Helping companies grow

Increase your prices – part 13: The Quest for Certainty

Hans Peter Bech — Tue, 10 Apr 2012 06:00:27 +0000

If you are more busy than you appreciate then you must increase your prices

The title of this post #13 can be rephrased this way:

Will the engagement of management consultants improve the probability of success?

Occasionally I get this question from potential clients, who do not have much experience, have bad experience or are otherwise skeptical towards using management consultants.

My answer always is: “I don’t know. As an independent management consultant I can only answer for myself. Call my other clients and ask them why they engaged me and what they achieved.”

It is not my job to convince anybody to engage a management consultant. That decision must be made separate from talking to me.

I sometimes face this scenario: “We do not have any plans for engaging a management consultant, but if you believe you can make a difference, we will be happy to consider your proposal.”

Proposal for what?

If it ain't broke- don't mend it!»

This post is about dealing with situations where a potential client wants some kind of assurance up front that the engagement of you as a management consultant will produce positive results.

Management consulting includes a very broad spectrum of services. This post is primarily focusing on “psychotherapist” type services.

Why engage a management consultant?

Why do CEOs» use management consultants?

The are typically five areas where the need for external assistance is required:

To assist with strategic and business planning
To help identify, organize and manage change
To assist resolve issues
To help identify opportunities
Other areas where there is little in-house experience, too much in-house bias or no in-house resources available

The main characteristics of the five areas are “change” and “uncertainty.”

Mitigating risk

Will engaging a management consultant guarantee that the change will be successful and the uncertainty reduced?

The answer is no!

There is no “guarantee” when dealing with change and uncertainty.

No management consultant in this world could have guaranteed Apple that the iPod, iPhone and iPad would become successful.

Will engaging a management consultant increase the probability that the change will be successful and the uncertainty reduced?

The answer is: Maybe!

The role of the management consultant is to facilitate the process of describing the situation» , analyze and present the issues, analyze and present the options, define the objectives, define the strategy, assess the organization’s capabilities for executing, develop the plan and identify the critical success factors.

Executing the strategy through the associated plan and budget is not the responsibility of the management consultant. Of course, you can ask the management consultant to perform the execution. If he accepts to do so then he is – by definition – no longer a consultant. He then becomes the CEO or one of the executives. He becomes an “insider”.

Nothing ever goes according to the plan

Irrespective of how you execute a plan I think it is fair to claim that nothing ever goes according to the plan.

Not even the set-up of a cost center, where we in principle have full control, will go according to plan. It always turns out that finding the people with the required skills is more difficult than expected, the learning curve is longer and steeper than expected and making people work together takes more effort that expected.

Strategies and plans where the outcome depends on potential customers making purchase decisions in our favor are associated with considerable risk and almost always under-perform.

Statistically you should expect that 50% of all outcomes were overachieving compared to the plan and 50% were underachieving compared to the plan.

That is not the case.

I do not have any empirical evidence, but my guess is that 99% of all new business plans underachieve and only 1% overachieve.

Why is it so?

I see two main reasons for this phenomenon

CEO’s and executives are driven by success to the extent that they systematically overestimate the opportunities and underestimate the obstacles, the competition, the expenses and the inertia.
The management consultant forgets his role as the impartial facilitator and the “devil’s advocate” and joins the “team of optimistic dreamers”.

I see this happening again and again: Independent management consultants who are talking enthusiastically about their client’s fantastic products and opportunities. Sometimes they even come across as cheap sales people.

We all want to be part of a success and the sooner the better. We identify the success of our clients with our own success, and that is ultimately also the objective. However, as management consultants we must stay detached. We must remain the “outsiders”. We must maintain our positions as the un-biased facilitators looking for the cheese as well as the holes in the cheese.

Auto-hyping and unconscious self-suggestion are the management consultants worst enemies.

Conclusion: Will the engagement of management consultants improve the probability of success?

If the management consultant maintains his role as the “outsider” and the un-biased facilitator, then the answer is: Yes!

But is also depends on how you define success.

My company was asked to help a German company expand their business in Sweden. After having interviewed 20 potential customers, some of the competitors and some other players in the eco-system, it became apparent that the value proposition of the German company was not very different from what the local competitors already offered. It also became clear that the German company only had less than 1% market share in Germany, and that customers were spread across several industries and sizes of companies. Entering the Swedish market would require several years of investment and “time-to-break-even” would be very hard to predict. Wouldn’t it make more sense to go for 2% in Germany than trying to bootstrap Sweden? Wouldn’t it more more sense to focus on a market segment in Germany and achieve a >10% share of this specific segment, before initiating international activities?

