🎙️Show Notes for Episode 050 - 5 Methods To Uncover If You’re Undercharging as a ConsultantFeb 23, 2022
No one plans to undercharge when they set up their consulting business. And, often it can be a gut-punch when you realize you’ve been undercharging and had no idea.
It can be blatant or subtle but no matter where you're at in that spectrum, whether you're just unaware of what's possible, or you've literally been avoiding this, it's not a problem. I want to help you with this.
And so today is the beginning of a series related to undercharging so that we can get you earning at the level of the value of the work and the results that you're producing. There are five methods or tools that work really well to help you to figure out for yourself if you are undercharging.
Listen in to learn more about these five methods and how they can help you determine if you are undercharging so that you can then pivot and start to run your business more effectively:
- [00:28] Celebrating 50 episodes of the Grow Your Independent Consulting Business Podcast!
- [08:39] Method #1
- [13:54] Method #2
- [16:58] Method #3
- [19:12] Method #4
- [23:26] Method #5
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**note: This is an automated transcript, so please ignore spelling errors and grammar mistakes*
Welcome to the Grow Your Independent Consulting Business podcast. I'm Melisa Liberman, a fellow IC and business coach. On this podcast, I teach you to become a consistently booked independent consultant without becoming a pushy salesperson or working 24/7. If I can do it, you can too.
listen on to find out how. Welcome to Episode 50, I am so happy you're here. And I just have to say 50 episodes is really an accomplishment. And to celebrate that here with you today, you know, I used to be the type of person who would never celebrate anything because either one it wasn't good enough in my mind, or number two, someone else had done it better, bigger. Or number three, it's just a waste of time. In my mind, it was keep it moving, no time to be distracted by celebrations, we have more to do bigger things to accomplish. And there was never any payoff for accomplishing anything in my mind. So I'm taking a moment with you here today to say 50 episodes is an amazing accomplishment. I went live with four episodes. So, this means that we've done 46 consecutive weeks 4647 depending on how you're counting 46 or 47 consecutive weeks of content. That's almost one year. And I hear from so many of you that you're loving the podcast every week, and it's so actionable for you and is helping you move your business forward. And that is my goal. So, I just want to celebrate 50 episodes with you here today. And take a moment to say do the same thing for yourself. Don't be the negative Nancy that I used to be, and not give yourself that moment. Don't skip over celebrating what it is that you've accomplished, whether it's big or small, or in between. Take a moment right now and ask yourself What have I accomplished in this business I'm creating that I'm in awe of could be signing your first clients, it may be a signing your first client that didn't know you in the past, maybe it's signing your client that is your first value-based pricing versus hourly rate based. Maybe it's now you've got two clients in your pipeline, and you just have none, whatever it is, take a moment right now. And give yourself some acknowledgment of something that's going well something that you've accomplished something that you're proud of. Instead of having that mindset like you probably have fallen into in the past, I know that it used to be the way I lived. It's not good enough or it doesn't count or all celebrate as soon as some bar is reached, which Oh, the keeps moving right, you never heard you keep moving the bar and never celebrating it. So that's my message for you today. As we dive into this episode, celebrate yourself. Be proud of what you've accomplished. be public about what you've accomplished. I can't even tell you how crazy it is that I'm here on this podcast, telling you I've done a great job at consistently producing this podcast for you every week with such an intent to give you value and give you actionable strategies and share the ups and downs of what it's like to run a consulting practice. So you don't feel alone. So go figure out for yourself what that thing is that you're celebrating. Okay with that, I would also love to ask you, if you're loving this podcast, go give me a review a rating and a review, especially if you're using the Apple app, whatever it's called Apple podcast app, it helps other people find this. So it's not about me, it's about how do we help other people find this podcast so we can help them the same way that you are here and learning new strategies that you can implement in your business. So if you have a minute, go put in that rating and review. And I just have to thank Trevor who just put one in recently, and said how impactful this podcast has been for him. Melisa is a great host who brings excellent insights into each episode. So I just appreciate you taking the time, Trevor, and for any of you out there who are listening and want to help other people be able to find this easier. Take a minute if you have one and go leave a rating and a review. Okay, so with all of that, let's dive into today's topic, which is five methods that you can use to uncover if you're undercharging as a consultant. So I'm going to share with you five different methods you can implement for your business