EP. 066 The 3 Pre-Reqs To Raising Your Consulting Fees

Jun 16, 2022
 
 

I frequently find that independent consultants wait for someone else to give them permission to increase their consulting pricing. You could be falling into this IC business owner trap too, waiting for someone else to give you permission to increase your fees.

Here’s the truth. This hesitation is a corporate hangover. Remember back in your employee days when you had to wait for somebody to give you permission for something, whether it was a budget that gave you permission to spend money or someone in finance or sales who had to bless it.

But now you’re the consulting business owner. You’re the person in charge. 
So my question to you is, who gives you permission to raise your consulting fees? 

Listen as I share the three prerequisites to raising your consulting fees. 

  1. The first is, to be clear on what you're selling, and what you're not selling. 
  2. The second is, frequently calculate the tangible and intangible value of the work you deliver and the outcomes you're creating. 
  3. The third is to sell yourself first on the fee increase. 


I can't wait to share this with you because it really is a formula to help you get to the place where you're not undercharging.

  • [00:43] Quick behind-the-scenes update on the podcast and how it can benefit your business
  • [03:18] Why it's important to provide an honest answer to this question…Who gives you permission to raise your consulting fees?
  • [05:28] The three prerequisites 
  • [05:57] Prerequisite #1 and an example: Be clear about what your selling and what your not selling
  • [08:54] Prerequisite #2 and an example: get clear on the tangible and the intangible work that you delivery
  • [17:33] Prerequisite #3 and an example: Sell yourself on the pricing increase  
  • [23:10] Bonus tip: Set triggers to consistently reevaluate the prerequisites 
  • [24:55] Episode recap
  • [25:37] Ready for help figuring out how to apply these strategies in your IC business?
    • I invite you to book a Strategy Consultation call with me.
    • On this call, we'll dive into your business, get clear on your goals and challenges and determine an action plan for you so that you can create the business impact, income, and flexibility that you desire. 
    • To book yours, please visit https://www.consultmelisa.com.

 
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 FULL TRANSCRIPT

 

**note: This is an automated transcript, so please ignore spelling errors and grammar mistakes*

 

00:18

Welcome back to the podcast. I am so happy you're here as I am every single week. And I can't wait to dive into today's topic with you, which is the three prerequisites to raising your consulting fees. Before we get started with that, though, I just wanted to share with you a little behind the scenes of the podcast. So as I'm recording this, it's the last week of May. And typically, I re-record just a week in advance, as you noticed a couple of episodes ago, I lost my voice. So how to get super creative. So I decided to start batching the podcasts and in one week record all of the next upcoming months, and stroke podcasts in one week. So that is my new approach to the podcast is batching things and trying to get some efficiencies of repete, you know, doing the same thing in one week versus spreading it out across the month. So we'll see how it works. But I wanted to share that with you. I mean, I may continue doing this. Or I may go back to the old way, we'll see. But I wanted to share it with you because it's important to just constantly revisit not, I will say not constantly, periodically revisit how you're operating your business. So you may have repeatable tasks like I'm describing to you with the podcast recordings, you may have certain repeatable tasks in your business, and I have a certain way of doing those. And the way might be working out really well for you. But it kind of sucks your energy that way might not be working out that well for you. And it may be hard to overcome procrastination and overwhelm whatever the case is for you. Periodically revisiting those repeatable tasks can be really beneficial in a couple of different ways. It can help you become more efficient, and maybe increase the level of quality. And it can also help you to just get really reinvigorated and potentially improve the amount of mental energy that it's taking for you to produce something. So I love shaking things up every now and then I wanted to take this opportunity to encourage you to do the same thing. And we'll see how if I continue with this method or not. But I will tell you one of the downsides of this method is I have recorded a good chunk of these June episodes so far. And I want you to hear all of them immediately. I think they're so good if I don't say so myself. And I don't want you to have to wait, you will wait. And by now you're you've listened to a good chunk of the tune episodes, but my impatient part of myself doesn't want you to wait. And that's been the one downside I've noticed so far. So anyway, with that, let's dive into the three prerequisites to raising your consulting fees. I can't wait to share this with you because it really is a formula to help you get to the place where you're not undercharging to talk about it frequently on this episode of this podcast, right? So the first thing I want to ask you, which I find to be a really interesting question, who gives you the permission to raise your consulting fees? Who gives you permission to raise your consulting fees? Really, honestly answer that for yourself. Because on the surface, you might say, Well, me, I'm the running the business. But under the surface, I often find that consultants are really waiting for someone else to give you permission. If you're like most consultants, you might be waiting for someone else to give you permission. Someone to tell you how, you know, your rates are less than we pay other consultants you should charge more or you to get access to some rates that maybe you know colleagues are charging and realize, oh, I have some headroom here. I should increase my feeds. Who are you waiting to give you permission to raise your consulting fees? Mostly that comes from a kind of hangover from corporate right? Were when you were in corporate as we all were at some point.

