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- Herausgeber: John Wiley & Sons
- Kategorie: Fachliteratur
- Sprache: Englisch
The latest edition of the leading guide to consulting engagement pricing, from the "Rock Star of Consulting" Alan Weiss In the newly revised Third Edition of Value-Based Fees: How to Charge - and Get - What You're Worth, best-selling author, speaker and renowned consultant Dr. Alan Weiss delivers a thoroughly updated guide to proposing, and receiving, consistently high fees that are based on the value you deliver to each client you serve. The author walks you through the many reasons that time-and-materials pricing models are outdated and inadequate and how to convert existing clients to your new value-based fee model. He also discusses fundamental new developments in consulting, including the remote delivery of services, the waning market power of the consulting giants, economic globalization, and the shift from project work to advisory work. Among the step-by-step techniques and strategies provided in the book, you'll find: * How to establish value-based fees, including determining your unique value and creating a "good deal" dynamic * How to create, capitalize on, and market to trusted advisor relationships * How to implement fee increases immediately, prevent and rebut fee objections, create consulting products, and explore lucrative new fields Perfect for newcomers to the consulting field as well as time-tested veterans, Value-Based Fees is an indispensable guide for every solo consultant, entrepreneur, and small consulting firm.
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Table of Contents
Cover
Title Page
Copyright
Dedication
For the Third Edition
Introduction to the First Edition
Introduction to the Third Edition
Acknowledgments
About the Author
CHAPTER 1: The Origins of Value
ABUNDANCE AGRICULTURE AND THE ARTS
THE ABUNDANCE MIND-SET
WHY YOUR PRESENCE ISN'T REQUIRED
THE IMPORTANCE OF BUYER COMMITMENT, NOT COMPLIANCE
CRITICAL STEPS FOR BUYER COMMITMENT
THE BUOYANCY OF BRANDS: HOW BRANDS HELP FEES
CREATING SHARED SUCCESS
CHAPTER ROI
NOTES
CHAPTER 2: The Lunacy of Time-and-Materials Models
SUPPLY-AND-DEMAND ILLOGIC
ETHICAL CONFLICTS OF INTEREST AND OTHER MINOR MATTERS
LIMITING PROFITS, OR WHY NOT JUST FORGET
DOMANI?
WHY LAWYERS AND CPAS DO SO POORLY
EDUCATING THE BUYER INCORRECTLY
THE MERCEDES-BENZ SYNDROME
CHAPTER ROI
NOTES
CHAPTER 3: The Basics of Value-Based Fees
FOCUSING ON OUTCOMES, NOT INPUTS
THE FALLACY AND SUBVERSIVE NATURE OF “DELIVERABLES”
QUANTITATIVE AND QUALITATIVE MEASURES AND CRITERIA
MEASURING THE UNMEASURABLE
SERVING THE CLIENT'S SELF-INTEREST
THE SUBTLE TRANSFORMATION: CONSULTANT PAST TO CLIENT FUTURE
PERPETUAL MOTION, PERPETUAL PROGRESS
CHAPTER ROI
NOTES
CHAPTER 4: How to Establish Value-Based Fees
CONCEPTUAL AGREEMENT: THE FOUNDATION OF VALUE
ESTABLISHING YOUR UNIQUE VALUE
CREATING THE “GOOD DEAL” DYNAMIC
THE INCREDIBLY POWERFUL “CHOICE OF YESES”
SOME FORMULAS FOR THE FAINT OF HEART
CHAPTER ROI
NOTES
CHAPTER 5: How to Convert Existing Clients
THE LITMUS TEST—SETTING PRIORITIES
OFFERING NEW VALUE
FINDING NEW BUYERS WITHIN EXISTING CLIENTS
FINDING NEW CIRCUMSTANCES
THE RESISTANCE
ABANDONING BUSINESS
CHAPTER ROI
INTERLUDE: THE CASE OF THE LOADED LOADING DOCK
NOTES
Ethics and Fees, Fees and Ethics
NOTES
CHAPTER 6: The Sublime Nature of Trusted Advisor Relationships
OPTIMAL CONDITIONS FOR TRUSTED ADVISOR RELATIONSHIPS
CHOOSING TIME FRAMES AND CREATING REALISTIC EXPECTATIONS
ORGANIZING THE SCOPE AND MANAGING PROJECTS CONCURRENT WITH THE RETAINER
CAPITALIZING ON TRUSTED ADVISOR RELATIONSHIPS
AGGRESSIVELY MARKETING TRUSTED ADVISOR RELATIONSHIPS
CHAPTER ROI
NOTES
CHAPTER 7: Seventy Ways to Raise Fees and/or Increase Profits Immediately
CHAPTER ROI
NOTES
CHAPTER 8: How to Prevent and Rebut Fee Objections
THE FOUR FUNDAMENTAL AREAS OF RESISTANCE
MAINTAINING THE FOCUS ON VALUE
BORING IN ON THE SUBJECT
OFFERING DISCOUNTS
FULL PAYMENT IN ADVANCE
USING “SMACK TO THE HEAD” COMPARISONS
CHAPTER ROI
NOTES
CHAPTER 9: Setting Fees for Everything Else
KEYNOTE SPEAKING: DON'T CHARGE FOR YOUR SPOKEN WORDS
PRODUCTS
EXPLORING NEW LUCRATIVE FIELDS
AND NOW FOR SOME PERSPECTIVE
CHAPTER ROI
NOTES
CHAPTER 10: Fee Progression Strategies
ENTRY-LEVEL FEES
TRANSITION TO A “GOING CONCERN”
TRANSITION TO PEER-LEVEL REFERRAL
TRANSITION TO THE BRAND PHASE
TRANSITION TO THOUGHT LEADER AND ICON
ALAN'S AXIOMS FOR THE “GOOD DEAL”
NOTES
CHAPTER 11: Volatility Opportunity
VALUE DOESN'T DISSIPATE DUE TO DISTANCE
WE DON'T HAVE TIME, WE DON'T HAVE MONEY
HOW CAN I HELP YOU?
