GETTING PAID MORE: WHAT IS YOUR CONSULTING REALLY WORTH?
Have you ever tried to piece together an income from a string of client engagements that barely cover your monthly bills?
We all want to have great coaching or consulting practices… and make a lot of money doing it! But we can’t do that by consistently underearning… but how do we get there?
For the most part, the time and effort associated with acquiring clients are not related to the number of zeros on your invoices. Over my 30 plus year consulting career, I’ve found that some of the largest engagements I’ve ever won were some of the easiest to obtain. Why? Because low-dollar clients are generally less sophisticated buyers of coaching or consulting services… and therefore are harder sells.
What???
I don’t mean they’re not smart, but for one reason or another, they may not always understand or appreciate the value that you provide for them. It takes longer for you to convince them to hire you. They are less likely to value and follow through on your recommendations because they didn’t pay all that much for them. They generally don’t give you high-value referrals. And, if they start having cash flow issues, you will be the last one to get paid.
It’s hard to add significant value to a low-dollar engagement that’s only based on tasks or time. When low fees are charged, resentment may develop on your part when the client asks for more attention.
It breaks my heart when I see new coaches and consultants repeatedly selling low-dollar engagements and trying to make it up on volume. The problem with this approach is the math of it all. Here is an example with round numbers. Let’s say a business coach charges $600 for an average engagement. (Your average fee might be more, but this actual example will still hold true. Put your own numbers to it.)
Consider this low dollar example… which is all too common these days. Multiply the $600 by 52 weeks (that’s right… you can’t take time off at that rate) that’s $31,200/year. For 2021, the self-employment tax rate in the U.S. is 15.3% on the first $142,800 worth of net income (up from $137,700 in 2020). After self-employment taxes, you are down to $26,300 or less. (That’s a bit more than $13.00 an hour. (Fast food workers in the US want to go on strike for a $15 an hour minimum wage.) That doesn’t include any other expense incurred to get those $600 clients in the first place… like website hosting, gas, postage, copies, printing, internet access… I could go on, but you get the idea. At that rate, one would have to find 52 new clients a year… That’s pretty much impossible!
BUT… What if those professionals raised their average fee to $2500 and only needed to get half as many new clients? Their gross revenue would rise 108% to $65,000 per year.
But, 95% of the time, we cannot simply raise prices without giving a corresponding increase in the value provided to the client. How do you do this? BY RESTRUCTURING WHAT YOU OFFER TO CONSISTENTLY SOLVE CLIENT PROBLEMS AND PRODUCING VERIFIABLE RESULTS.
Value is not created by lowering fees, it is created by achieving greater positive outcomes for the client.
(I do have to mention that there are times when even if we are comfortable charging more and know the value you’re giving clients, you still might hit a ceiling for what you can charge because you’re in a market that has become commoditized, like general sales training.)
It is still up to us to prove the fact that the value that we provide to the client is worth more than our fee. But what is the best way to do that?
Real value to the client is provided when you:
• Solve specific problems
• Help a client successfully take advantage of an opportunity
• Create a change in a team’s/client’s behavior
• Lead the client to or past their stated goals
If your engagement or working sessions with a client includes successfully achieving one or more of these four items, they will want to do even more business with you. If not, you are just another coach or consultant with time spent on consultations, recommendations, and reports that accomplish little or nothing. More on this later in this section…
Why your clients NEED your help… If your clients had to develop that ability or solve the problem on their own… they’d spend WAY more of their time learning how to solve the same problems that you can solve much faster… precisely because of what you know that they don’t. That savings in time and money has a real economic value. If your expertise helps clients earn 25% more or reach their goals in less time, there is always a quantifiable dollar value that can be assigned to that type of outcome. That is where the value lies.
A professional who has high profit margins typically will have fewer engagements than one running at a low profit margin. But that is good news… as it will allow you more time for marketing and finding the next higher dollar client!
NOW… I am not recommending you to instantly dump any low-dollar clients you might have now… they’ve gotten you this far. Rather, I’m asking you to consider adopting a mindset that says that you will no longer offer low-dollar engagements. After a while, your low-dollar clients will drop away through attrition.
Strategically, you might think about it this way…
One of your business strategies for the rest of this year would be to seek out only new higher value clients who have a greater dollar margin for time spent than your current book of business. The way I like to define the annual “book of business” is the collection of clients that a professional had during a one year period. For example,
Eight clients who spent $4000,
One client that spent $10,000,
and
Four clients that spent $5000
for a total of 13 clients and $62,000 or $4770 per client. Calculate yours! I know that top-earning consultants know theirs! If we don’t measure it, we can’t improve it! That way you can write an objective for yourself that reads like this…
During the next 12 months, increase the average value of my
new clients from $4770 to $______________.
This will have an incredibly positive effect on your business. Think about how you will feel as your average fee goes up… and your bank account gets fatter and your bills get paid as soon as they arrive.
I want your business to grow into a sustainable and very profitable operation. Now that you have this knowledge, start putting it into practice today… don’t wait! Just learning this for learning’s sake means nothing… it is in the IMPLEMENTATION of these ideas that the TRANSFORMATION will happen in your practice…. Leading you to more clients and higher fees.
Then, it’s time to crush that little voice inside us that says things like, “There’s no way I can charge more,” or “I can’t charge that much,” or “I’m not worth that much for this engagement.” Instead, we need to remind ourselves of specific instances where we have provided immense value your clients were happy with, praised or complimented, etc. What you think about yourself has nothing at all to do with the value that you provide to clients. Resist discounting yourself or your accomplishments… It is NOT about what YOU are worth, it’s what you DO is worth to the client.
By now, you are probably asking yourself… How am I supposed to do that?
Two ways… By developing a standard menu of higher value services and using add-on services with both current and past clients. Let me explain…
Over the years I have been in practice, I have learned to simplify things by offering standard packages at standard pricing. I used to write a unique proposal for each client’s needs. As time went on, I realized that I was causing a lot more work and stress for myself by creating something different for each prospect I approached. So, I created a menu of my highest value services and dumped the rest.
In terms of add-on services, we’ve developed a program that allows you to add One Page Business Plans to your toolkit. Click on the button below to find out more.
Here’s the bottom line of all this… Start making the kind of money you deserve by pursuing only high-margin business opportunities and forget the rest! You’ll sleep better at night…