🎙️Show Notes for Episode 085 of the IC PodcastOct 27, 2022
When what you do comes naturally to you, it’s common to underestimate, overlook, or even completely miss the value, benefits, and impact you create for your clients. This results in common pricing mistakes that have a huge impact on your business.
Understanding the effects of these pricing mistakes will help you decide on what to do when it comes to the overall growth and success of your business.
And so, in this episode, I walk you through the seven specific consulting pricing mistakes we want you to avoid.
I help you understand what each of them are through some examples so that you can identify whether or not you're making these mistakes, make the necessary adjustments and start making more money in your business.
Key points in this episode
- [01:06] Register for the MBO Partners Webinar on How To Raise Your Rates Today To Win Business Tomorrow happening October 27th, 2022 at 1pm EST - https://www.mbopartners.com/events/charge-what-youre-worth/
- [02:01] Today's Agenda
- [03:08] Check out the Rate & Pricing Mega Tutorial https://www.melisaliberman.com/blog/independent-consultant-rates-and-retainer-fees-guide
- [04:24] Check out the Independent Consulting Pricing Assessment: https:/ICpricing.com
- [05:31] The 7 Consulting Pricing Mistakes To Avoid
- [05:39] Underestimating What You Do
- [09:07] Undercutting Yourself
- [12:00] Making The Pricing About You
- [14:57] Undercharging
- [19:03] Mis-Assessing Risk
- [23:14] Delaying involvement of your potential client in pricing discussions
- [27:01] Not Understanding or Selling the Value
- [28:37] Key takeaway from this episode
- [29:01] What to expect next week on EP. 086 Overcoming Value Based Pricing Fear
- [29:16] Episode Recap
MENTIONED IN THIS EPISODE —
- Check out the Rate & Pricing Mega Tutorial: https://www.melisaliberman.com/blog/independent-consultant-rates-and-retainer-fees-guide2
- Check out the Independent Consulting Pricing Assessment: https://ICpricing.com
- EP. 050 - 5 Methods To Uncover If You’re Undercharging as a Consultant
- EP. 051 - 4 Root Causes for Undercharging as a Consultant
- EP. 052 - The 5 Steps to Overcome Undercharging
FOR MORE RESOURCES SPECIFIC TO THE INDEPENDENT CONSULTANT —
- Discuss working with me as your coach - Click here to schedule your consultation
- Check out my YouTube Podcast Channel https://www.youtube.com/channel/UCUrsHqeAFDkcI8Kqc4QssEQ
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**note: This is an automated transcript, so please ignore spelling errors and grammar mistakes*
Welcome; I'm so glad you're here. And today, we're going to talk about consulting, pricing mistakes. Want to help you avoid these seven consulting pricing mistakes. Pricing is on my mind, we haven't talked about it in a while on this podcast. It's definitely something I think all of us are thinking about just in terms of pricing and thinking about, you know, what our business looks like. And where we can be adjusting our pricing to reflect the value that we're delivering. It's always such a good topic to visit, revisit, and revisit and revisit as a business owner. And then also, it's on my mind, because I will be hosting a webinar later today. This, this podcast goes live on October 27. So when it goes live, it will be October 27. And the webinar for MBO partners is later on the 27th happens to be just looking at the calendar, one o'clock Eastern time. So if you happen to be listening to this in the real time, we'll put the link in the show notes to go register for that webinar. And I believe if you register after the webinar, you'll still get the replay. So if you don't happen to be listening to it in the real time, go check out that link. Anyway. So we're working, we'll be talking in that webinar about how to raise your rates today. To win business tomorrow is the topic so I always love doing webinars with them. And so it'll be a good one, very interactive with their team as well. So with that, let's dive in today to the seven consulting pricing mistakes we want you to avoid. That's what we're going to focus on, I'm gonna walk you through those seven specific mistakes, and help you understand what each of them is, through some examples. So that you really can identify whether or not you're making the mistake. Now listen, there's nothing wrong with making a mistake. This is not a problem. It's only a problem if you avoid it after you realize you're making the mistake. So no judgment going on here. It's just a set, you know, a time for your business at this moment as you're listening to figure out what might not be going the way you want it to and and identify the areas that you want to adjust. All right. So I always like to remind you don't lose us anything that I share with you against yourself. We're here and evolving and constantly in growth mode, working on our businesses, and always improving. And that's that's the intention. All right. So with that, the first before I dive into those seven mistakes, I want to point out two resources for you, that will be really valuable complements to the work that we're talking through today. The first is a rate and pricing mega tutorial. It's a bit it's a, that's a nice sexy word for, you know, a 15 or 16, page blog, all about rates and pricing, and pretty much everything you ever wanted to know in a Cliff's Notes version, we probably all have books on our shelves that are about pricing that are you know, volumes. This is the this is the Cliff Notes version of exactly what you need to know as an independent consultant about rates and pricing. So we'll put the link in the show notes. So that you can go find that the simple way to that I'll tell you here verbally is to go to my website, Melisaliberman.com, you can find a Resources tab and then find the blog and then if you scroll down a little bit through the show notes, you'll find the that rates and retainer fee, blog that make it tutorial. So go check that out because it's it's got so much in depth there that I have