We recommended that our client stop the effort in Sweden and focus on Germany.

A client asked us to perform a review of their operation in the UK (which was unprofitable) and provide suggestions for improvements. After 4 days of interviews in the UK and a review of the pipelines we came to the conclusion that there was nothing wrong in the UK. The go-to-market approach applied in the UK was involving resellers. The resellers were all in the final stage of the learning curve and they all has solid pipelines of projects to be closed within the following 3 months.

Our recommendation was to do nothing. 3 months later the UK operation was profitable.

These examples show that management consulting assignments can lead to results that were not part of the initial mission.

Applying a set of trained and experienced external eyes on a situation will improve the probability of success. However, defining the success factors before commencing the assignment can be extremely difficult.

Recommendation

My recommendation is to never set the expectations that you can ensure a successful outcome of an assignment before you have sufficient insight to make that justification yourself.

What you can assure is that you will remain the trusted adviser who will provide an un-biased situation assessment at all times and that you will always speak your mind irrespective of the potential repercussions.

Increase your prices: Summary

I meet and talk with a lot of independent management consultants. 99% of them are extremely busy. They are so busy that they have little time to learn new approaches, keep up with the development in their area(s) and develop their business. Most of them even complain that they are too busy. They also use their busyness as an “excuse” for not being responsive and not meeting deadlines.

When I ask why they are so busy the unison answer is: “client projects”. My response is: “Fantastic, you must be making tons of money?” Answer: “Silence.”

The silence continues when I ask them: “When will you increase your prices and by how much?”

Other posts in the series:

Post #1: Brand values and positioning
Post #2: Networking
Post #3: Pre-qualification
Post #4: The first meeting
Post #5: Self assessment
Post #6: The objectives
Post #7: The deliverables
Post #8: Pricing
Post #9: The proposal
Post #10: Price and Payment terms
Post #11: Client references
Post #12: Delivery

When all the lights are green there is a very good reason to call in someone external to take a check on the situation. Successful organizations have a tendency to suffer from megalomania and people in the organization believe they can walk on water. Complacency makes us blind and external changes in the market, in technology and in the environment get ignored. Success is the first step to failure. Often it is exactly the top management who suffer from megalomania. In this case they will not call in an external management consultant who might tell them something they don’t want to hear.

using management consultants is typically a CEO decision. In larger organizations the decision and budget may reside with Divisional Executives who have the full P&L responsibility for their operations. Line managers will often be reluctant to engage management consultants as they perceive this as a sign of their own inadequacy.

including gathering additional information from the organization and the market

Increase your prices – part 12: Delivery

Hans Peter Bech — Mon, 20 Feb 2012 07:00:49 +0000

If you are more busy than you appreciate then you must increase your prices

This is the 12th post in a series of posts addressing the issue that too many independent management consultants are working too many hours for too little pay.

See the end of this post for a summary and a list of subjects in the series.

This post is about delivery

Delivery

I often meet independent management consultants who know exactly what needs done. In the shortest time imaginable they cut through “the crap” and deliver the recepy for the remedy. Clients are enthusiastic, because they love to get into execution mode fast. Maybe the remedy is right – maybe it is wrong. In any case that’s not how a management consultant is supposed to work. Jumping to conclusions and activities is the last thing a management consultant should do.

The 7 step management consulting process

I recommend using this 7 step process model in all your consulting practice. Management consulting is not just about “getting things done”. It is also a learning process for the client, enabling him to replicate and continue improving the processes and performance after you are gone. The 7-step model enables you to document the findings and conclusions in each phase leaving a trail, which you and the client can use to learn and improve throughout the project.

Insight

Separating insight from previous experience, prejudices, assumptions, presumptions, conclusions, believes etc. is absolutely critical. Insight is the raw data on the specific situation. Try to get data from independent sources. Talking to the clients’ staff, customers, potential customers, suppliers and industry analysts are excellent sources for insight.

Analysis

This is the phase where you draw conclusions based on the insight. You may have to move back and forth between Insight and Analysis until you and the client are comfortable with the premises for what you are about to do.

Objectives

Setting objectives is the foundation for the strategy, but also the only way you can measure if you are successful or not. Objectives should be as SMARTE as possible (Specific, Measurable, Accepted, Realistic, Timed and Ethical).

Strategy

Strategy is the general approach to achieving your objectives. It is a written explanation and justification of how a set of general activities can lead to the objectives defined. Check and double check that the entire project team is aligned on the strategy before moving to planning and execution.

