sales process), and personal metrics that are usually emotional and tied to your buyer (such as behavior change and the impact of the project on internal culture). Make sure to include them in your proposal as well.
I recommend you make a list of at least 10 metrics that your offerings impact, and keep them in mind during the sales conversations. Not all of them will be relevant to a prospect, but most will.
As long as you don't present a solution that costs more than their budget - something you must identify before the proposal - you shouldn't see any objection to fees. Make sure to offer a high ROI to your client and stand your ground during the negotiation.
The Bigger The Impact, The Bigger The Fee
Your fees should be a direct proportion of the amount of value you deliver. If you want to raise your fees but are not creating a big impact on your client, you should pick bigger problems to solve.
This sounds obvious but is forgotten by many small consultancies in the market. You can't capture more value than what you create - at least sustainably - because that means worsening your client's situation. They would pay for more than what they're getting.
If that's your case, you need to go back to the drawing board. Look at your experience, internal capabilities, and how you can make your prospects' lives better. Package it all in one clear offering, and go to market.
Don't commoditize your expertise. You can always do and charge more.