NOTES
Appendix A:
Questions for Qualifying the Economic Buyer
Appendix B:
Questions for Establishing Business Objectives
Appendix C:
Questions for Establishing Measures of Success
Appendix D:
Questions for Establishing Value
Appendix E:
Questions for Assessing Personal Value Contribution
Appendix F:
The Difference Between Inputs and Business Outputs
Index
End User License Agreement
List of Tables
Chapter 10
Table 10.1 Fee Progression Across Categories
List of Illustrations
Chapter 1
Figure 1.1 The Watertight Doors
Figure 1.2 The Relationships Between Fees and Buyer Commitment
Figure 1.3 Consulting Business Acquisition Sequence
Figure 1.4 Costs from the Expert Versus Investment from the Partner
Chapter 3
Figure 3.1 Value Distance
Figure 3.2 Transforming Consultant Past to Client Future
Chapter 4
Figure 4.1 The Value-Based Fees Sequence
Figure 4.2 The “Good Deal” Equation
Figure 4.3 Strategic and Conceptual Formula
Chapter 5
Figure 5.1 Revisiting ROI
Chapter 7
Figure 7.1 Strategic Profiling in Which the Buyer Joins in the Diagnosis
Chapter 8
Figure 8.1 Filters to Be Overcome to Reach a Buying Decision
Chapter 9
Figure 9.1 Transforming Consultant Past to Client Future
Chapter 10
Figure 10.1 The “Success Trap” at Word-of-Mouth and Brand Phases
Guide
Cover
Table of Contents
Title Page
Copyright
Dedication
For the Third Edition
Introduction to the First Edition
Introduction to the First Edition
Acknowledgments
About the Author
Begin Reading
Appendix A Questions for Qualifying the Economic Buyer
Appendix B Questions for Establishing Business Objectives
Appendix C Questions for Establishing Measures of Success
Appendix D Questions for Establishing Value
Appendix E Questions for Assessing Personal Value Contribution
Appendix F The Difference Between Inputs and Business Outputs
Index
End User License Agreement
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ALAN WEISS
Value-Based Fees
3rd Edition
How to Charge What You’re Worth and Get What You Charge
Copyright © 2021 by Alan Weiss. All rights reserved.
Published by John Wiley & Sons, Inc., Hoboken, New Jersey.
Published simultaneously in Canada.
No part of this publication may be reproduced, stored in a retrieval system, or transmitted in any form or by any means, electronic, mechanical, photocopying, recording, scanning, or otherwise, except as permitted under Section 107 or 108 of the 1976 United States Copyright Act, without either the prior written permission of the Publisher, or authorization through payment of the appropriate per-copy fee to the Copyright Clearance Center, Inc., 222 Rosewood Drive, Danvers, MA 01923, (978) 750-8400, fax (978) 646-8600, or on the Web at www.copyright.com. Requests to the Publisher for permission should be addressed to the Permissions Department, John Wiley & Sons, Inc., 111 River Street, Hoboken, NJ 07030, (201) 748-6011, fax (201) 748-6008, or online at http://www.wiley.com/go/permissions.
Limit of Liability/Disclaimer of Warranty: While the publisher and author have used their best efforts in preparing this book, they make no representations or warranties with respect to the accuracy or completeness of the contents of this book and specifically disclaim any implied warranties of merchantability or fitness for a particular purpose. No warranty may be created or extended by sales representatives or written sales materials. The advice and strategies contained herein may not be suitable for your situation. You should consult with a professional where appropriate. Neither the publisher nor author shall be liable for any loss of profit or any other commercial damages, including but not limited to special, incidental, consequential, or other damages.
For general information on our other products and services or for technical support, please contact our Customer Care Department within the United States at (800) 762-2974, outside the United States at (317) 572-3993 or fax (317) 572-4002.
Wiley publishes in a variety of print and electronic formats and by print-on-demand. Some material included with standard print versions of this book may not be included in e-books or in print-on-demand. If this book refers to media such as a CD or DVD that is not included in the version you purchased, you may download this material at http://booksupport.wiley.com. For more information about Wiley products, visit www.wiley.com.
Library of Congress Cataloging-in-Publication Data
Names: Weiss, Alan, 1946- author. | John Wiley & Sons, publisher.
Title: Value-based fees : how to charge what you’re worth and get what you charge / Alan Weiss, Ph.D.
Description: Third edition. | Hoboken, New Jersey : Wiley, [2021] | Includes index.
