Archives For fixed fee

Here are some ways to increase fees without penalizing your clients.

  1. Measure risk – Impact and likelihood, of a disaster, jointly place a value on it and set your fee accordingly.
  2. Look for problem areas that consistently show up across the companies you do business in.  Come up with solutions and use this material to call higher.
  3. Trade product gross profit for recurring revenue.  This builds annuity rather than a one-time transaction.
  4. Use Assessments rather than traditional open-ended questions to discover larger opportunities.
  5. Be willing to give away assessments in order to reach higher-level people in the account.  This leads to selling larger value priced deals.
  6. Propose options to build adjacent business in the accounts you are already working.
  7. Build greater expertise into your consulting group to offer more complex solutions
  8. Develop presentation skills that appeal to the executive level.  You’ll find that you are worth more to them than the next guy.
  9. Pass up smaller transactions to create more time for complex deals that offer greater reward.
  10. Develop stronger marketing programs to position your company as the expertise leader, rather then the low price leader.

© 2011, David Stelzl

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When was the last time you raised your fees?  If your business still quotes T&M most of the time, now is the time to make the change.   If you set fixed price fees based on estimated time, you might consider moving to “value pricing” this year.   Don’t wait; it’s the New Year, meaning people are open to change.

If you’re looking for justification on fee increases, look at the value you bring to your clients.  If your value is low, it’s time to upgrade.  However, most companies I talk to insist their value is high and their clients are highly satisfied.  If this is the case, you have justification to raise your fees.  But don’t penalize your existing customer contracts.   Guarantee pricing to your best clients while you move new business opportunities to new prices.  Consider adding new offerings to your existing programs that deliver more value with a higher price.  Figure it will take several months, if not a year to see bottom line impact, so get started now.  Those who wait until their income statements are in a crisis will be sorry.

Some considerations.  It’s time to charge more if:

o You are losing money on existing contracts

o Installations are coming in with lower margins than expected

o Fixed prices are turning into losses

o You are the low price leader in a high-tech market

o Larger companies won’t consider you because of amateur pricing levels

o Your business is project oriented

o Your value exceeds your price

© 2010, David Stelzl

Is there ever a time to charge less?  In fact there is…

(Remember Crazy Eddie? – funny, but the wrong approach for your company.)

1. If a company’s terms put payment way out there, often a discount for upfront payment is warranted.  While speaker’s fees generally are prepaid, consulting fees are not.  Using a fixed fee model allows you to invoice early, and many companies actually have a policy to accept early teams with a 10% discount.  An added benefit comes in that the project is much less likely to be downsized or canceled when fees are prepaid.

2. Subcontractor work or business where you are no the front line seller can also be discounted since there is little cost of sale, and possibly less or no commission being paid.

3. Certain referral sales may also be discounted since your prospecting time is low.

Note: Challenging economic times are not justification for discounts.  Instead, figure out what value is needed to move people, and find things to do that justify themselves based on value.

Finally, should you do something for free?  Yes.  I’d rather do work at full price, tossing in some pro bono work when called for, than discount across the board.  As I have mentioned, once you start discounting, your street price goes down and cannot be regained.  On the other hand, if a client is in desperation or you have enormous competitive pressure while entering a new market, pro bono work can be performed without creating a long term expectation.  Bottom line, you control pro bono work, discounts control you.

© 2010, David Stelzl