to figure out if you're undercharging or not in your consulting work. Okay, I will say this, almost every consultant I talked to is undercharging in some way. So you probably are too. And it can be blatant, or it can be subtle, and you can be aware of it, or literally not know, at all, or not want to know, right? I don't know, if I want to know, then I'm gonna have to do some things that are uncomfortable. So no matter where you're at, in, you know, in that spectrum, it's not a problem, I want to help you with this today, today is the beginning of a series related to undercharging and under-earning, so that we can get you earning the value of the work and the results that you're producing. So whether you're just unaware of what's possible, or you're just literally been avoiding this, figuring out if you're undercharging or not, I want to help you with the five tools that work really well to figure this out for yourself. Okay, so that is our focus for today. The five methods you can use to uncover or figure out if you're undercharging. The next thing I want to say to you is a little bit of a warning. A lot of times if you're like a lot of the consultants that I meet, and I work with this topic can bring up some defensiveness or some nervousness, or some resistance. It's one of those topics, probably because it relates to money, that can create that immediate emotional reaction. And sometimes before we ever begin here, so if you're already feeling like hesitant or nervous, or, or I don't know, if I want to hear this, don't worry, I want you to know that this is totally normal. First of all, this topic, if I'm under earning, right, let me give you an example. Let's just say you've been going through your practice, and you're feeling really good about it, you're working really consistently, you're generating the money you were expecting or maybe even more, and then all of a sudden you figure out wow, I've actually been charging half of what other people charge. And it kind of feels like that gut punch, right? Like, oh, and then the shame and the regret and the overwhelm set in, here's what I want to say for you. That could be the case, you could be charging half of what you're capable of charging, you might use these tools and figure out you know, for right now, you're pretty spot on and from how you're pricing your projects, wherever it is that you're fitting into this, whether it is you use these tools, and it comes to some form of a gut punch, or you use these tools to confirm, you know what I think I'm right in the ballpark of where I should be. What I want to share with you is neither of those as a problem, we just want to get the data, we want to get the facts, we want to figure out where you're at from an undercharging perspective. And we want to do that without self-judgment, use these five tools I'm going to share with you figure out where you're at from a business perspective. And then you can use that information to figure out where you want to go next, and not use these tools against you to judge yourself for what you've been doing wrong. In the past, I should say what you think you've been doing wrong in the past, or regret that you haven't looked at this yet, or any of that kind of stuff. Look, you're a business owner, there's going to be a lot of ups and downs, there have been up till this point. And there's gonna be a lot more. And so I want to help you get to the place where you're looking at what you're doing. And you're taking in the information and making business decisions off of it without judging yourself for what may or may not have gotten right or wrong up until this point. Okay. So that's my little bit of a caveat here. Don't judge yourself, as you're putting these tools into place. We're using them as mechanisms to help you run your business more effectively. Okay, so with those, with those warnings in mind, I'm going to walk you through each of the five tools. So the first tool is, again, we're talking about how to a tool to uncover if you're undercharging. So the first tool to uncover if you're undercharging is to look at the what the market is telling you look at what the market is telling you. There's two ways to do this two primary ways. Number one, do you have more demand than you can handle? So this comes in the form of you might be turning client work away, that's the more obvious way to know I have more demand than I can handle. So I'm turning clients away, I'm turning potential work away. That's the most obvious way. But for most people, that's not happening so much. It's more subtle, because we tend to say yes to things and to try to figure them out. The way that you could be turning work away kind of proactively is that you're not doing any business development. You're not doing any business development, because you're already working on a project and you feel like I'm fully subscribed. And so then basically you don't have a you know, if you had a brick and mortar, the sign would be closed. It was say closed for business, right? It's like God noon on a Tuesday and someone wants to come and buy something from your store and it says closed for business. So look at what the market is telling you do you have more demand than you can handle? If the answer is obvious, because you're turning work away, then that's a great data point here. And that's a way to know that you are probably undercharging, because you haven't regulated you haven't up-leveled the amount you're pricing. Because you have more demands than you have