consolidated for us, you've got one place to go for all anything you want to know about rates. Then the other thing that I will encourage you to go take is a new assessment that I've created. It's the independent consulting pricing assessments. I love creating these assessments for you. I've created assessments on scaling, your readiness for scaling your readiness for the recession, your productivity, and now this newest one is on pricing. So go get that assessment where it's at, I see the letters I see as in independent consultants, I see pricing.com. So that is a new assessment, you'll answer a handful of questions. And then it's going to give you a really detailed report on where your, where your areas of opportunity are from a pricing perspective. And it also gives you resources that you can lean on to start addressing those, those areas of opportunity. All right, so that is two resources that I want to share with you so that you, of course, put this work that we're talking about on this podcast into action for you and your business. So with that, let's dive straight into each of the seven mistakes, and talk about what each one of them looks like what it is and what it looks like. So the first mistake is under estimating what you do. So when you're pricing out or offering and going through the sales process, it's so common for independent consultants to underestimate the value of what you do. A lot of times this work comes naturally to you. You might have been born with the ability to like define a process I might have been, I don't know, it's kind of kind of weird, right? We just gravitate towards certain things, certain things come eat more easily to less than other things. And so because they come easily to us, we, it's so common for us to underestimate the value of them, we kind of assume that everyone can do this thing that we're really good at. And we overlook that we even it's so common to even just overlook, just completely overlook that it's what you're doing is even, even something that's valuable. And so when you get to the place where you're under estimating and making this mistake in your pricing, you're not taking into account all of the all of the value that you're contributing to that engagement and to that clients. And so when you're not taking all of that into account, because you're overlooking it, you're under estimating it, then you missed that you missed that value, you miss those benefits, you miss the impact. And you don't incorporate that into your pricing strategy as a result. So take a step back and just think about where are you under estimating things that just come naturally to you that are truly a benefit and a value to your clients and start incorporating those into your sales process and ultimately into your pricing. All right, number two, oh, let me go back to number one, I can't I gotta tell you Sorry about this, I had a client I was working with and he is a Six Sigma experts. A Lean Six Sigma expert works with manufacturing clients and goes into you know, these manufacturing environments and helps them to streamline their processes. And this truly comes so naturally to him both because of the nature of his personality and what he loves and is passionate about and, you know, the corporate experience that he had accumulated over all these years. And so
as we were coaching together, almost every single time we had a call, we were identifying something new that he was just completely overlooking that he was providing to this client that just came naturally, he didn't have to think about it. It just rolled out off his tongue. It was very instinctual and incredibly valuable to this client to avoid them, you know, shutting down their entire manufacturing line. And so as you're able to really dialogue with someone else and have that other point of view to say, look, this is you're telling me this and this is incredibly valuable. And you're in and it seems to you you aren't recognizing it. So that can be really an important part of this process. Is you figuring out what you're overlooking, but also it's so hard to see the forest through the trees right. So having someone else who can help you identify that is it is a really important and effective strategy in in terms of overcoming that first mistake. Okay? The second mistake is undercutting yourself. So what I mean by this is how you think of yourself matters when you Think of yourself as I am a vendor to this clients, I am a subordinate in some way, I'm talking to the CMO, for example, or the CEO or the CEO, II Oh, and I and I'm, you know, I feel subordinate to them. Or perhaps you're, you think of yourself as just a one, you know, I'm just a one person shop here. When you think of yourself in that way, you end up pricing yourself in that way, you end up pricing yourself as a commodity, you end up pricing yourself, as someone who's less experienced than what you are, you end up pricing yourself as someone who deals isn't delivering the level of value and outcomes that you truly are. i This is something I also catch with my clients so often. And it just, it's it's a, they don't even realize it and you're probably not realizing it either. It just is one of those things that just you just might say in passing, that might even sound kind of funny, right? Being self deprecating, I love being self deprecating. But at the same time, when you're being self deprecating