 

04:40

You had to wait for someone to give you permission for something. Whether it was a budget that gave you permission to spend money, whether it was even though you had a budget you still had to get permission to spend money, whether it was increasing the rates of what you were charging and corporate with your clients and some person in finance had to help you look at it or sales had to bless, it's just such an interesting question to ask yourself, Who are you waiting on to give you permission, just raise your consulting fees. So today, let's just start off this episode by saying you get to decide when you're going to raise your consulting fees. And now you're going to work on the prerequisites to feel like you know, to get yourself into the most ideal spot to go ahead and raise those rates so that you ultimately stay on top of your rates so that you're handling them in a more systematic versus haphazard way. And that ultimately, you're avoiding undercharging. So with that, we're going to cover these three prerequisites. Today, I'm going to tell you what they are. And then I'm going to dive into the details of each one of them so that you know how to implement this in your business. And I'll give you an example as we go, really, to help you get crystal clear on these three prerequisites. So the first is, number one, be clear on what you're selling, and what you're not selling. Number two, frequently calculate the tangible and intangible value of the work you deliver, to want to be calculating the value of the work you're delivering the outcomes, you're creating both a tangible and intangible way. And then thirdly, is to sell yourself on the fee increases, sell yourself first. So let's dive into each of these three, you're gonna go to the show notes and grab them. So you don't have to be taking copious notes here. But I want to really dive into each of these three prerequisites. So you can figure out how this applies to you and your business. So the first one, be clear on what you're selling, and what you're not selling. We've talked about this in prior episodes in other ways, you can go back to Episode 60. After this, we'll put the link to that in the show notes. To really think about this on a different level in terms of your sales mindset. But for today, let's talk about being clear on what you're selling as a prerequisite to you increasing your consulting fees. Most consultants, here's what you're not selling, here's what you're not selling. Most consultants think they're selling themselves. That's not what you're selling. If you think you're selling yourself, you're probably in a staff augmentation or extra pair of hands type of a situation. And honestly, there's nothing wrong with that. But if you're listening to this episode, my guess is that that's not your ultimate goal for your business, to be staff augmentation or that extra pair of hands, you want to elevate your business and continue elevating and growing your business. So you have more impact, and you're more fulfilled in the type of work you're doing, and quite frankly, are paid more. So with that, we need to decouple you from your services, you're not selling yourself, because if you are, it's so easy to hit a limit on what you're charging. In this case, we're really getting clear on what you're selling, which is, again is not you? And what it is that you're selling is the outcomes that you help your clients to achieve. That is what you're selling. And that's what you want to be very clear on as a prerequisite to raising your rates, to raising your fees to raise your pricing. You are selling the outcomes, you are selling the results you are selling what the clients that ultimate end state that the client is looking to achieve. And when you're able to separate those outcomes and benefits that you're helping your clients to achieve and start charging for your work in that way. Quite frankly, your revenue potential can be endless. It's no longer attached, the amount of time you're spending on your fees and pricing and revenue is attached to the results you're getting for your clients. And so that's the prerequisite to you charging more. The first prerequisite to you charging more as an independent consultant is to get crystal clear on what you're selling, what are those outcomes, and to stop thinking that you're selling yourself this first prerequisite so it can be as simple as I am not selling myself, I will stop thinking that I will start noticing what I'm thinking that and cut that off because it's not benefiting you and it's not benefiting your clients. So now let's dive into the second prerequisite which can help you get more clear on the unknown to quantify the types of results you are delivering

 