Plan

The Plan is the “What-Who-When”. The plan is normally supported by a budget and an organizational structure.

Execution

Time to execute. Monitor that execution is following the plan and nobody is missing their deadlines.

Measure

In bigger projects you measure regularly during execution and adjust according to the learning. Make sure you also perform regular “project reviews” where you measure performance against objectives on the “macro level” and document what should be improved/adjusted in the future.

Applying the 7 step management consulting process

The 7-step model can be the basis for a 1-hour meeting where you move all the way from step 1 to step 5. And it can be the basis for an 18 months project of bringing a new product on the market, making an acquisition, moving into a new market etc. You can have several small 7-step processes in a big 7-step process. You may have to move back to previous steps if you loose alignment and consistency, if new people come onboard or if major external changes occur.

Do all projects always start at 1 and end at 7?

No, far from. You will often be approached by clients who are in step 5 or 6 and wanting your advice. You will always meet lots of people who mix up objectives with strategy, insight with analysis, strategy with plans and people who just want to execute something now! based on a hunch. It is your job to make sure the client understands the premises and guide him thorough this process.

The 7-step model is simply a framework enabling the management consultant to work structured and secure alignment with his client at all times mitigating project risk as tight as possible.

Recommended literature

I will recommend any independent management consultant to read at least two books by David Maister:

The other book is focused on building deeper relationships with your clients and delivering value on top strategic issues.

The next post in this series: The Quest for Certainty

Increase your prices: Summary

When I ask why they are so busy the unison answer is: “client projects”. My response is: “Fantastic, you must be making tons of money?” Answer: “Silence.”

The silence continues when I ask them: “When will you increase your prices and with how much?”

Other posts in the series:

Increase your prices – part 11: Client references

Hans Peter Bech — Wed, 08 Feb 2012 08:00:43 +0000

If you are more busy than you appreciate then you must increase your prices

This is the 11th post in a series of posts addressing the issue that too many independent management consultants are working too many hours for too little pay.

See the end of this post for a summary and a list of subjects in the series.

This post is about winning your clients as references

It is all about trust

It's all about trust

Clients choose external management consultants only for projects, which are very important if not outright critical. They choose the management consultant to perform the assignment based on trust. This means that they will apply the following priorities in their choice of consultant:

Do we have good experience using this management consultant from previous and similar assignments?
Has the consultant been recommended by someone we know and trust?
Is this management consultant qualified for the assignment ?
Does the consultant have solid references?

Your current and past clients

You obviously use the referrals and recommendations from your current and past clients to win new clients. Next to new projects from your current clients, referrals and recommendations should be your second largest source of new business. Why? Because this reduces your cost of sales dramatically. Potential clients will come to you with an active and urgent need. They will talk to you because you have been endorsed by someone they know and trust.

Public testimonials

Should you make customer testimonials publicly available on your web site and Linkedin? Absolutely!

You should ask for short testimonials from your clients and have them added to your Linkedin profile as well as posted on your web site. You can draft a text yourself, which your client can alter or extend as he wishes.

Policy: No testimonials given!

Although I personally haven’t come across any yet, I know there are companies out there who do not accept giving testimonials. Such policies obviously lower their value to you. You must consider if this constitutes a “no go” position on your side. Having a client, which you cannot use as a reference has little value.

It is standard practice in the industry to endorse someone who has done an outstanding job. If your client wish to deviate from this standard code of conduct he should at least pay a premium for your services compensating you for the lack of referral value.

The next post: Delivery

Increase your prices: Summary

When I ask why they are so busy the unison answer is: “client projects”. My response is: “Fantastic, you must be making tons of money?” Answer: “Silence.”

The silence continues when I ask them: “When will you increase your prices and with how much?”

Other posts in the series:

Increase your prices – part 10: Negotiating the price and payment terms.

Hans Peter Bech — Mon, 30 Jan 2012 07:00:12 +0000

If you are more busy than you appreciate then you must increase your prices

This is the 10th post in a series of posts addressing the issue that too many independent management consultants are working too many hours for too little pay.

See the end of this post for a summary and a list of subjects in the series.

This post is about negotiating the price and the payment terms

The price and the value

The value of your consulting must justify the price you ask. If the value you provide is uncertain or the issues you are addressing are non-critical any price you quote will be too high. If your consulting services are easy to substitute the competitive pressure will drive down the price you can ask.

The price you can ask and your negotiation power is determined by the issues covered in post #1 – #9. If the client is finding your price too high after you have submitted your proposal, then you have missed something in your positioning, in your qualification of the client and/or in your qualification of the project/assignment.