Identifiers: LCCN 2021028896 (print) | LCCN 2021028897 (ebook) | ISBN 9781119776925 (hardback) | ISBN 9781119776970 (adobe pdf) | ISBN 9781119776963 (epub)
Subjects: LCSH: Business consultants—Fees.
Classification: LCC HD69.C6 W466 2021 (print) | LCC HD69.C6 (ebook) | DDC 001—dc23
LC record available at https://lccn.loc.gov/2021028896
LC ebook record available at https://lccn.loc.gov/2021028897
COVER DESIGN: PAUL MCCARTHYCOVER ART: © GETTY IMAGES | SECRET AGENT MIKE
Dedicated to the heroic people in our police and fire departments and all first responders, whose value will always exceed anything any of us could ever afford to pay.
Other Works by Alan Weiss
Alan Weiss on Consulting
(interviewed by Linda Henman, Aviv Shahar)
Best Laid Plans
(originally
Making It Work
)
Business Wealth Builders
(with Phil Symchych)
Getting Started in Consulting
(also in Chinese)
Fearless Leadership
Good Enough Isn't Enough
(also in Spanish)
Great Consulting Challenges
How to Acquire Clients
How to Establish a Unique Brand in the Consulting Profession
How to Market, Brand, and Sell Professional Services
How to Sell New Business and Expand Existing Business
How to Write a Proposal That's Accepted Every Time
Legacy
Life Balance
Lifestorming
(with Marshall Goldsmith) (also in Korean, Indonesian, Turkish)
Managing for Peak Performance
(also in German)
Million Dollar Coaching
(also in Portuguese)
Million Dollar Consulting
(also in Portuguese, Russian, Polish, Chinese, Korean, Arabic)
Million Dollar Consulting Proposals
Million Dollar Consulting
®
Toolkit
Million Dollar Launch
Million Dollar Maverick
Million Dollar Referrals
Million Dollar Speaking
(also in Chinese, Portuguese)
Million Dollar Web Presence
Money Talks
(also in Chinese)
Organizational Consulting
Our Emperors Have No Clothes
Process Consulting
The Consulting Bible
(also in Portuguese)
The DNA of Leadership
(with Myron Beard)
The Global Consultant
The Great Big Book of Process Visuals
The Innovation Formula
(with Mike Robert) (also in German, Italian)
The Language of Success
(with Kim Wilkerson
)
The Resilience Advantage
(with Richard Citrin)
The Son of the Great Big Book of Process Visuals
The Talent Advantage
(with Nancy MacKay)
The Ultimate Consultant
The Unofficial Guide to Power Management
The Power of Strategic Commitment
(with Josh Leibner and Gershon Mader)
Threescore and More
Thrive!
Value-Based Fees
Who's Got Your Back?
For the Third Edition
My global coaching clients, both executives and entrepreneurs, have provided me with continuing “finger-on-the-pulse” wisdom from both sides of the desk. It's been my pleasure to work with them and to earn their trust.
I'm also thankful to the successful thought leaders who constantly exemplify generosity, which I've tried to emulate, though not as successfully as they have. So I happily thank Chip Bell, Dan Gilbert. Bob Cialdini, Dan Pink, Chip Heath, Jonah Berger, James Carville, Marty Seligman, Marshall Goldsmith, and Lou Heckler for their contributions to me and my global community.
Introduction to the First Edition
The Ultimate Consultant Series is intended for successful practitioners who are seeking to scale still loftier heights. I'm happy to be among them.
This book is probably on the topic most eagerly anticipated of any I've written about in consulting. For the first time, I've recorded everything I know about the techniques that have worked best for me in raising fees, obtaining fees from unlikely sources, and supporting continuing fees. Yet this is by no means a mercenary book.
I believe in two aspects of consulting very strongly. First, you can't help others until you help yourself. Consequently, unless you're at least comfortable and secure financially, it's difficult to engage in pro bono work, to contribute to charities, and to help others to achieve their goals. Second, the basis for any successful client relationship is a win-win dynamic, the “good deal” you'll read about throughout this book. Therefore, you have to be treated well financially, and the client has to appreciate your value.
And when you come right down to it, there's a third aspect: Clients truly believe that they get what they pay for. No buyer ever bragged about being successful in capturing the cheapest consultant available, someone sitting by the phone with no business who took on the assignment in return for food. No, buyers—and their egos—revel in telling people that they snagged a consultant impossible to obtain, had to pay dearly, and expect everyone to listen closely.
After I worked on a project for a total of about six hours, the CEO asked his top officers what they would have charged had they been I. They guessed about $2,000 or less, having multiplied and divided by the $150 or $200 hourly rate that they charged.
“Well,” said the CEO, “he's charging us $18,000, so listen up!”
Dizzy Dean said once, “If you can do it, it ain't braggin.'” As you read on, you might want to listen up.
Alan Weiss, Ph.D.
East Greenwich, Rhode Island
November 2001
Introduction to the Third Edition
We speak today of “disruption” and “volatility.” With the original version of this book over a decade ago, nearly 20 years ago, I disrupted the consulting profession with the concept of billing for value and not time.
Today, professional services organizations, from law firms to accountants, from architects to professional organizers, are evolving toward value-based fees (though some are mammals and some are still dinosaurs).
