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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

Break out the pricing?

November 8, 2010 — 6 Comments

Imagine asking the car dealer to break out the pricing on spark plugs, steering wheel, etc.  And then ask them to walk through the process of assembly with you. Ridiculous?  However, we do it all the time with our customers.  The place were this is most concerning is on the consultancy side.

When you buy the car, you care about the car.  You want a car that runs, performs, fits with your lifestyle (I drive a FWD SUV outfitted with roof bike racks and packed with mountain bike tools, parts and clothing) and doesn’t break down.  The process doesn’t really matter; the overall cost must fit in the value budget you’ve set based on education.

So why are we walking through the steps and selling the method; the manufacturing process?  Sometimes this matters in explaining quality, but only the differentiators matter.  Focus on the result, not the process.  Focus on the value, not the price.  When people ask how long it will take, find out the required deadline.  The amount of time you spend should not be factored into their decision.  They need something, you have a solution, you can deliver…period.  Now, how much is this worth to their organization?

© 2010, David Stelzl

All Budgets Lie

November 5, 2010 — Leave a comment

No budget!  How many times have you heard these words?  “No one has budget, there’s no money to spend, we have to wait until next quarter…”  So just go back to the office and tell you sales manager to hold off on selling until Q1.  No problem, I’m sure they’ll understand.  Meanwhile, can you raise my base so I can live a few more months?

What if the doctor said, “You’re about to have a heart attack?”  Would you tell him, “This is a bad time – Christmas is approaching and you funds are tied up, or maybe the economy isn’t great so you’ll have to hold off on treatment?”  No way!  You’d be there, reallocating, taking money out of savings, or even taking money out of 401K with a penalty if you needed it to live on while recovering.  Remember, you’re on commission, so if you’re not selling, you’re not getting paid.  Insurance might cover some bills, but you’re going to need living money.  Yet, you still take care of the issue.  Why?  Because it’s urgent!  Because budgets lie.

Security is urgent.  There is no budget.  This is why I am always talking about selling security, or tying risk mitigation to product and project sales.  Would you believe I bought Salesforce.com for security reasons?  That’s right, I was experiencing major problems with Act! and on the verge of losing my contact database.  After three corruptions I moved to a product used by major global companies, figuring that if Salesforce was experiencing problems, John Chambers would be on the phone pushing them toward a solution.  I bought is at a time when funds were low, but it didn’t matter.  I reallocated.

Find the urgency.  Every company is experiencing urgent threats, they just don’t realize it.  Be the one to show them the issues – but make sure you show the people that matter in a way they can understand it.  Then show them the solution.  If it’s as urgent as a heart attack, you’re in.  And for asset owners, losing 100 million credit card numbers borders on a heart attack.

© 2010, David Stelzl

Recently I’ve been focused on price.  Why?  Because it seems to be one of the key issues.  “The price is too high”, “We don’t have budget”, “How much of a discount can we get?”  The list goes on with excuses and pleas for you to cut the price.  But it always boils down to value.  So what do I mean when I say, “Agree on value before quoting a price?”

Earlier in the year I was talking with a prospect about speaking at a marketing event.  Through several meetings I finally made my way to the decision maker, the place where we all want to be.  When I heard the words, “But we can get a speaker for free”, I was ready.  Why?  Because I’ve hit this same objection countless times.  There are lot’s of things out there offered for free…free email, free wireless, free Googledocs, free teleconference services, free newspapers, and the list goes on.  So why do we continue pay for these services?  Because somewhere along the way we’ve discovered some value that is not included in the free service.  How about free eye surgery! Would you buy it?  Not me – I’m hiring the best surgeon I can find regardless of price.  Even if I do have to reallocate funding from other activities, including pizza!

Establishing this kind of value requires spending time with the stake holders, learning about their business, their pressures, upcoming decisions, risks, etc.  Once you understand, you begin to paint a picture of how you solve the problem.  In my case I know that getting the speaker there is not that big of a problem.  Getting a great speaker in the area of technology is a bigger problem, but not insurmountable.  Getting a speaker that can move 5o executives to take action is a giant hurdle.  Most technology speakers are there to tell you what they know, not move the audience to buy.  And finally, who knows how to get 50 executives into a room in the first place?  I do.  Understanding his pain allowed me to explain where his upcoming event was likely to go wrong, and then show how I was going to solve the problems he was about to face.  His free speaker can’t do that.  What’s the value?  If only ten percent of those executives buy projects or managed services, he’s up many thousands, hundreds of thousands, maybe even millions of dollars, depending on the kind of event he is hosting.  So what’s that worth?  A lot!

