How to Increase Your Consulting Fee Rates
Increasing your consulting fees and rates is unnerving. To do it right you must build a business platform that has authority and recognition, and have confidence of knowing your own value. Here is what you need to know if you want to increase your rates
In researching her book, “The Million-Dollar, One-Person Business,” Elaine Pofeldt interviewed independent solo professionals to learn the differences between average and high earners.
Elaine discovered specific factors that made the difference between average and high earners. Although she interviewed many different types of independent professionals it is easy to see how these factors are the same for high earning consultants.
Elaine found the five factors that created high earnings were, <Link>
- Picking the right niche
- Creating high value in an area of demand
- Building a defensible brand
- Testing the product or service before wasting time, money, and opportunity
- Leveraging the offer instead of working hourly
The Consulting Mastery course, Starting and Building a Thriving Consulting Business, covers all of these areas for consultants, but here are a few tips that will help you ask for higher consulting rates.
Confidence is Key, But You Must Prepare
Confidence is essential in moving forward and taking the next step. However, confidence without competence is disaster.
Rule: Confidence without Competence Leads to Disaster.
In the Indiana Jones movie, The Last Crusade, Harrison Ford takes a Leap of Faith onto a bridge he cannot see. While this is a leap of faith, Indiana Jones (Harrison Ford) is a veteran explorer (expertise) and he has a book with secret knowledge that he trusts (unique consulting knowledge). Without the expertise and the secret knowledge, he would have been foolish to take that step.
Top level athletes, salespeople, speakers, and consultants I have met all used some form of confidence building to achieve peak performance.
Early in my career, I remember having a hotel room next to one of the top salesmen in the semi-conductor industry. At 6:00 am every morning for three-days I would hear Tony Robbins audio coming through the door. After the third morning I asked him about it. He said it was key to him staying “Up” and winning clients. After listening to the audio, he then meditated on the audio’s topic for half an hour. Since he was making mega-bucks and was one of the top performers, I listened and learned.
For years I had an active self-hypnosis study and practice and used visualization as part of my preparation before attempting something intimidating. It worked.
Watch top-level gymnasts or springboard divers pause and close their eyes before starting their routine. They are visualizing a successful performance.
DO NOT DO THIS!
IMPORTANT! People unfamiliar with visualization and self-hypnosis talk about “visualizing success” – “Visualize yourself standing on the winner's platform with the Gold Medal.”
What you want to do is visualize yourself successfully performing each piece of your routine. Do not just visualize being on the platform. Visualize going through it step-by-step with confidence.
The gymnast is not visualizing standing on the gold medal platform. The gymnast is feeling and visualizing each move in the routine before physically performing the routine.
A consultant preparing to negotiate a higher rate might go through these steps,
1. Listing a prospect’s biggest objections.
2. Writing your response to each objection.
3. Visualizing your prospect/client voicing the objection. Imagine every part of the situation. How the office is arranged. Where people are sitting. The attitudes.
4. Visualizing yourself responding with confidence. Voice your responses in a low tone with your eyes closed. Hold yourself up as you speak and visualize.
5. Finally, visualize your prospect/client understanding and coming to agreement.
This will give you the confidence to do your part successfully. You may not win every time, but you will have control and confidence over your part of the negotiation.
After you feel confident in your responses, then start visualizing yourself doing a “Happy Dance” in the parking lot after winning the big contract.
Remember, you can only do your best. You cannot win them all because somethings are out of your control.
Build Your Brand and Authority
Executives and managers that hire you are staking their career on your ability to help them succeed. They must feel that hiring you is a safe decision.
Rule: To sustain a higher fee model you must have solid authority and brand.
Early in my business career I was manager of competitive analysis for a division of Texas Instruments. Some of our systems were technically very competitive against systems from IBM, but we had a difficult time selling against IBM.
The biggest sales barrier was that the buying manager felt safe going with IBM and could justify the decision to their superiors. However, if they bought from Texas Instruments, they had to build a case for justifying TI over IBM and if the system was not adequate it put their career in jeopardy. The “safe” decision was to buy from the big, well-known brand, IBM. The same goes for consulting. If you are an unknown the hiring manager can feel insecure hiring you.
Managers and executives buying your consulting services must feel safe and know you are the authority. Build authority and branding through referrals and testimonials, keynote addresses, publishing, webinars, and more.
The first thing prospects search for is a strong LinkedIn profile. Next are testimonials. If you have these two you have a solid foundation for your authority.
As a new consultant you absolutely have to have a great LinkedIn profile, testimonials, and a few blogs and LinkedIn posts that target your client’s pain. We cover this in the Starting and Building a Thriving Consulting Business course.
Stage 3: Promoting Your Services in the course guides you through creating a powerful marketing message, LinkedIn profile, posts, testimonials, white papers, and case studies. These are the foundation to building your brand.