Never negotiate the price

I know there are many philosophies on price negotiations. When it comes to setting the price for services provided by an independent consultant my recommendation is clear:

The price you quote the first time must the right price.

Stand firm!

The value of management consulting is normally magnitudes higher than the price being paid for the consulting. It has no impact on the clients’ business case that you reduce your price with 5-10%.

The price can only change if you also change the deliverables. If the client is not prepared to pay your price, and is insisting on wanting all the deliverables associated with the price, then you have one option only: Stand firm and don’t give in.

The payment terms

As an independent management consultant you must always get an up-front payment when signing the contract. A consulting contract with no up-front payment is the same a no contract. With no up-front payment the client has not committed himself to the project.

How much up-front payment depends on the length of the project. For shorter projects 30-50% is appropriate. For longer projects an amount equivalent to 1/n’th where n is the expected duration of the project in months.

The next post: Client references

Increase your prices: Summary

When I ask why they are so busy the unison answer is: “client projects”. My response is: “Fantastic, you must be making tons of money?” Answer: “Silence.”

The silence continues when I ask them: “When will you increase your prices and with how much?”

Other posts in the series:

Post #1: Brand values and positioning
Post #2: Networking
Post #3: Pre-qualification
Post #4: The first meeting
Post #5: Self assessment
Post #6: The objectives
Post #7: The deliverables
Post #8: Pricing
Post #9: The proposal
Post #11: Client reference
Post #12: The delivery
Post #13: The Quest for certainty

Increase your prices – part 9: The proposal

Hans Peter Bech — Mon, 23 Jan 2012 07:00:31 +0000

If you are more busy than you appreciate then you must increase your prices

This is the 9th post in a series of posts addressing the issue that too many independent management consultants are working too many hours for too little pay.

See the end of this post for a summary and a list of subjects in the series.

This post is about writing proposals.

The proposal

The proposal is the written confirmation of what you have agreed with the client during the pre-project discussions including the specific terms and conditions for performing the work. The proposal is also your opportunity to demonstrate that you understand the situation, have identified and qualified the objectives, have defined the specific deliverables, have a clear process for the project and have clear terms and conditions for the payment you will receive for delivering your services.

The content of a management consulting proposal

I recommend using the following structure for your proposal:

Introduction
The Background
The Business Objectives
The Purpose of the Services Offered
The Deliverables
The Process
Terms & conditions

In the following I will elaborate briefly on each section of the proposal.

Introduction

The introduction is a brief management summary of the purpose of the proposal. What will you do, why will you do it and what are the outcome expected to look like.

The Background

The background is a brief description of the clients business. Normally you can use the “About Us” from the clients web site and sharpen the content with you own words. Most clients have very fluffy and glossy adjective ladden “About Us” statements. Clean out the fluff and present a crisp description of the client’s core activities and their current market position.

Describe the current situation with a focus on the challenges and the opportunities associated with the business environment related to the area where your services are to be delivered. This section describes the clients motivation for investing money in engaging you.

The Business Objectives

A management consulting service is seldom a self contained project; it is mostly a component of a larger context. Describe the business objectives associated with the grand project. Translate the objectives into tangibles if possible. What is at stake if nothing is done? What is gained when the project is successful?

This section of the proposal is the most critical. The probability that you will get this assignment is directly proportional with the size of the business opportunity for the client and your understanding of this relationship.

The purpose of the service offered

In this section you specify the purpose of the service you provide related to the overall business objective. Focus on the outcome of the service in terms of business value.

The Deliverable

List and specify what you will deliver and in which format. Deliverables are typically:

Preparation and facilitation of workshops
Documentation
Recommendations
Meetings

If you know the principle content of reports you can include a table of content or a sample report as an appendix. The more specific you can be on the content and format of your deliverables the better.

The Process

The process is describing the activities required to produce the deliverables and the associated timeline. As an independent management consultant your typical process steps are:

Research (existing client documentation and Internet)
Surveys
Interviews
Workshops
Meetings

Provide a simple Gantt chart illustrating when you will perform which activities and deliver which deliverables.

Don’t be too specific on the process. Leave it as open as possible. Your obligation is to deliver the deliverables. The process is not really important for the client other than he should be convinced that you have one.

Terms and Conditions

In this section you quote your price(s) and the payment schedule for the services to be delivered.

You may want to submit your first draft of your proposal the the client without prices. Doing so gives you an opportunity to verify the situation, the objectives, the deliverables and the process one final time. In case of adjustments you have the opportunity to apply corresponding adjustments to the price afterwards.