What are your solutions worth?  I don’t know…what problems are you solving?

© 2010, David Stelzl

Justifying your Fee

October 29, 2010 — 2 Comments

My son has never had pizza!  Can you believe it…you should know by now that I eat pizza at least once a week, and that’s a bad week for me.  Why have I deprived me son?  Be cause he is allergic to everything.  Gluten (which knocks out just about every restaurant bread), wheat, corn, dairy…that is, until yesterday.

After seeing numerous doctors, some local, some far away, we finally have the problem solved.  The local doctors offered him cortisone to treat skin rashes which covered his body head to toe when he was an infant.  My wife, believing the surface treatment was the wrong answer, began researching this.  She soon discovered the food allergy problem, which is actually the result of your body not properly digesting a food, which leads to a toxic substance in the body rather than properly digested food, which in turn must come out of the body, generally in the form of a rash.  Well, with a long list of allergy foods in hand, we were able to keep Tiny Tim (as I call him) somewhat free of rashes.  The problem is, that means Tiny Tim can only eat a hand full of boring foods while watching the rest of us enjoy pizza and ice cream.

Then a couple of months ago someone refers us to a doctor just three hours from my house.  Two visits, three weeks of treatment using natural products (no drugs), and he’s free to eat whatever.  Of course Insurance doesn’t pay for this type of treatment…it’s all out of pocket.  But do you think I questioned the fee?  Did I send out RFQs, collect three bids, push the doc for a 30% discount, count his hours?  No!  He solved a serious problem using his intellectual capital.  He earned the right to advise me, charge me, and convince me to call him the next time I have a medical need.  This is the essence of becoming the trusted adviser.  This is not a commodity.

PS.  Tiny Tim and I are having pizza tonight!

© 2010, David Stelzl

After several posts on proposals and some words on pricing, people have responded with all sorts of reasons on why they can’t give a fixed price.  Believe me, I understand the dilemma.  If you just don’t know what it will take, you don’t want the risk…here are the common objections:

1. Client doesn’t want to pay more than the hours they see you onsite.

2. You always lose when you fix price

3. No one knows what it will take to complete the job

4. What about scope creep

and the list goes on – feel free to add some below and I will respond with my take…so what do we do?  First let’s understand the real issues:

  • When you do T&M the client sees it as T&M with a cap.  Even if you say, “there is no cap”, they expect one.  If someone quotes me $500 to fix something in my house and sends me a bill for $2000, we are going to have a problem.  Even if I pay it, it’s probably the last time I hire them.
  • When there’s a cap, I take all the risk.  If we come in early, I make less just because I was efficient.  In other words, I sold the $10,000 deal, got the approval, and perhaps a PO was issued for $10,000.  And I’ve even forecasted it!  But I only bill $7000, leaving 3K on the table.  I just lost commission on 3K and my company lost the balance right off the bottom line.
  • On the other side, if I go over, the PO is issued, the people I am dealing with have put the funding together, it’s all signed off and ready to go,  but three weeks later I am back in their office trying to get the PO increased.  What do we do?  Put everything on hold while we wait?  That will go over well with my clients!
  • Or I decide to keep going with no further approval.  Every dollar over is a loss in profit, and if my firm charges me a burden cost on services, which they should if they are smart, I really take a loss.  Before I know it, there is no GP left in the deal and my commission in zero.

So why do people continue to justify the T&M approach?  If you find you are losing on every deal, see if there is a trend.  I had one client who was losing about 25% on every deal.  Well, that was simple, start adding that amount to every new quote and you will be right on.  If the price is too high, the T&M quote is too high – another issue solved.  If the client only wants to pay for hours you can prove you spent, the deal was sold on price, not value, if you just don’t know, break it into phases and quote what can be quoted, estimate the rest for phase 2…stop quoting T&M prices!