supply, which would be the amount of time you have in your week or month to do this work, right. So if you're turning work away, literally, that's a great sign that you are undercharging, because you want to recalibrate with the supply in the demand equation, right? That's easy to understand. If you're in this situation, where essentially, you've got that closed sign-on, obviously, we don't have a closed sign, you're probably working from your home office here, right. But if you have that proverbial closed sign-on, which means that you're not doing any business development, you're not networking, you're not literally energetically available to even entertain conversations about what might be out there for you to do for you to serve for you to take on new projects, then this means that you've got to open that up. First, you've got to figure out, if I'm literally open to any type of work that comes to me. And I'm the kind of person I'm the kind of business owner who figures out how to accomplish that work, then the market can start telling you that you actually do have more demand than you can handle. It's just that you're literally closed for business, not even entertaining it. So that's really important to know, when you're thinking about is there more demand that I can handle? For many of you, it's going to be, you know, what I actually haven't been open to taking on any new work. I'm not really putting myself out there. I'm not doing any business development. So I actually don't even know if there's more demand than I can handle. So that's the first thing that you want to answer. So again, the tool is to look at what the market is telling you. And to understand that subtlety. Whether or not you're literally turning work away, or you're more subtly turning work away. A lot of times, there's more out there for you than what you can handle. And that is a sign that you could be undercharging. Okay. So the other aspect of this, when I talk about look at what the market is telling you is that you might not even just be testing the market, right? Here's a great way to know, if this is you, you're not testing the market, which means that every time you send a proposal and start having conversations about the financial side of it, there's never any friction. There's never anyone that says, You know what this is beyond what I thought it would be. There's never a time where they want to negotiate with you. There's just literally Yes, let's go forward. That's another sign that the market is telling you that the rate or the project pricing you've created, could be under what the value is that you're delivering? Because it's like an immediate, yes. versus you know what, let's talk through this, it's more than I was expecting. And then you're having that dialogue about what the value is for them why they would want to move forward, what they see the value to be, you know, from a compensation perspective, and then you're having that negotiation. So, tool number one is to look at what the market is telling you. And just to recap what I've said here, before we move on to tool number two, you want to look at do you have more demand than you can handle? If you do, then that means that you could be undercharging. And number two, if you're constantly getting yeses, when you're talking through the financial piece of your proposal, it could be that you're undercharging, because it's less than what they were expecting. So that's another way, if you're creating conversations around the pricing, then you're testing the market in that way. Okay, so that's tool number one, tool number two, or method, the method or the tool that you can use to uncover and figure out if you're undercharging, is to look at the way you calculated your rates. Look at the way you calculated your rates or your project fees. So, for many consultants, we start off trying to figure out how much to charge and we look at what did I make incorporate, what was my salary, maybe what was my salary, and my bonus, and, and other intangibles, and we get to a lump sum number, and then we divide it by some number of hours in the year. And that creates what we start with from a billing perspective. That's one way that is very common, right? Another way that's really common is to kind of ask around or potentially use rates that you were aware of when you were in corporate and maybe we're paying a consultant out of your budget and use that as your starting point, which is fine. However, you want to use that as just one data point. You want to use that as one data point and figure out in addition to that, data points, what makes sense from a rate perspective based on the value that you're delivering to that end clients, quantitative value and qualitative value. So if you haven't taken, what I like to say, a multi-dimensional approach to calculating your rates are your project fees, then this is an opportunity for you to look, because this could be a great way to see a flag that says, you know, what you're under, you could be undercharging. So what I mean by that is, if you've literally just taken kind of that calculation from what you would have been making incorporate, maybe you add a little bit of a kicker to it, because now you have to pay taxes or whatever the things are, that you now have to deal with, as a business owner, you're charging an hourly rate, this is a great kind of indicator to say, You know what, you're probably leaving money on the table, because you haven't taken that multi-dimensional approach to your pricing, which