Happy Cog’s Greg Hoy posted a must-read post that covers a profoundly important topic for consultancies: how to avoid the apocalyptic scenario of not charging enough. Or as Greg coyly phrases it: “What’s your budget?” If you sell your time and services to anyone you don’t want to miss it. Greg shares some great tips.
As a partner at a consulting firm myself, I’d add one more thought: the cost of your time is speculative. Yes, your competitors and your prior work will steer the conversation towards a particular range, but don’t be fooled, those factors are hardly reliable.
Near the end of his post, Greg finally gets to the dance that inevitably ensues:
The prospect says, “We’re accustomed to firms charging $75/hour”. That’s fine. I’m accustomed to my martinis slightly dirty. Just because you’re accustomed to something doesn’t make it a rule. Explain why your services cost what they do. Explain what truly differentiates you from your competition.
“You’re not that beautiful.”
“What? Of course I am. Look at me.”
“I mean…you’re moderately attractive, but not beautiful.”
“Well I don’t agree. I think you’re wrong. Look! Look at my eyes! My lips!”
“Yeh. I don’t know.”
That prospective client isn’t negotiating pricing. He’s telling you, in a not-so-roundabout way, that you aren’t worth what you think you’re worth. It’s a perception tug-of-war.
So what to do?
Here’s what you do: move everything else around except what you believe you’re really worth. Maybe they get less. Maybe they don’t get your senior people. Maybe it’s six components instead of nine. All those variables can change except your worth. That can’t change. It’s an undeniable fact beyond subjectivity and beyond the reality-bending rhetoric of your client-to-be. You are worth what you are worth and unless you’re feeling charitable something else has to give.
Now, I realize competition can get heated and this may be the marquee client you’ve been dying to work with. If that’s the case just understand that perception hasn’t just been shifted for pricing but for who you are, what you deliver and most importantly, what you are worth. In a sort of automatic process, perception leads to real, objective valuation. You may sell low now, but know that the market is listening and pricing accordingly.