10:00

The outcomes that you are creating. And so that's what the second prerequisite is, is to help you get very clear on the value, the intangible and the tangible value of the work that you deliver. So let me share with you a really simple, it's not incredibly easy, but it is an incredibly simple exercise that I give my independent consultant, business owner, coaching, coaching clients, so the clients that I coach, those clients that I work with one on one, one of the first exercises that we do together, is to really start helping them get clear on the impacts of the results that they deliver, and to quantify those. So the four steps that I'll give you today, that are part of the work that I do with clients is number one, just sit down and quantify the short term. So the immediate tangible impacts of the work that you do with your clients. What is that short-term? tangible impacts? Like? What could you truly quantify? Sometimes it's more straightforward, depending on what your niche is, as a consultant, sometimes a little more challenging, but really force yourself to figure out what are the tangible impacts of the work that you do? It could be things like increasing that client's revenue, it could, so that's quantifiable, right? It could be things like decreasing their costs, like retention, that's quantifiable, how much do they know the answer to how much does it cost to replace an employee? You can generalize that as part of this exercise. But then you'll want to ask them that question, like you, you know, go through your business development exercise, so you know exactly what the numbers are for them in particular. So right now, we're doing more of a kind of across-the-board exercise, but it's incredibly valuable for you to do also with each individual client, then you're going to want to Secondly, you want to quantify the short-term intangible impacts of the work that you do in tangibly if that's a word, what is the impact of the work that you do all of those things that are not as easy to quantify, but or to measure? Just give yourself a guess? Don't overthink this or overcomplicate it, give yourself a guess of what is what are all the intangible impacts, that the work you are doing, could have on your potential clients, then add these two together, which gives you the full picture of the short-term impact. And then multiply that out. Think about it from the longer-term perspective, what is the lifetime value of the work that you're doing for a given client and come to a number, it's kind of crazy, when you look at it this way, when I have clients do this, we very quickly get into the millions, sometimes multiple millions. And then when you look at your pricing is like 50k, or 100k. So crazy how that looks so mean, you know, meaningful, meaning less than the big picture to that particular client meaningful to you. But if you're when you're delivering millions of dollars of value, the fact that you're charging 100k or 200k, or whatever that whatever it is that you're charging, looks so much easier on paper, right? So let me give you an example of this. So we're no longer thinking retain charging ourselves. That was the prerequisite one. Now, prerequisite, two is really getting clear on the value of the work that you deliver. So let's just take it as a simple, simple example. Let's say that you're an agile consultant. So as an agile consultant, you're helping some, you know, development organizations to improve the process by which they deliver new products. Development organization might be a software company, or it might be some arm within another company that is delivering new products to market, right. And so your goal from an agile perspective is to help them improve the process by which they're delivering that software in order to increase their throughputs in order to be more attractive to new developers, which, at the point, we're recording, this is a scarce commodity. It's hard to hire good developers. So let's talk through this formula that I gave you about the short-term impacts, which are tangible and the intangible. If you were to add all of those up,

 