I recommend to quote prices separately only on items which are genuinely separate, meaning that they actually can be excluded from the delivery without affecting other deliveries. Bundle items which are interrelated.

Pack as many of your Terms & Conditions as possible into “General Terms & Conditions”. These T&C’s should comply with industry standards and should be non-negotiable.

If your work is depending on client contributions you may want to define the consequences of the client’s lack of performance (which is almost always the case!!).

Next blog post in tho series: Negotiating the price and payment terms.

Increase your prices: Summary

When I ask why they are so busy the unison answer is: “client projects”. My response is: “Fantastic, you must be making tons of money?” Answer: “Silence.”

The silence continues when I ask them: “When will you increase your prices and with how much?”

Other posts in the series:

Post #1: Brand values and positioning
Post #2: Networking
Post #3: Pre-qualification
Post #4: The first meeting
Post #5: Self assessment
Post #6: The objectives
Post #7: The deliverables
Post #8: Pricing
Post #10: Negotiating the price and the payment terms
Post #11: Client reference
Post #12: The delivery
Post #13: The Quest for certainty

Increase your prices – part 8: Pricing

Hans Peter Bech — Mon, 16 Jan 2012 07:00:54 +0000

If you are more busy than you appreciate then you must increase your prices

This is the 8th post in a series of posts addressing the issue that too many independent management consultants are working too many hours for too little pay.

It is my objective to inspire as many independent management consultants as possible to exercise their profession and approach their clients in a different way.

See the end of this post for a summary.

Pricing

This series of posts has the title “increase your prices.” However, the pricing itself is just a single element in securing a high price for what you do.

There are two major parameters, which determine how much you can ask for a certain assignment:

The perceived value of the outcome for the client
The perceived substitution opportunities for the client

The value of the outcome

The amount a client is willing to invest in consulting is proportional with the perceived value of the solution. The value can be either minimizing risk associated with a new venture, avoiding costly consequences of certain activities, revenue opportunities from new initiatives and so on. All projects are initiated for a reason, but not all projects have clear and measurable objectives.

This issue is covered by post #6: The objectives

The substitution opportunities

The price a client is prepared to pay for consulting is depending on the perceived substitution alternatives available. If the project can be delivered by many other consultants, with whom the client has good experience, there will be a competitive pressure on your prices.

This issue is covered by post #1: Brand values & positioning

Pricing formats

You basically have two formats available as an independent management consultant:

The fixed price format
Time & material

Both formats can be combined with a performance element when this makes sense. I will deal separately with this issue after describing the two main formats.

The fixed price format

Fixed price = fixed delivery

The fixed price format is preferred by many customers especially when engaging with a new consultant. It makes many clients comfortable when they know the price of the project and that they have budget coverage.

As an independent management consultant you use the fixed price format when you fully control the risk associated with the project. When the project prerequisites and the outcome can be defined very precisely and the effort required to complete the project is well within your control, then you can often set a price which is acceptable to the client and at the same time provides a very satisfactory remuneration for you.

Packaged services such a executive search, market research, strategy analysis, customer satisfaction surveys, reseller search and so on are predominantly delivered on a fixed priced basis.

Your average hourly pay on fixed price projects will normally exceed what you can ask on a time & material basis.

This should never be you

There are apparently independent management consultants who accept a fixed price format for projects where they cannot control the risk. Such situations are normally characterized by vaguely defined projects assumptions and unclear project objectives. This leads to very unfortunate situations where the consultant has to deliver many more hours than estimated or anticipated. Such hours cannot be delivered to other clients at a more acceptable price. The consultant risks being dragged into a vicious circle.

The best way to avoid high risk fixed price projects is to break them down into smaller sub projects. The first sub projects should be devoted to defining the project assumptions and project objectives more precisely. After setting the objectives and defining the project premises it will be more obvious and measurable what the next steps should be.

The time box

There are situations where a fixed price is required, but the project by nature is open-ended. In such situations a “time box” can be a solution. A time box is a fixed amount of hours, days, weeks or months. If the project has not been completed within the time box, the client and the consultant can negotiate how to continue the project.

The time box gives the client a fixed price, but leaves the outcome open.

Time & Material (T&M)

T&M is not the preferred remuneration for management consultants

Most clients know that consultants charge more for fixed price projects than they can charge on a T&M basis. Clients therefore often ask their trusted advisors to deliver on a T&M basis.