In volatile times, your value is your value. It doesn't matter whether you're on Zoom, or Skype, or you're a holograph levitating in a virtual meeting room. Value is not “presence,” and certainly not physical presence in the traditional sense. In fact, the benefits of meeting without travel, without the expenses of lodging and transport and food, and without the vagaries of rescheduling and postponing at great cost due to uncontrollable factors, make for even greater value in remote interactions.
The $18,000 cited in the introduction to the earlier edition would be $50,000 today. Our value is greater than ever, but it does face that toughest of all sales.
The first sale is always to yourself.
Read on, and let me assist you in closing the deal.
Alan Weiss, Ph.D.
East Greenwich, RI
March 2021
Acknowledgments
My thanks go to the people who have made the fees possible, the wonderful clients with whom I've had the good fortune to work over the past two decades. I immodestly think that they're better off, and I know that I am. They are wonderful people.
Who says that nice guys finish last?
Here's to the most enduring clients: Dr. William Winter, Keith Darcy, George Rizk, Art Strohmer, Jarvis Coffin, Marilyn Martiny, Wayne Cooper, Lowell Anderson, Roseann Strichnoth, and Jerry Arbarbanal.
Deep appreciation goes to the wonderful editors at Jossey-Bass/Pfeiffer, headed by Kathleen Dolan Davies, the only human who speaks even faster than I do. It has been a joy to work with them all.
My thanks also go to Matt Davis for suggesting and assisting in the second edition.
Once again to L.T. Weiss, my love and affection—I know you hear me.
About the Author
Alan Weiss is one of those rare people who can say he is a consultant, speaker, and author and mean it. His consulting firm, Summit Consulting Group, Inc., has attracted clients such as Merck, Hewlett-Packard, GE, Mercedes-Benz, State Street Corporation, Times Mirror Group, The Federal Reserve, The New York Times Corporation, Toyota, and over 500 other leading organizations. He has served on the boards of directors of the Trinity Repertory Company, a Tony-Award-winning New England regional theater, as president of Festival Ballet Providence, and chaired the Newport International Film Festival.
His speaking typically includes 20 keynotes a year at major conferences, and he has been a visiting faculty member at Case Western Reserve University, Boston College, Tufts, St. John's, the University of Illinois, the Institute of Management Studies, UC Berkeley, and the University of Georgia Graduate School of Business. He has held an appointment as adjunct professor in the Graduate School of Business at the University of Rhode Island, where he taught courses on advanced management and consulting skills. He once held the record for selling out the highest priced workshop (on entrepreneurialism) in the then-21-year history of New York City's Learning Annex. His Ph.D. is in psychology. He has served on the Board of Governors of Harvard Medical School Center for Mental Health and the Media.
He is an inductee into the Professional Speaking Hall of Fame® and the concurrent recipient of the National Speakers Association Council of Peers Award of Excellence, representing the top 1 percent of professional speakers in the world. He has been named a Fellow of the Institute of Management Consultants, one of only two people in history holding both those designations.
His prolific publishing includes over 500 articles and 60 books, including his best-seller, Million Dollar Consulting (from McGraw-Hill). His newest is Legacy (Taylor &and Francis). His books have been on the curricula at Villanova, Temple University, Stanford University, and the Wharton School of Business, and have been translated into 16 languages.
He is interviewed and quoted frequently in the media. His career has taken him to 63 countries and 49 states. (He is afraid to go to North Dakota.) Success magazine cited him in an editorial devoted to his work as “a worldwide expert in executive education.” The New York Post called him “one of the most highly regarded independent consultants in America.” He is the winner of the prestigious Axiem Award for Excellence in Audio Presentation.
He is the recipient of the Lifetime Achievement Award of the American Press Institute, the first-ever for a non-journalist, and one of only seven awarded in the 65-year history of the association. He holds an annual Thought Leadership Conference, which draws world-famous experts as speakers. In 2017 his featured speaker was Harvard Distinguished Professor Dan Gilbert, whose work on happiness has drawn over 15 million TED views.
He has coached former Miss Rhode Island/Miss America candidates in interviewing skills. He once appeared on the popular American TV game show Jeopardy, where he lost badly in the first round to a dancing waiter from Iowa.
Alan has been married to the lovely Maria for 52 years, and they have two children and twin granddaughters. They reside in East Greenwich, RI, with their dogs, Coco and Bentley, a white German Shepherd.
CHAPTER 1The Origins of Value: What People Want Is Not as Important as What They Need
ABUNDANCE AGRICULTURE AND THE ARTS
Somewhere in the mid-eighteenth century, agricultural production exceeded population growth, meaning that surplus farming could replace subsistence farming in many places. The farmer could therefore barter crops in exchange for someone to repair fences, tutor the children, or sing in the evening.
Thus, “value” became highly important. Was someone who planted crops more valuable than someone who tended the animals? Was a plow horse more valuable than a new roof? Could some of the children be released from sunup-to-sundown chores by employing others, perhaps even sending them to school, or the priesthood, or the military, or a convent?
And I'm quite sure that about 200,000 years ago one of our forebears exchanged some flints or arrowheads he had prepared in exchange for a mastodon steak or some hide for clothing. The two parties involved somehow reached an agreement about the value of the transaction and the worth of the services or products.