14:59

you could save your Sell 500k A year and save that client 500k easily in costs every year with retention, developer retention, developer recruiting, the ease of recruiting this point, the developers are looking for this type of methodology versus waterfall, for example, you can help that client See, accumulate that 500k in cost savings by them, avoiding mistakes, costly mistakes that require rework, helps them with code quality, rework, avoidance speed to market, quicker to revenue streams, new product, revenue streams, whatever it is, right? Those are some examples for you. So you could very easily get to a 500k number in terms of the short-term impacts. And by that I mean, you know, a short term like six months, 12 months, something like that. And then over the course of the typical lifespan of the processes you've designed, let's just say that those processes last two or three years before they need to be revisited or refreshed in a larger scale way. Of course, it's iterating, always iterating, right, but in a larger scale way, the work that you've done will last them two or three years, you could then so then multiply that 500k out, and you could be easily saving them a million to a million and a half. This is a business case, right? What what does it look like to the results of the work that you're delivering. And in a cost savings perspective, or in a revenue-generating perspective, whatever the type of work is that you do like gives you an example. And so then, again, this can be this type of exercise can be incredibly eye-opening for you, as you're looking at increasing your fees. Because number one is going to help you to really ask deeper questions during your sales cycle to understand the why behind why they might consider bringing you on board to work with not work for right. Why does this matter to them? Why does this work matter to them? What will the impact of this work be tangible? intangibly? What is the what are the numbers you can attach to all of this when you think about your business in this way, Nicola, who I interviewed last week, referred to this in the episode that we just recorded when she started thinking about her business in this way and asking these deeper questions during her business development cycle, it just naturally leads to increasing your consulting fees and for her consulting fees, because you have such a deeper understanding of why this work matters and what it impacts to them in the org and what impacts that will have for them in their organization? And why those impacts matter to them. The numbers, the quantifying of that. So doing this second prerequisite that I'm sharing with you, which is calculating the value really helps you to get to a deeper, more meaningful business development process, which naturally leads to you setting yourself up as a trusted adviser. And naturally leads to you being able to request much, much larger fees. The second value of this exercise again is the calculation of the tangible and intangible values. I touched on this a minute ago. But the second reason why this can be incredibly eye-opening is that you can see the value of the benefits you deliver which makes you more comfortable proposing those higher rates. Again, when you see the work that I do leads to a million or a million and a half in value to this client. Of course, as you know, proposing 100k or 200k 300k becomes so much easier when you look at it from this perspective. So that's why this is one of the prerequisites for you. Raising your consulting fees is to get your head into this headspace. So it becomes so much easier for you to propose these numbers versus feel like I am going to propose a higher number and almost like throw it over the transom and hope that they agree to it. You see the difference there. So then the third prerequisite is for you to sell yourself on the pricing increase.

 

19:44

You have to sell yourself first before you can sell anyone else and quite frankly doing that second prerequisite may get you fully there. But you need to look and see where it didn't get you there were still the hang-ups about you feeling like the work that you do. shouldn't be priced at that level, whatever that next level is, what are your hang-ups around you asking for that amount of money, whatever that new amount of money is. And most independent consultants overlook this key critical step. We just again, delegate, whatever, whatever our pricing is to the client's budget or whatever we think the market will allow or not allow. And that's truly not the truth. I've seen such a range in pricing models and what consultants are able to charge and quite frankly, they're worth it even more because of the value they're delivering. And so it's just not true that there's some kind of a market cap or some kind of an external constraint being placed upon you, the constraint being placed upon you is the way you're thinking about yourself, and the value that you deliver. And what your what you think your client is thinking and getting yourself fully on board 110% that you sold yourself first. So part of it again is that exercise I just shared with you. And part of it is you asking yourself, where are my hangups, where, where do I, where do I feel nervousness? Where do I feel hesitation? Where do I feel nauseous? As I'm thinking about this particular new pricing? And why? Why am I thinking that? Why am I why am I feeling that? It's because of the way you're thinking? So what are the thoughts you have about yourself? And your ability to, you know, demand that amount of money in the marketplace? What are your thoughts about your clients, and their ability to pay? Or they're interested in paying that amount of money? For the work you do? What do you think your clients are thinking about you, as your requests, you know, as you're proposing that amount of money? Answering those types of questions. So questions in those categories will be incredibly insightful for you to figure out where this upper limit is for you, in the way that you're pricing out your proposals and helping you to move beyond it. And look, at the end of the day, you've got to sell yourself first on this pricing, this new pricing. Because if you think your pricing is too high, or you think that your client isn't going to want to pay it, think about how that makes you show up. It makes you hesitant, it makes you come across as tentative, it makes you kind of scanning the room, like wondering when the other shoe is going to drop or wondering when they're going to push back on you or wondering if they're going to, you know, kind of just toss you out of the room, whatever it is that you're afraid of. And so of course, it's going to be harder for you to sell higher pricing on your proposals because you come across with self-doubt and tentativeness. And it ends up making you undermine yourself and your expertise. That's why it doesn't work. So the alternative is that you've sold yourself first on the pricing increase, you're not waiting for someone to agree to your new pricing and your next proposal and therefore then decide you can feel confident about it. Use felt confident first, you believe in it 110%. First, you believe this pricing is a no-brainer. So that you can show up in a leisurely confident trust-building way with those potential clients. Do you see how your thoughts about your pricing are at the core of how you're coming across in that sales cycle? In one way, when you're feeling tentative and nervous, it creates that dynamic that makes your client nervous to work with you to say yes, regardless of what the pricing is. On the other hand, if you're sold first, that's when you show up in a leisurely confident, really clear, and crisp way with that client and build that trust and confidence with them from the outset.