There is a limit to how much you can charge as an independent consultant on a T&M basis. The CEO will typically divide his own salary package with 1.600 and it will be difficult for you to charge more than that. This is one of the reasons why small companies seldom can engage good consultants. Larger companies are prepared to pay higher consulting fees simply because their executives are used to higher fees themselves.

It is almost impossible for the independent management consultant to make a premium on the T&M format. However, there are obviously projects where no other format is applicable. Projects of an exploratory nature or ongoing process facilitation can basically only be delivered on a T&M basis.

T&M is never the preferred format for the independent management consultant.

Performance based pricing

High risk is a "no-go" for an independent management consultant

There are obviously many potential clients who will try to push the risk associated with a project to the consultant. This is acceptable when you do consulting in areas where you have a better chance of managing the risk than the client has.

Let’s give a few examples.

Let’s assume that you work with reducing the expenses associated with certain operational activities. Your business model is to do an audit first. If you can identify a savings potential of amount Y, you are entitled to charge the client x% of Y for the audit. Your risk is minimal as you are doing this all the time and you know how to deal with all the “loose ends” of such an assignment. You may even have a set of services for taking the savings home that the client also can pay for on a performance basis. Such a business model can be highly profitable for an independent management consultant.

IPO and M&A projects always have a retainer and a performance element. In this situation the client will be highly motivated to ensure the consultant gets the best terms and conditions possible. The performance element is not introduced to minimize the risk, but to maximize the outcome. A performance bonus is obviously also easier to award when it is being paid with someone else’s money, which is the case in the IPO/M&A situation.

You should never accept a performance based format in situations where the risk is high and basically outside your control.

Let’s assume that a potential client wants you to help him break into a new market. He offers you a high percentage of the revenue, which will be generated by your own effort. You don’t know the client very well, and he is not prepared to pay you for the learning curve activities required for you to understand the Customer Value Proposition, the nature of the Value Chain and all the other basics concepts.

Such a project is a suicide mission, which you should always reject. See this blog post to get a more elaborate explanation of why this format simply doesn’t make sense: Commission Only?

Price and value

The perceived value of something is reflected in the price. If you are unable to get a reasonable price for your services there can only be three reasons:

The perceived value of your service is low and/or
The competitive pressure is high and/or
The potential client doesn’t have any money

In the first two instances you need to work on your Value Proposition. In the third instance you need to walk away.

Pro bono

Doing pro bono work is something we all do from time to time. We obviously do so for other reasons than making money. Do not mistake pro bono work with engaging in high risk projects, which are to yield a high profit some day. Those are two different things. We do pro bono work to help someone in need.

Summary

When I ask why they are so busy the unison answer is: “client projects”. My response is: “Fantastic, you must be making tons of money?” Answer: “Silence.”

The silence continues when I ask them: “When will you increase your prices and with how much?”

Other posts in the series:

Post #1: Brand values and positioning
Post #2: Networking
Post #3: Pre-qualification
Post #4: The first meeting
Post #5: Self assessment
Post #6: The objectives
Post #7: The deliverables
Post #8: Pricing
Post #9: The proposal
Post #10: Negotiating the price and the payment terms
Post #11: Client reference
Post #12: The delivery
Post #13: The Quest for certainty

Increase your prices – part 7: The deliverables

Hans Peter Bech — Mon, 09 Jan 2012 06:00:44 +0000

If you are more busy than you appreciate then you must increase your prices

This is the 7th post in a series of posts addressing the issue that too many independent management consultants are working too many hours for too little pay.

See the end of this post for a summary.

This post is about defining what you will deliver during your management consulting assignment.

Deliverables

There are four main reasons why specifying the deliverables is a very good idea:

It is a great way to set expectations and agree with the client beforehand what is to be delivered and when.
It is easier, especially for new clients, to accept a proposal with specific deliverables.
Payments are normally associated with deliveries. It is an opportunity for you to agree with the client up front when payments will be released.
It prevents you from engaging in projects, which turn out to be open-ended. You use too many hours and the client is unsatisfied. The situation becomes “lose-lose”.

The dilemma

Clients are engaging management consultants because they are facing issues that they cannot handle themselves or because they consider an outside “expert” contribution as required. Thus, management consultants are called upon when change is required. The need for having clearly defined deliverables is grounded in the discrepancy between what clients are ultimately looking for and what management consultants can actually deliver.

What do clients want?

What client ultimately wants and what management consultants can deliver is not always the same

Clients undertake change projects to achieve business results, which can be measured in reduced cost, increased revenue, improved profit, asset sale, asset acquisition, increased market share, improved sales productivity, shorter sales cycles, improved quality, shorter delivery time, less customer complaints, improved customer satisfaction, increased production capacity, faster time-to-market, improved channel performance, bootstrapping new markets, a solid basis for making high impact decisions, etc. etc.