“Value” represents worth, usefulness, importance, good stuff like that. A “fee” is equitable compensation paid in return for a desired service or product.
Questions? Simple, right?
I was the keynoter at a convention once where a participant in the audience told me that he could make more by billing hourly for his time than anyone could basing fees on value. I laughed and walked away. This isn't a shade of grey, or a debate, or philosophic point. He was denying the existence of gravity or oxygen.
Alanism:Logic encourages thought, emotion urges action.
When retailers find sales declining, the smarter ones raise prices, they don't engage in desperation sales. Buyers are willing to pay the higher prices when they perceive those prices denote higher value.
People believe they get what they pay for; otherwise no one would buy a Brioni suit, or a Bentley car, or a Breitling watch. Now, you don't need Brioni, Bentley, or Breitling for attire, transportation, or the time of day. But they do fulfill certain ego needs, certain emotional desires. Nothing wrong with that.
Logic makes people think, but emotion makes them act. When I was confronted with the need for a wrench, sending me to the unfamiliar hardware store, I found three wrenches, all alike, at three different prices. I chose the most expensive on the “emotional” basis that it was probably made from better materials (I had zero evidence of that). Some people will buy a brand name they recognize on that same basis, which is why we'll focus on the relationship between fees and brands later in the book.
When a woman asked me in 1985 if I'd like to have one of the very first car phones in New England (the last four digits were 2468 at my request), I didn't do a cost analysis or ask for references; I told her to get over to my place and I'd cancel my afternoon appointments. Ego needs are quite legitimate and very powerful buying catalysts. Today I carry the latest iPhone in my pocket; it works through my car's sound system (but I wouldn't mind looking into a mastodon steak if possible).
At some point, of course, there was the question of how many days, how much time, how much presence was required, and time became a measurement of value. Yet it's interesting that a field hand might have been paid by the day or a teacher by the lesson, but the great artists were paid by results. Michelangelo, da Vinci, Beethoven, and Mozart were commissioned to create works of art, not to work by the day or to be “present.” Some of these works took years and there were vast gaps between the commission and the fulfillment thereof. Da Vinci was famous for lugging works around with him that were in various stages of completion, including the Mona Lisa. Michelangelo required four years to complete the ceiling of the Sistine Chapel, despite the imprecations of Pope Julius who, understandably, wanted to see it in his lifetime.
For our purposes here, and for your purposes in terms of future success, “value” pertains to the quality and power of the results delivered. There is no value in a training program, a book, a focus group, a strategy session, a coaching engagement, unless there is a demonstrable tangible and/or intangible result of quality and pragmatic application. By “intangible” I refer to ego fulfillment, aesthetics, comfort, security, and so forth. Not all value is monetized, and in fact some of the greatest value is intangible, such as an improvement in self-esteem or closer relationships and intimacy.
As we continue, please bear in mind that this type of thinking is a question of “mind-set.” You have to believe that the result is the key, and not arbitrary “deliverables,” those darlings of the human resource crowd, or the time required. Cole Porter, Salvatore Dali, Thomas Alva Edison never worried about the time required to create value.
However, there is a second aspect about this mind-set that is overarching: Charging by a time unit is unethical.
I mean that as harshly as it's written. I read a piece on social media while writing this book from an Australian accountant who pointed out that if you charge by the hour (as most accountants still do) you “run the risk of cheating yourself of greater income.” What he meant is that if you're good and fast, an advantage to your client, you get paid less. If you're slow and inept, a disadvantage to your client, you can make a lot more money.
This is the inherent unequivocal problem with fees based on time units or “showing up”: They abuse your client relationship or they undermine your ability to earn money. Every client deserves fast and quality results, and every professional services provider deserves equitable compensation based on the results they create.
I don't believe anyone ever asked Picasso how long it took to paint Guernica. Some expert valuations place it at a worth of $200 million. That is not a typo. At a $1,000 an hour, an incalculable fortune in Picasso's time, he'd need 200,000 hours to equal the $200 million price by the hour. That's about 22 years. He lived to 91, so perhaps working round-the-clock he might have done it.
That agricultural transformation, as well as ego fulfillment and including great results not based on time, are a function of an abundance mind-set.
THE ABUNDANCE MIND-SET
It's insufficient to possess abundance. One must be willing to use it. We must move from a poverty and scarcity mentality to an abundance mentality. If the farmer with a surplus decided it was best to keep it and protect it for that proverbial “rainy day,” there would be nothing with which to pay for a tutor or fence repair. And some people, no matter what their income or savings or prospects, act as if they're poor.
You've all seen this: the otherwise successful people who never pick up a check, who take modest vacations, who have ten-year-old cars, whose houses need maintenance. These are people continually asking if they “really” need something as an excuse not to spend money on an acquisition. We've all seen elderly people who have ardently saved through their lives only to lose it all in a health crisis or scam.1
I once asked a group of coaching clients at an event what they would do if they unexpectedly gained $600,000 via a client request for work, or a lottery winning, or an inheritance. Most spoke of partial savings, some philanthropy, some personal acquisitions, vacations, and so on. But one woman said to me, “I wouldn't touch a cent of it, it would sit in the bank!”2
Thus, we experience people with significant growth and prosperity who continue to act as if they were desperately trying to gain a foothold, to keep their heads above water. I call the need to change based on true prosperity securing the “watertight doors.”