Find the Ideal Client in the Perfect Niche
Who do you think has the greater authority and demands the most respect and higher fees, a neurosurgeon or family doctor? I am not putting gown family doctors. They are the first line of healthcare for most families. We have had one GP for more than 10 years. But if you need brain surgery you need a specialist and you are willing to pay for it. It is the same for consultants.
Rule: It is easier to move to a higher fee with ideal clients in your perfect niche.
Be unique in a valuable niche. During these COVID-19 and recession times picking your niche is even more critical.
Most independent consultants begin working as freelance professionals charging an hourly rate. Even their daily rates and project rates are based on hourly rates.
While easy to calculate, an hourly rate makes your work, and you, a commodity. You end up battling everyone with similar skills on Upwork or Fiverr. A hiring manager can look on a job website and find five to twenty people with what looks like your (non-unique) skillset.
I guarantee this will happen when you promote yourself as a “general business” consultant. For example, a “forensic accountant for real estate fraud” can use a much higher fee model and find clients more easily than a “general business accountant”. While the target market for the forensic account for real estate fraud is smaller, it is easier to precisely find and contact clients, and then talk to them about their specific pains and solutions.
To move up the fee ladder you need to find your perfect niche. You need to know how to use LinkedIn and LinkedIn Navigator to find and engage the exact person who has the pain you solve.
In the first two stages of the Starting and Building a Thriving Consulting Business, Finding Your Niche and Finding Your Ideal Client, you learn how to find your best niche in the New Economy. (Some industries are going through major transitions from COVID-19 impact, digital transformation, and supply chain transformation.) Once you find your perfect niche, you then need to find and engage your ideal client and address their inner and outer pains.
Stay in Touch, Stay in Touch, Stay in Touch
Stay in touch with your clients. It is just a darn good human relations practice. It is also a basic principle in marketing, Top-of-Mind awareness.
Rule: Stay in Touch and Stay Top-of-Mind
If a client has seen that you have published more, you are speaking at virtual conferences, you announce new offerings, they hear others talking about your projects, then they expect good things are happing in your firm. The next time they ask to talk with you about a project they won’t be as shocked when they see your rates have increased.
Staying in touch is great for branding and great for pricing!
Get High Level Sponsorship
Being hired and sponsored by a higher-level person gives you more power to be heard and get things done. It also means more income.
Rule: Get High Level Sponsorship and Make Bottom Line Impact
In many engagements, especially when working with strategy, my initial contact would be an upper-level manager, who then introduced me to a CxO level executive. While I worked through the strategy process with a director or upper-level manager, everyone knew that the CxO was my sponsor. That made it easier to get access and meetings to all stakeholders. (I never, to my knowledge, used a sponsor as a coercive lever. I strongly believe in getting all stakeholders onboard.)
The greater the impact on the bottom line and the higher level your sponsor, the greater your income. Sell your consulting based on how it will impact the bottom line, or in non-profits like hospitals, how it will impact the success of their mission.
Get Your Timing Right
Timing is not everything, but it sure is something you need to think about when increasing your rates.
Rule: Timing is Not Everything, but It Accounts for a Lot.
There are seasons and cycles in business consulting and government consulting. You need to consider when your client’s budgets are funded, and when they are open to consulting engagements.
For example, in strategic consulting, you might start increasing your contact rate in September by asking about strategic performance analysis and budget preparation. There is always pre-work to be done before end-of-year strategy work. Get ready for it and be part of it.
If you hear through your connections that budgets might be cut or reduced, take the high road, and check in with your clients. Can you reduce your Statement of Work and fee to meet their new budget needs? It is better to maintain a client’s goodwill and a partial engagement than to be cut off completely.
Stay aware of industry trends and rumors. One consultant I knew let his client get two months behind in payments. When he finally asked for payments his very large client told him to get in line behind all the others they owed. Had he been on top of his accounting and closer to the client he would not have lost so much.
Give them Choices
No consultant would be arrogant enough to have a “Take It or Leave It” attitude toward an increase in consulting rates. They would not be a consultant for long.
Rule: Give Clients Choices among Tiers of Value to Protect Your Consulting Rates
If you have been staying in touch with your clients and building your offerings you can create tiers of offering, for example, trainings, virtual vs. onsite, productized or packaged consulting offerings. This gives clients the opportunity to “downgrade” your support while you keep the client and maintain the same approximate price level (for less work on your part).
Yesterday we had a good example of to make this work. We have an attached “Granny Unit” apartment at the side of our house. My wife needed to remove an extra cable box and sports package from the apartment. When cable representative talked with my wife, she could have just removed the remote cable box and sports package.
Instead, the cable rep talked with my wife about what we needed and our viewing preferences. The cable rep found a combination of “new offerings and specials.” Overall, we ended up paying less each month, but having more viewing alternatives. And, we came away with a better feeling about the cable company.