What can management consultants deliver?

Management consultants typically deliver process facilitation, analysis, recommendations, opinions, domain expertise, training, coaching, validation, data, etc. etc.

Only very seldom does the final outcome of a change project depend entirely on the work performed by the management consultant. Never does the management consultant control all the issues and processes which determine the outcome of a change project.

Thus, there is a need for determining when a management consultant has delivered the agreed upon deliverable irrespective of the final outcome of the change project.

Performance based pricing

I will devote a dedicated blog post to the issue of performance based pricing. A this stage I will only conclude that business performance based pricing on management consulting services is the exception and not the rule simply because the relationship between the two is extremely thin. Numerous other internal and external issues will determine the outcome of any change projects.

Deliverables

If you are familiar with the four types of consulting you also know that some consulting assignments have very specific deliverables, while other assignments are of an exploratory nature, where the final as well as the intermediate deliveries are harder to specify.

Type of deliverables

Deliverables can be anything that is tangible and which you and the client can agree has been performed or not.

These are typical types of deliverables:

Payment and deliverables

As a management consultant you should always avoid having an asynchronous relationship between the effort delivered and the payment received. Tying payments to deliverables is a great way to synchronize client payments with the effort delivered by the management consultant.

Summary

When I ask why they are so busy the unison answer is: “client projects”. My response is: “Fantastic, you must be making tons of money?” Answer: “Silence.”

The silence continues when I ask them: “When will you increase your prices and with how much?”

Other posts in the series:

Post #1: Brand values and positioning
Post #2: Networking
Post #3: Pre-qualification
Post #4: The first meeting
Post #5: Self assessment
Post #6: The objectives
Post #8: Pricing
Post #9: The proposal
Post #10: Negotiating the price and the payment terms
Post #11: Client reference
Post #12: The delivery

Management consulting assignments often include some kind of written documentation; the hated Report. The better you can specify the content and the format of the written documentation the better. A report can also be a market survey, a long list, a short list, interview summaries, an opinion etc.

Workshops, training sessions, meetings you facilitate. Such events may also be completed with a report summarizing the findings and conclusions.

Situations where you deliver process or project management, coaching, process facilitation and so on can be used to define a completed delivery.

Selling hours is nobody’s favorite business. There are however instances and situations where that is the only meaningful deliverable.

Increase your prices – part 6: The objectives

Hans Peter Bech — Thu, 05 Jan 2012 07:00:18 +0000

If you are more busy than you appreciate then you must increase your prices

This is the 6th post in a series of post addressing the issue that too many independent management consultants are working too many hours for too little pay.

It is my objective to inspire as many independent management consultants as possible to exercise their profession and approach their clients in a different way.

See the end of this post for a summary.

This post is about setting the objectives for a management consulting project.

The project objectives

Management Consultants are instrumental when executing change

So you have decided to bid for the business. It meets most of your qualification criteria.

What are the project objectives? Qualify and quantify them. Write them down.

Why is the client spending money on this project? Write down the background. Don’t think about the solution at this stage just focus on the objectives and the circumstances.

Writing down this information will help you understand the clients’ situation and identify information you may be missing fully grasping what the client would like to achieve.

Measuring success

How will the client measure if the project is successful? Are there certain milestones, which can be meaningfully defined? Are there quantifiable outcomes of the project? Can the project be broken down into smaller projects?

Client contributions

What do you need from the client to be successful? Can the client jeopardize the project? How?

Outside your control

But before you call the client again you need to reconsider all those project elements, which are not related to you.

If you have been an independent management consultant for some time you will already have experienced how clients can make it impossible or at least very difficult for you doing your job. Just a few examples:

The CEO for whom you are working gets fired or resigns
Certain client representatives are working against you (the CEO forgot to inform or motivate the project to his associates)
The client is acquired by another company
The information provided by the client prior to engaging was not exactly correct, only partial or very subjective.
Certain client representatives do not deliver information on time
The project gets postponed due to other urgent issues
The project objectives changes
The need for the project vanish
The client can’t pay
Etc.

Is there anything you can do to mitigate the risk factors?

Pricing considerations

Can you package some of or the entire project into a “fixed price/fixed delivery” format, or do you have to go for time & material? Can you estimate the effort required?

Reconfirming the objectives and the conditions with the client

You should now be well positioned to call the client again and have the project objectives reconfirmed. You can also test some of your concerns and make sure that both of you have the same understanding of the “project environment”.