Figure 1.1 The Watertight Doors
In Figure 1.1 you can see the progression from trying to survive, to being “alive,” to having “arrived,” and finally to thrive. Survival takes pressure off, then “alive” means you have a “going concern,” as the accountants like to say. “Arrive” denotes a brand and recognition within your field, with unsolicited referrals coming your way. And “thrive” is the expert and thought leader, one who sets the paces and is used as a reference point for excellence.
The problem is that many people to the right of my chart still act as though they're on the left, never having been able to abandon old habits and old friends. To transit from left to right, we must be willing to change our beliefs, friends, image, self-talk, expectations, affiliations, and so forth. That's the only way to create “watertight” doors that don't permit us to slide back.
I talk to people too often who tell me in the same sentence that they're having their best year ever but can't afford to invest in their own self-development, or give to charity, or take an unexpected vacation. You may see this as hypocrisy, but I see it as an inability to leave a poverty mentality that enabled them to survive but not enjoy their arrival or beyond.
The abundance mind-set is not merely about money. It's also about time, information, volunteerism, support, and so forth. In other words, an abundance mentality is denoted by generosity. The most successful people I know are also among the most generous I know.
You can begin each day as a long-slow crawl through enemy territory or as having the potential for great opportunity. Thinking abundantly is a mindset and a permanent disposition. It's not a motivational technique or a fad.
Not long ago, so many people burned their feet at a fire-walking (hot coals) session that extra EMTs had to be called! My conclusion is that they just weren't motivated enough! Trodding hot coals does nothing for your life, unless that's the only route to your office. But creating and maintaining a positive and abundance mind-set will enable you to enjoy life, be resilient, and constantly appreciate your own worth for others, which just happens to determine your fees.
WHY YOUR PRESENCE ISN'T REQUIRED
The concept of value is not, therefore, vested in your physical presence, physical work, or even being in view. Value is a function of the worth I place on a product, service, or relationship. Value may be, like beauty, in the eye of the beholder—a season ticket to a 49ers game might thrill one person but cause someone else to say, “Is that on Xbox?” or “What's a 49er?”3
Value can be tangible:
Increased income
Larger market share
More referrals
Lower cost of new client acquisition
Value can be intangible:
Improved aesthetics
A feeling of security
Greater safety
More freedom
Some value is society- or community-related, creating normative pressures to appreciate it:
Better roads
Faster internet
More access to quality health care
Better schools
Some is intensely personal:
More intimacy with my partner
Better cooking skills
Ability to speak a second language fluently
More respect from colleagues
Value pertains to the importance of something, and is measured in worth, often expressed in equitable compensation. Given the diverse factors noted above, some people see value as a bargain (“I purchased this fine wine for 25 percent below retail prices”) and some as justification for major investment (“The painting is worth $5 million on the market at the moment”). What is the worth of a great vacation or entertainment experience. Those with a scarcity mentality might buy cut-rate tickets to the theater and tolerate obstructed views, while those with an abundance mentality might pay 200 percent of face value to secure house seats.
But note that these are all experiences of one kind or another. A personal guide in Pompeii has to be with you if you're on a walking tour, and is much more valuable than an audio guide as you wander around. (You can't ask questions of an audio guide.) However, the person selling you the house seats needn't accompany you to the theater or even talk to you; it can all be done on the computer.
Alanism:Charging by the hour or any other time unit for professional services isn’t merely amateurish, it’s unethical.
Whether we are present (e.g., interviewing people and holding focus groups at a client's site) or not (e.g., advising by e-mail, phone, or Zoom), our value is in the results of our project and advice, not in terms of whether we are present or not, in reality or virtually. This book is of value to you, but I'm not reading it to you and you're not paying by the page.
Our clients are best served by quick, accurate resolutions to their issues. But if we charge by the day, for example, we make the most money by staying as long as we can. That is an ethical conflict. Moreover, the client shouldn't have to make an investment decision each time the client feels we may be needed. And our presence is often disruptive, distracting, and costs still more because of travel and lodging needs.
Many professional services began charging by the hour (lawyers still tend to bill in six-minute increments) and have never changed: accounts, designers, attorneys, architects, consultants, coaches, and so forth. However, the smarter ones evolved to understand the concept of their value, not merely their time. What is the value of legal services for a successful acquisition, or an amicable divorce? How valuable are accounting services that proactively can reduce your taxes or arrange for interest-free loans under certain circumstances?
CASE STUDY: THE ARCHITECTS
The American Institute of Architects (AIA) was a client for a couple of years. Their members habitually charged by the hour for designing blueprints, finalizing plans, overseeing work, and so forth.
During a decade of increased salaries for almost every professional service in America, the architects suffered a net decline in income. How much is more light, a better family environment, and better use of space worth? Apparent, less than $100 an hour.
According toSalary.com, the average hourly fee of an architect in the U.S. in 2020 is $27. That is not a typo.
Value-based fees is a philosophy that holds that we provide a dramatic return on the client's investment through our projects and advisory services, in return for equitable income. That's why a peer-level, trusting relationship is required with our buyers, which we'll talk extensively about as we progress. That's how partners treat each other.
