Over the past few articles, we have been looking at the three main success factors you need to establish the overall framework of a successful sole practitioner consultancy. So far we have looked at Self-Awareness and Clarity of Purpose. Today it’s the turn of Price Integrity.
There are 6 tips I would invite you to consider in terms of establishing price integrity:
1. Try to price based on value created not time expended. This is far from easy, but if you don’t try it won’t happen! It is very dangerous to assume that there is always a direct correlation between the time you commit and what you are paid.
- Consider the range of activities you undertake; could some of them be described as “commodity”, and some as “value-add”? By way of example, a sole practitioner accountant probably has a range of activities that could be described as commodity (preparing a set of accounts), but may also have some activities where he is genuinely making a difference (devising and implementing an efficient tax management strategy). These probably deserve different levels of reward.
2.Consider pricing options. Does your business lend itself to Day Rate, Fixed Fee, Performance-Related, or a hybrid of these? I have used all of these at different times.
3. Structure proposals on a modular basis. The reason for this is you can then trade time for money, and not just face having to concede, i.e. if the client baulks at the price you can just take a module out and bring the price down accordingly.
4. Know your worth. If you are offering a “Rolls-Royce” service, the prospect will be confused if you are offering a bargain basement price. You need to stay in line with the market, and match your pricing to your overall strategy – low cost offering/niche offering/differentiated offering – with the latter two representing the best opportunities to price at the top of the market.
5. Be prepared to take a degree of risk – this brings us back to the performance-related aspect. I have on occasions done work where I have offered the prospect a choice between a full day rate or a lower day rate, with a performance “kicker” if a target increase in pre-tax profit is achieved by a certain date (and on a formula agreed with the client’s accountant so there can be no “misunderstandings”).
6. Be prepared to walk away. If you sense that you are viewed as a cost as opposed to an investment then, unless your model is to be a low cost provider, or there is some form of ulterior motive, you should think long and hard before agreeing to undertake work at an unsatisfactory fee level.
Now that we have covered the three success factors you need to set yourself up as a successful consultant, it time for you to implement them. I hope this list of tips is helpful for you, let me know how you get on if you try them out!