Providing the project objectives, milestones, deliverables and a description of the environment in writing BEFORE quoting any prices is highly recommendable.

The next post: The deliverables

Summary

When I ask why they are so busy the unison answer is: “client projects”. My response is: “Fantastic, you must be making tons of money?” Answer: “Silence.”

The silence continues when I ask them: “When will you increase your prices and with how much?”

Other posts in the series:

Post #1: Brand values and positioning
Post #2: Networking
Post #3: Pre-qualification
Post #4: The first meeting
Post #5: Self assessment
Post #7: The deliverables
Post #8: Pricing
Post #9: The proposal
Post #10: Negotiating the price and the payment terms
Post #11: Client reference
Post #12: The delivery
Post #13: The Quest for Certainty

Happy New Year

Hans Peter Bech — Mon, 02 Jan 2012 09:00:10 +0000

I wish all my readers a happy New Year. May 2012 fulfill your ambitions and bring joy, happiness, fun and prosperity to you and those you care about.

This blog grew its’ readership from 20.000 visits in 2010 to almost 86.000 visits in 2011. In December 2011 we had close to 6.000 visits. The traffic to the blog increased by more than 100% in the 2nd half of 2011.

The Independent Management Consultant

The independent management consultant

The blog is aimed at the Independent Management Consultant. I saw a post somewhere recently claiming that there are approximately half a million independent management consultants world wide. My “feeling” is that this number is somewhat low. Anybody out there with a reliable number?

I am an independent management consultant myself. I write this blog to share my thoughts and experiences with the objective of steadily increasing the value we, as management consultants, can provide our clients and the outcome we can take home for ourselves.

Why do I care about other management consultants?

The more value independent management consultants bring to the business community the more respected our profession will be.
Higher standards leads to improved reputation, which again lead to more projects and better remuneration.
I want to work with other independent management consultants, who specialize in areas complementary to my own services. I subcontract or refer business to other consultants when a project is outside my area of expertise. This way I can maintain account control, provide more value to my clients and enjoy the benefits of the leverage.
Writing is a way to reflect on what I read, observe and experience through my own consulting praxis. It is a great way for me personally to continuously consider how I can improve my consulting skills, increase my productivity and improve the price/performance ratio of my customer value proposition.
The number of independent management consultants will grow in the future.

The need for specialized skills on a project basis will drive the increasing demand for our services.
The benefits of being your own master and making your own decisions will drive more and more people to work as independent contractors.
The proliferation of web based collaboration tools and social media platforms will enable people inside and outside organizations working closely together irrespective of time and place.

I also believe that writing a blog is a good way to communicate your values and positions to the world. The world of potential clients and potential cooperation partners.

Who are the readers?

Who is reading this blog?

I don’t know much about my readers. I don’t ask a lot of questions either. Tracking the traffic to the blog I use several web stat tools.

Here are some highlights:

Average time on the blog: 2m 17s
New visitors: 80%
Most visiting country: USA
Most visiting continent: Europe

Increase your prices – part 5: Self assessment

Hans Peter Bech — Thu, 29 Dec 2011 07:00:46 +0000

If you are more busy than you appreciate then you must increase your prices

When I ask why they are so busy the unison answer is: “client projects”. My response is: “Fantastic, you must be making tons of money?” Answer: “Silence.”

The silence continues when I ask them: “When will you increase your prices and with how much?”

Assessing your own performance

Frank self-assessment is required to improve your performance and your corresponding value

In the previous post I described a first meeting you have had with a potential client. On the way back to your office/home or to your next meeting you are assessing your own performance. When you get back to your office you write down your observations.

Increasing your value (and price) you must constantly improve your performance. You also need to match your specialty with the right clients and the right projects.

Here is the list of assessment questions you will ask yourself:

Was my pre-meeting qualification adequate?
Did I achieve my objectives with the meeting?
Did I ask the right questions?
Did I get the information I need for the next step?
Is the the client qualified?
Is the project qualified?
Will successful completion of the project deliver substantial and tangible result to the client?
Can I deliver the projects?
Can I win the projects?
Do I want this client as a reference?
Will this client serve as my reference for future clients?
Will my value increase when I deliver successfully on this assignment?
What should I do different next time?
Should/can I delegate the project or parts hereof to someone else?

Surprisingly few people are assessing their own performance and constantly challenging themselves to perform better next time. However, their is no way you can ask higher prices unless you constantly improve your performance.

The next post: Confirming the project objectives.