Capitalism is based on my providing you with products or services of a certain quality in a certain manner at a certain time, in return for which you will provide me with certain fees in a certain manner at a certain time. If you haven't looked around lately at communism or socialism, let me assure you that capitalism has won.
Let's proceed to help you and your clients win together by intelligently assessing value and commensurate fees.
THE IMPORTANCE OF BUYER COMMITMENT, NOT COMPLIANCE
I can prove anything on a double-axis chart,4 but the matrix in Figure 1.2 happens to hold true. As you can see in the figure, the ideal relationship occurs when buyer commitment to the project (and to you) is high and your fee is high. If buyer commitment is high and your fee is low, you are wasting an opportunity. If buyer commitment is low and your fee is low, you will, at best, create an indifferent sale. And when fees are high but commitment is low, you will be shown the door.
My estimate is that most consultants' approaches (whether or not they actually get the business) are in the bottom left quadrant about 25 percent of the time, in the bottom right quadrant about 10 percent of the time, in the upper left quadrant about 60 percent of the time, and in the upper right quadrant only about 5 percent of the time!
That's right: most consultants, including most of you reading this, habitually undercharge for your services and deliver far more than you are receiving in remuneration, considering your contribution to success. You are undercharging and over-delivering, and lest you consider that an exalted position, consider trying to pay your mortgage or 401k contribution with that combination.
Figure 1.2 The Relationships Between Fees and Buyer Commitment
Most buyers comply. That is, they are willing to go along with the “expert,” even if it's sometimes against their better judgment. Or they will delegate you to someone they believe has the technical ability to evaluate your proposition, typically in the human resource department, finance, or legal. (Put these together, and they are an anagram for “no business here.”) Buyers who merely comply may be seen at first blush as easy to work with, but they are actually land mines waiting for some weight to trigger them. That's because they hold the consultant responsible for everything. They believe that you are doing something to them or for them or at them, but certainly not with them.
Compliance is dangerous because the buyer usually takes no inherent responsibility for the project but rather abdicates to the consultant. I've never found a project that a consultant can unilaterally implement successfully, since consultants have responsibility but no real authority. (When that dynamic is reversed, it's the sign of a very poor implementation scheme.)
Consulting projects should be true partnerships between the consultant and the economic buyer. This begins prior to the proposal being signed and is an integral aspect of obtaining high fees. A merely compliant buyer will grudgingly or apathetically go along with the implementation but will do so at the lowest possible fee. The head is involved but not the gut (remember: logic makes people think, but emotion makes them act). Large fees are dependent on emotional buy-in, and that must be achieved in the relationship aspect of the consulting sequence, well prior to the actual closing of business.
This is why patience in formulating the right relationship is more important than attempting to make a “fast sale.” The former is a partnership where fees are academic; the latter is a unilateral benefit where fees are often the main point of contention.
The buyer's commitment to outcomes and to his or her role in the partnership being formed to reach those outcomes is the key determinant of high fees. Buyers who are too willing to go along with your recommendations are as potentially fatal as those who dig in their heels after you've said hello.
CRITICAL STEPS FOR BUYER COMMITMENT
It's worth repeating here briefly the sequence of events in the consulting business acquisition process that engenders the highest-quality commitment; the first three are shown in the graphic in Figure 1.3:
Shared Values:
Those common business beliefs that will allow you to work effectively with the prospect—for example, a mutual antipathy for downsizing or a common belief in the importance of ongoing employee feedback
Relationship:
That level of a trusting interaction in which you and the buyer are comfortable with each other, can be honest (even in disagreeing), and share insights and assistance with each other on a mutual basis
Conceptual Agreement:
Agreement between you and the buyer on the
objectives for the project,
expressed as
business outcomes; metrics,
measures of progress toward those objectives; and
value,
the buyer's stipulation of how he or she and the organization will be better off as a result of those objectives being met
Figure 1.3 Consulting Business Acquisition Sequence
These three critical steps, each dependent on the prior step being successfully in place and addressed as we proceed, will garner buyer commitment. The absence of conceptual agreement will result in either a lost sale or a lousy sale (and the latter is often more damaging than the former).
Fees are dependent on buyer commitment well before a proposal is ever tendered. Note that fees are not even on my chart.
THE BUOYANCY OF BRANDS: HOW BRANDS HELP FEES
The second book in this Ultimate Consultant Series is dedicated to branding for consultants. One of the key reasons for effective branding is to enhance fees.
Fees are (or should be) based on value. That value is always in the eye of the beholder—in our case, the economic buyer. Hence the more value conveyed to that buyer by the most powerful means, the less downward pressure on fees. Effective branding actually creates a fee “buoyancy.”
There is actually one thing better than a buyer impressed by you and respecting you on sight, and that is the buyer impressed by you and respecting you before ever laying eyes on you.
No CEO ever said, “Get McKinsey in here,” when strategy work was needed, then followed up by saying, “I think they're too expensive.” As they say in the Ferrari showroom when someone asks about gas mileage or insurance costs, “If that's your concern, you really shouldn't be here.”
Ferrari is a brand that evokes certain immediate understandings on the part of the potential individual buyer:
High cost
Top status
High maintenance
High insurance
High repair costs
Unique image
Personal ego needs met
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You know those things going in, and they are not points for discussion when dealing with a salesperson.