means looking at other dimensions to the way that you're pricing your work. That's certainly one data point, I teach my clients three different data points to use to triangulate their project pricing. And you want to get to that place where you're doing that to where you're taking into account. Other aspects like the value, what is the ROI for this client? What is the return on their investment, what is the return on the results that they're getting? What is the cost of them not doing or taking the action, and taking that into account when you are calculating the project pricing that you're proposing? So again, this is tool number two, a method for you to figure out if you're undercharging or not, if you're purely using some form of a calculation based on your corporate salary, your past corporate salary, then that's a flag to say most likely, you're undercharging, because you're not taking into account the value that you're delivering to those clients. All right, tool number three, method number three, to help you uncover if you're undercharging as a consultant is to ask yourself, when was the last time you changed your project pricing, if you haven't changed the way you calculate your project pricing, after the last contract you had, this can be a really good easy sign to know that you're undercharging. Many consultants are re-calculating their project rates, their project fees, the way they're pricing their projects. And I'm using this as a broad term, because some of you were charging hourly, some of you were charging more on a what we call in the industry value-based pricing. However, it is that you're charging many consultants, and this might be you two are just revisiting this like once a year, every few years, because again, money is something that we commonly like to avoid, because it makes us uncomfortable, right? So you want to be looking at your pricing strategy, after every project after every statement of work, and not just automatically rolling forward with what you used in the past. This is another indication for you, if the answer to the question, when was the last time you changed your project rates and fees? If the answer, is I don't know? Or if the answer is last year? Or if the answer is a couple of years ago, this is such an important indicator for you that you could be undercharging, you want to be looking at this after every single contract and not get stuck in the trap of I'll do it later. Or I should charge everyone the same amount, or I shouldn't increase my rates because I've already worked with this clients. This is what they're expecting whatever those things are, you want to put a business practice in place for yourself that after every, so w is finished after every project is finished that you're revisiting this. Or another way to say it is before every proposal I make I'm revisiting my pricing. I'm not just using my pricing automatically. Okay, so that is tool number three, ask yourself when was the last time I changed my project pricing strategy, the fees upon which I'm basing that strategy? Okay, tool number four, or method number four for you to know if you're undercharging or not, is to do some research regularly. Don't be afraid to ask your colleagues some of us are really good at this and some not money can be so taboo, right? So ask your colleagues, what is our pricing strategy for certain types of work? You can use rate calculators, again, that should be one data point. So they're their rate calculators out there. I'll put the link to the one that I use occasionally in the show notes. So they're rate calculators out there, you can look up government contract rates as public knowledge and again though these are just data points for you to use to triangulate. You can see these numbers on a piece of paper which are typically hourly and you might even be able to guess like, what is the ultimate value this client was getting? Why did they pay this amount? But a lot of times those rates are based on just that traditional way of thinking, right? Oh, this is kind of the equivalent of if I were paying someone a salary, this is what I'm going to pay them. So I wouldn't put too much weight on those data points. But certainly, there's something that can come into play as you're triangulating. And as I mentioned that multi-dimensional pricing strategy that I teach my clients, you want to set up something similar for yourself. So, if you want my help and doing it, seek me out, you can book a call, consult melisa.com. Or if you want to set this up on your own, you just figure out, you know, what are the different data points that are coming into play as I build up my pricing strategy for a given clients. So again, those rate calculators or government rate contract data can be one data points to help you triangulate what your rates are but proceed with caution is what I want to say proceed with caution. Because, again, those are based on that more traditional way of thinking that rates should be some calculation based on an annual strategy. So here, from a researching perspective, you can certainly go out and do that type of research and ask colleagues, but the most important thing here is that you want to be a detective, get into Sherlock Holmes mode here and constantly look for and figure out why your clients value the results that you deliver. I would be doing this almost every day, at least once a week. If you're working on a project, what did I do that results in in something qualitative or quantitative? What did I advise