Perhaps one of the most reoccurring reasons for poor profits in consulting is under charging. It’s unfortunate because it has less to do with not understanding what your consulting fees should be and more to do with lack of confidence, insecurity or most commonly desperation.
Let me share the story of a friend of mine named John Butler. John was a seven-figure management consultant in Dublin Ireland, and former client of mine before he passed away. John attended a conference I was hosting in Germany some years back and over beers one night we got to talking about this vexing issue, and how so many other consultants we knew suffered from it.
John had indeed built very profitable consulting practice years earlier, but had grown tired or working so hard and was considering retiring from the 80-hour a week job he’d built for himself. He wanted to pull the throttle back and relax a little more.
He struggled with the thought of having to fire clients, though, so he figured the best way to avoid that confrontation was to get the clients to voluntarily leave him instead. He decided that if he raised his consulting fees significantly, enough clients would walk away, and if he did keep some small percentage of his clients the addition in fees would cover the losses. Near the end of one year John informed all of his clients that he would be quadrupling his fees!
Thinking that this move would surely thin his client base out imagine the shock when he found out he only lost approximately 20% of his customers! And thus John’s profits skyrocketed into the seven-figure range.
The moral here is that too many consultants think it’s safer to charge less and get at least some business than charge more and risk not getting any. In reality you’d be surprised at how charging more doesn’t scare off clients as much as you might think. I would argue it actually only scares away those cheap ones you don’t want anyway, and creates the impression of superior value in all the ones you do want.
The time you spend as a consultant is valuable so you should be paid well for it. If you want to grow your practice in the future by outsourcing your non-talents or weaknesses you must consider your business goals when deciding upon your consulting fees as well.
Scary as it might be, especially for the newcomer, do not undervalue your worth, do not set low prices and do not settle for checking a win in the “Got a client” box, only to find you are unable to check the box in the “Made enough money to pay the mortgage” box.
How do you determine your true value and what steps do you think you can take to raise your consulting fees? Give me your comments below.