 

24:14

That the ability to get to move your client forward and have them on board with the proposal that you're making for and formulating with them all comes down to the way that you're thinking about it. And the value you see that you're delivering and your ability to deliver that value and your unwavering belief, unshakable belief in your pricing in your proposal in your results. This is truly not something that you can or want to be delegating to your potential clients. You delegating to them to make you feel confident in your pricing by them saying yes is what's going to create a lot of neither knows, they say no, I've decided that we're not going to move forward. Or it creates situations where you are continuously under charge because you're wanting that client to give you permission. Back to the first question I asked you, right, who gives you permission, maybe not directly, but subtly, you're looking for them to give you that permission. So do not delegate this to your potential clients, it's imperative that you sell yourself first on the pricing, and the increases in pricing that you create as you submit proposals, and create proposals with those potential clients, and that you're not delegating it to them, to make you feel comfortable, that it's okay to raise your prices. So those are the three prerequisites, I want to share one last thing with you to reevaluate. So these prerequisites are incredibly important, want to make sure that you put those in place in your business. But you also need a trigger a point in your business to make sure that you're re-evaluating pricing structures. Because if you're just kind of waiting until it feels like the right moments, you'll you're going to delay delay delay until you've lost you know, you've underpriced so many different so many opportunities that you didn't need to. So this doesn't happen without intentionality, you want to reevaluate your product pricing structures. Some consultants have great processes where they just look at that after every engagement. So that could be your trigger, or your trigger to look at your prices, your pricing structures could be just adding it to your business calendar every, every few months, whichever works for you. Because otherwise, your brains going to gravitate toward pushing this decision off. And it's going to feel really logical, like oh, I'll just read look at my rates. As soon as I know, this client is really happy with the work that I do. Or I'll think about this after such. And such happens, we know that that's how our brain works, it always defers to later to avoid that immediate discomfort. So in order to make sure that doesn't happen to you either put in a business practice that you're going to revisit this after every engagement no matter what or set it in your business calendar every few months so that you intentionally are putting these prerequisites in place. And quite frankly, they're not a one-and-done. It's not like one day, you can just do this work and then it's over, check it off the list forever, is these are living breathing prerequisites that you want to be focusing in on so that you can set yourself up for those pricing increases more frequently than not. Alright, so the summary here for you is to get really clear on what you're selling, and what you're not selling. calculate that value both the intangible and tangible of the work that you deliver, sell yourself first on the increases, don't expect your clients to sell you for you,

 

28:10

and put it in your calendar, or put it at the end of every engagement so that you revisit it on a regular basis. And then finally, as we wrap up, I want to encourage you to put this work into practice. And there are a couple of next steps that can also benefit you in getting to the place where you're charging the amount that is commensurate with the value that you're delivering, and not undercharging. So the two next steps for you would be if you're interested in helping get help in applying this to your business specifically, I only work with clients one on one, to really dig into your business, and figure out how this applies to you. So that you can go further faster toward predictability towards sustainability and toward having more fulfillment and joy in your practice. So you can book a consultation with me at consultmelisa.com My name has one s Melisa, you can get the link in the show notes. But I wouldn't love to talk with you coaching might not be the right fit. And there are often times where I tell people you know what I wouldn't, I think you should go do this instead of coaching. But if it is the right fit, I would love to talk with you in more detail and see if we'd be a good fit working together so that again you're not just constantly repeating the same results over and over again. We can help you get a breakthrough whatever your ceiling is, and become more profitable, become more fulfilled in your consulting business. If you're not quite ready to explore private coaching yet, and or you want more on predictability, create predictability in your business. Go ahead over to ice See the letters icscorecard.com. And you can take my independent consultant's business predictability assessment. And that's going to give you a reading score in four key areas of your business that relate that are such good indicators of why your business is maybe not as predictable as you want it to be right now, and how to create more predictability in your consulting business. So go take that assessment. It will give you a rating in those four key areas predictability areas, and also a really detailed report that gives you resources to implement whatever your you know, growth areas are to improve the predictability in your business. So that's it. ic.scorecard.com Thank you for tuning in today. I'm so glad you're here. And I can't wait to see you again next week. Take care.

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