them on that results in something that I can quantify? What did I advise them on on something that we can qualitatively put a value on, and constantly figuring out what those data points are, so that you're able to build that into your ultimate pricing strategy. So that you're able to fold that back into your messaging, as you're attracting people to become sought after for what you do. So that you can fold that into the way you're gathering requirements in your sales process. So you can fold that back in that knowledge back in about how you're delivering value quantitatively and qualitatively, and into your proposals and the pricing strategy that you use. So that tool number four is to do that research regularly. And the research is also using your own business, your own Case Studies and Results to feed in more data points for you, so that you can then use that to inform your pricing strategy. So again, that is tool number four, to do that type of research, both externally asking colleagues, maybe doing some, you know, Googling against rate calculators or government rate contracts, or, you know, other publicly available information. But even more importantly, researching and really being aware of and cognizant of, and capturing the qualitative and quantitative results that you are delivering. And if you're not doing that, this is such a good opportunity. Because if you're not doing that, then you're not thinking about that value as you're building up your pricing proposals, and therefore is a great indicator that you could be under charging. Okay, number five. The last method that you can use to uncover if you're under charging as a consultant is to ask yourself, How do you see yourself as you're setting up the project pricing, when you're thinking about yourself as a, let's just say, a project manager, when you're thinking about yourself as a program manager, when you're thinking about someone who's really good at delivering at operationalizing other people's ideas, for example, you're thinking about yourself in a way that is less valuable in terms of pricing for your project, then, if you were to be thinking about yourself, as someone who's strategic, as someone who helps create high-level vision and roadmaps and plans against that vision, you know, lead an initiative, support your client to lead an initiative forward. If you see that stark contrast the way you're thinking about yourself, as you're moving forward through the business development process, and pricing out your work. When you think of yourself as I'm don't want to use the word just, but I'm just a project manager. And you're completely shutting yourself off from you know what I'm a strategic resource, an asset who has some very specialized knowledge. There's two very different pricing approaches to that. One is more of a commodity, right? There's so many project managers and program managers out there, the other is specialized is more rare. And when you're thinking of yourself as a commodity, versus something that's specialized and rare, that's going to create a dynamic where you're undercharging. And so you might say to me, well, Moses, I have a lot of evidence that I'm, I'm not yet really that strategic. I'm not yet really, you know, as as an expert as I should be. So it's much more realistic to be thinking of myself, as a project manager, as a program manager, I want to challenge you on that, you're not just an extra pair of hands for these clients that you're working with, you truly have built up a body of knowledge, expertise, day to day experience, against what it is that you're doing, what you offer, and the results that you create for your clients. You might have to mine that out of yourself. But I'm telling you, 90% of the time, it's in there, you just aren't acknowledging it, if it comes naturally to you, so it doesn't seem as valuable. And you've got to figure out what those differentiators are for yourself. So that you can start thinking of yourself as an expert, so that you can start thinking of yourself as someone who's strategic, who's a true consultant, someone who's a thought leader, as someone who's in trusted advisor, as someone who's compensated for the rare knowledge and experience they have to offer to a client. Think about that mindset as you're developing your pricing approach versus the mindset of I'm a project manager here, I'm going to be a Program Manager for their initiative, which is so much more of a commodity, you're not a commodity, my friend, you are an expert in what you do. And that's the work for you. For this tool. Number five is to figure out where is it that you have something unique to offer? Where is it that what you bring to the table is unique in the market, and therefore your pricing the work and the results that you're delivering in accordance. So that's the fifth tool that you can leverage to figure out am I undercharging or not, if you're thinking of yourself as a strategic expert, someone who's rare, someone whose knowledge is very specialized, and valuable to an end client, because it can't find it anywhere else, or it's really hard to find anywhere else, then this might not be the tool for you. But I can tell you in working with so many consultants, it's usually the opposite. Most of us kind of think about ourselves as sort of that lowest common denominator, whatever it was that we started off our career as a project manager, a business analyst, a program manager, whatever it is, and not giving ourselves that credit, and therefore