Similarly, McKinsey is a brand that evokes certain immediate understandings on the part of the potential corporate buyer:
High cost (fees will not be negotiable)
Top status (no one can say we're giving this short shrift)
High maintenance (a lot of junior partners will appear)
High insurance (the board can't complain about quality of the help)
High repair costs (they will recommend tough interventions)
Unique image (the cachet alone will raise expectations)
Personal ego needs met (only the best for the best)
You get my point. The mere power of a brand is sufficient to overcome any resistance to fees and, in fact, often elevates fees merely by dint of association with such brand images as quality, reputation, client history, and media attention.
There is no brand as powerful as your name, although strong company brands can also serve quite well. When a potential client says, “Get me Jane Jones” or “Get me the Teambuilder,” that client is articulating a clear imperative: Don't go shopping, don't compare prices, and don't issue a request for proposals; just get me that person I've heard so much about. (That is far superior to the buyer saying, “Get me a great leadership consultant” and your name is one of several in the hat.)
Brands create an upward expectation of both quality and commensurate fees. No one expects an outstanding person to come cheap. You usually have to convince the buyer of that quality through careful relationship building. But a strong brand shortcuts that process considerably. The relationship building still needs to be done (for reasons of commitment, as noted earlier), but the time required is significantly reduced. The buyer wants to be a partner, wants to follow your suggestions, and wants to participate because your credibility has preceded you.
Brands are accelerators of credibility and therefore of relationships. They immediately justify higher fees in the mind of the buyer, and that is the only mind that counts on that matter. Brands are expressions of uniform quality. The ultimate brand for most solo consultants is their name, as in: “Get me Joan James.”
It's not the intent of this book to explore how to create a brand.6 However, it is vital to understand brand importance in the fee-setting process. Like bank loans being hard to acquire when you need them and easy to obtain when you no longer need them, high fees are most difficult when no one has ever heard of you and you desperately need the income and easiest when you're well known and business is rolling in.
Alanism:A brand is how people think of you when you’re not around.
The crime here is that many successful consultants either don't bother to use their past success to create effective brands or have created brands that they don't properly leverage for higher fees. Tom Clancy had never written a book nearly as good as his original, The Hunt for Red October, but he's certainly been paid far more for every subsequent work than for that first effort (and the writers now supporting his brand long after his death). He had been a smart marketer and a hugely successful “brand” (as James Patterson, who's sold a trillion books, seldom writes his own anymore but uses a “co-author”).
Brands create higher fees. And higher fees enable you to solidify the credibility of your brand. That's a great cycle.
CREATING SHARED SUCCESS
Many consultants take the position (out of arrogance or ignorance) of “Let me show you how I'm going to improve things around here.” The success is the consultant's, a sort of largesse provided for the lucky client. There is a certain power in being “the expert” without whom all goes to hell, but there is a huge risk, although not the one that might be apparent.
The apparent risk is that the client might not benefit as desired or, heaven forbid, might actually suffer a reversal of fortune. Remember the physician's sage credo, “First, do no harm.” It's no accident that large consulting firms are being sued right and left in this litigious society. They have not “delivered” the desired results.
However, the greater risk is that even with demonstrable success, the buyer feels alienated, disenfranchised, and apart from it. The fee in this case, despite success, will be paid grudgingly. For one thing, the client is now fearful of long-term dependence and doesn't want to incur huge costs each time the consultant's “expertise” is required to solve another problem. For another, the buyer does not feel the intrinsic ownership and sense of well-being that would emotionally overwhelm any reservations about costs. Third, from an ego perspective, the buyer will feel the need to insert some leverage into the relationship to retain the perceived upper hand and emphasize that the consultant serves at the buyer's pleasure (especially if the results are so visible that others in the organization are talking about them).
True partners never begrudge each other their proper due. In fact, there's an implicit trust that neither partner will take advantage of the other and that agreed-upon terms, conditions, and time frames are innately fair.
Fee pressure decreases with a sense of shared investment, shared accountabilities, and shared success. Figure 1.4 shows the difference between a focus on a buyer and seller (top) who are locked into a battle over costs with only vague benefits established and two partners (bottom) who have agreed on tangible results where the fee is simply an intelligent and economical investment.
When the buyer simply views the consultant as another vendor providing certain expertise, the cost of acquisition becomes the key focus, because this is a commodity purchase (Who can provide the cheapest computer monitors per our specifications?). However, when the buyer's self-image and role are as a partner in the consulting process, the decision becomes one of return on investment, and the clearer the outcomes (under the conceptual agreement discussed earlier) and the more dramatic, the higher the investment that is justified.
This is particularly true when that investment includes the buyer and key organization people in the partnership. Some of the most successful consulting projects I've landed—and the ones most impervious to fee pressure—are those in which a “virtual consulting team” was formed comprising key client resources and myself. No educated buyer will want to underfund or hedge on that investment.
Figure 1.4 Costs from the Expert Versus Investment from the Partner
Alanism:Borrow $100,000 from a bank and you’re a customer. Borrow $10 million dollars and you’re a partner!
These are some of the key factors in shared success:
A “we” mentality from the first contact with the prospect
Literature, web sites, and promotional materials that talk about partnering and shared responsibilities
A formal description of “joint accountabilities” in the proposal itself
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A strong focus on outcomes and business results, not on tasks or deliverables
