The Big Question
Questions I get from consultants. And my answers.
Got this question from a reader (great question, thanks!):
“I've been asked to provide a rate card but I don't want to charge by the day or hour, rather by project or based on a standard, packaged service. What's your advice on answering the rate card question and calculating how to charge for packaged services?”
Without knowing the exact context of the reader (e.g. relationship with the client, type of work proposed, competition for the project, etc.), in the shoes of the consultant I would consider this client as a non-ideal client. If you don’t want to charge by the hour of the day, you should avoid clients who insist on getting your rate card. Period. It’s the wrong start of a client relationship.
A few reasons why your client might ask for a rate card
● You already worked for this client on an hourly rate previously. By the way, it’s always very difficult to upgrade from hourly/daily rates to value-based, fixed fee or advisory retainer within existing clients.
● Your proposal or project has an hourly ‘look & feel’, e.g. you have suggested a certain time line, a certain effort per week, a certain availability per week/month, or proposed to accomplish certain hourly-like activities or tasks.
● Your proposal is not outcome-based: it’s not selling/proposing a result, an impact, an outcome, a problem resolution.
● You are not yet (enough) recognized as an expert or an authority in your expertise domain. The client wants you to follow their instructions and processes instead of you being in the power position as an authority. As a result, procurement is playing an important role in deal making and they are treating you like the masses, comparing your rates with ‘the market average’ and expecting you to discount your rates. The client is not going the extra mile to protect you from (sometimes disrespectful) negotiations with procurement.
● You have mentioned somewhere/somehow (in the past or present) you are (also) doing contract, interim or freelance work (maybe it’s in your LinkedIn profile?) or your consultant work is a typical hourly rate kind of job. It’s almost impossible to combine contractor (or task-based) work with upstream, outcome-based fixed pricing work. It’s either/or.
● The client (or procurement) is not allowed or is not used to work with expert consultants with a different pricing model. Sometimes, they are used to measure consultants on the basis of 'hours performed' (versus budget) and not on measuring outcomes, impact or results. Which is a shame, of course.
Here’s one of my own experiences with procurement
At one point in my consulting career I was asked to provide expert advice to a financial institution for a rather complex issue. They asked me to send a mail with my suggested approach. They were in a rush, the problem was blocking them, it had caused toxic internal discussions, they were stressed by it and were asking for urgent help to get rid of that problem.
I was confident I could help them and I suggested a (paid) deep dive to diagnose the problem. In my mail I proposed a value-priced diagnostic to be finalised within 2 weeks and the deliverable would be my analysis of the problem in combination with an implementation roadmap to get rid of the problem (to be implemented by themselves but with my - paid - guidance if necessary). I call this ‘paid discovery’.
About an hour after having sent the mail, a procurement guy called me. He had calculated: my value-based fee divided by 2 weeks of work. He said: Mr. Smeyers, you are asking about 3 times the ‘normal market rates’, we can’t accept this. My reply: "In that case, I don't think we're a good fit because you want a transaction and I proposed a fixed fee discovery methodology". I also told him I’d inform his colleague (the client) to let him know I didn’t get an agreement with procurement. The client called me back in 2 hours, said yes to my proposal and apologized for the procurement hassle.
What you can learn from this case
Once you have achieved an expert positioning in your domain (focus, specialisation and depth are your superpowers), never get into the procurement trap, telling you are priced above market. It’s a landmine to get you to accept less than you know you’re worth. Upstream experts are hard to get and charge premium (fixed fee) prices, do paid discovery (instead of writing unpaid proposals) and/or apply outcome-based, value-priced methodologies. See also my article about productizing consulting services.
If you have gathered multiple years of experience and you know all the patterns of the prototypical client problems, you are ‘above market average’. You should only collaborate with clients who are a good fit for you for a price which is appropriate for the value you are providing.
Next Big Q: I do quite a bit of discovery calls with consultants who are interested to work with me. They always ask me - understandably - to explain my point of view with regards to ‘standing out in a crowded consulting market’. Or in other words, what is my approach to help them stand out? I will summarize this for the readers in the next newsletter: how can you stand out as a consultant and become the go-to person in your expertise domain?