undercharging, because of the way we're seeing ourselves, not because of what we are capable of the value that we're capable of delivering. Alright, so those are the five tools that you can use the figure out if you're undercharging or not. So a quick recap here, you're going to want to look at what the market is telling you. And make sure that you're actually asking the market, what they're telling you versus just closing your door for business and not even being open to figuring out if you have more demand than you can handle and therefore, an opportunity to increase the way that you're pricing your work. The second tool was to look at the way you calculate your rates and your project fees. If you're not taking a multi-dimensional approach to your pricing strategy, like I teach my clients, then you're most likely leaving money on the table. If you're taking just that traditional route of calculating some hourly rate based on your past corporate experience, and maybe adding some upside to it. That's some opportunity to really look at things differently as you're pricing out your work. And thinking about it more from a value-based perspective. The third tool that you can use to figure out if you're undercharging or not, is to ask yourself when was the last time you changed your rates? When was the last time you change the way you calculate your pricing? If the answer isn't after my last statement of work, then you've got some opportunity there. And then we talked about you researching regularly, both externally. But even more importantly, internally as you're delivering projects, constantly figuring out what is the value that qualitatively and quantitatively that the work that I'm doing is delivering. And then the fifth area that you can use is to ask yourself, How do I see myself as I'm setting up the project pricing as I'm creating that proposal? Do I see myself as someone who's a commodity? Or do I see myself as someone who's more strategic and expertly and if the answer is the former, I see myself as something that's more of a commodity, then that's a great flag for you to say, You know what, I bet I'm undercharging here and I need to start putting the opposite of that in place. Start thinking of myself more strategically as I'm building this out. Okay, so those are the five tools that you can use to uncover or figure out if your undercharging code put those into work in your business. And if you want some help reach out to me, there's two different ways to work with me at the moment, I offer what I call a Blueprint Session. This is a one session where we really dive into your business and figure out what can you be doing to reach the goals that you've set for yourself this year. So we map out an entire roadmap for you, and really uncover not only the strategies you could be putting in place, but also the mindset side that you might be missing, that is holding you back from achieving what you want to achieve. I don't know how much longer I'm going to be offering these, they've been so impactful, and so valuable for the clients that I've been working with them on my availability ebbs and flows as well. So I may offer these from time to time, right now I'm offering them so you may want to go grab one, because, again, I may end up taking these down. And the second way to work with me is in my 90 Day independent consulting boot camp. And this is where we work together one on one on the strategy and the tactics and the mindset to help you transform from being a consultant into being a consulting business owner so that you can make more money, you can have more impact, and also have that freedom and flexibility that you want in your life. So if either of those are of interest to you, you can go to IC blueprint comm for that one off-road mapping session, and consult Melisa calm to talk with me about the 90-day boot camp. So those are the two ways right now to work with me. And I'm always adjusting and improving my offering. So the Blueprint Session may not be available forever. So if that's of interest to you go grab one. Otherwise, let's talk about the boot camp and how that might benefit you in your business. So that you can get to a place where you're not undercharging so that you're at a place where you're constantly reevaluating what you're charging and getting compensated for the time and the experience and the expertise that you have to offer to your clients. So that's what I've got for you today on episode number 50. Go put these five tools these five methods into action for your business so that you can figure out where you may be undercharging, and then stay tuned for next week's episode, we're going to continue on this same theme of undercharging and underearning so that we can flip that around for you and make sure that you're making the most out of your business and hitting your revenue and income goals. Have a good one and I'll see you next week.
Thanks for joining me this week on the Grow Your Independent Consulting Business podcast. If you liked today's episode, I have three quick next steps for you. First, click Subscribe on Apple podcasts or wherever you listen to make sure you don't miss future episodes. Next, leave me a review in your podcast app so other independent consultants can find a benefit to and finally to put the ideas from today's episode into action. Head over to Melisaliberman.com for the show notes and more resources to help you grow your consulting practice from your first few projects into a full-fledged business. See you next week.