to yourself and seeing yourself and letting that in, pack your pricing, you've got a problem as a business owner. And so noticing those things, those those sentences in your brain, or that inner critic who's telling you, you're just a vendor, or you're just a one person shop, you, you don't Who are you to be charging as much as you know, McKinsey or whatever is going on in your brain, you have to realize that that talk track is not sending you in the direction as a as a business owner, that you want to be headed in. So the shift here is looking at is identifying, noticing that with vigilance, having someone pointed out to you can be very valuable again in this situation. But you've got to also learn to notice that for yourself, and then start rebuilding and, and cultivating that new way of looking at yourself of seeing yourself as a peer, you're a peer to the CEO, you're a peer to the CMO, you're an expert, you're a trusted adviser. When you're seeing yourself that way, as you're going about your day to day or as you're going about a sales meeting, or as you're purposefully seeing yourself as you're writing our proposal, it can be the difference between honestly I see these these proposals for my clients, and it's it and that alone can be the difference of even just 10% 10% makes a big difference. And so think about the way you're thinking about yourself, and don't make that mistake of undercutting yourself. Okay, number three, is making the pricing about you. There is a common misconception in the industry, that you are your business. And we all kind of use this flippantly in a way it's like charge what you're worth, this is not what we're doing, we are not charging what you're worth. What we're charging, and what you're pricing out is the value. And the the value of the that the client is receiving.
Let me restate this, because it's so important. The client is not buying your time, the client is not even buying access to you. The client is not buying your services. That client is buying an outcome they wish to achieve and are willing to pay for. That's what they're buying. It's not you, it's you delivering that outcome. And so decoupling the solution here is decoupling you from what you're delivering. And I know it gets so intertwined. I understand that I I find myself in the same position that we're talking about. But you've got to be able to recognize when you're doing that and unravel, it's so that you're pricing things from the perspective of what the value is to that client, what the benefits are to that client, why they care about it, what that outcome is worth to them. And not thinking about the pricing as how much is my time worth. Most of the time we calculate some worth worthiness, or or a number For our time, based on the set point of what we were making in corporate, right, or what we would be making had, we stayed in corporate, it's kind of like, okay, I would be making around this amount of money. And if I kind of like back into the number, it's roughly $500, an hour, $300 an hour, whatever. $2,000 a day what you know, whatever the number is, for you. That's not what we're doing here. And that's what so many of us do that, but the pricing is not about you, and what some like calculation off of your corporate, what you will be making in corporate, the calculation is an app of about your worthiness, that's a whole separate topic, you're a human, that's, that's a completely different topic. It's not about what you're worth, it's truly about what the value is to the client, and you focusing on that and making this process about them, the sales process and the pricing process about them, it's going to help you get out of your own head, and, and put your personal hangups aside and be able to think about it from the clients perspective. Okay, you're getting me worked up here today. All right, this topic is Okay, number four, under charging. So the number four mistake that I see consultants making so often from a pricing perspective, is under charging, I have already done three episodes about this, you can go listen to them, and much, much, much more detail. But I want to remind you of this, those episodes are 5051 52, we can put we'll put those in the show notes. To remind you at a very high level what this means undercharging more, it's a very, very common that consultants don't want to rock the boat, they don't want to rate if you're charging on an hourly or daily basis, you don't want to increase your prices, or very or buy very much. You might, you might not even have a process for yourself to adjust pricing periodically, is it's more of like when I feel like it or I feel kind of resentful. That's what I see a lot of consultants come to me and say, I asked them what their processes for adjusting their pricing model, like the baseline against which they're, you know, setting their prices and and whether those are hourly or daily or value based, you know, thinking about the way that they look at the model? And the answer is always like, uh, well, you know, in the past, I've done that when I when I basically when I just start feeling really resentful, and I realize it's, you know, beyond time that I should have done this kind of thing. So think about it for you, when is the last time you adjusted your pricing? Do you have a set process for adjusting your pricing model? Are you considering the value, tangible, intangible emotional, of the work that you're doing with your clients as you're building out the pricing model, if you have more demand than you can handle, and sometimes that's, you know, that's cyclical, but if you have more demand than you can handle, that's also an opportunity to raise your pricing. The bottom that one of the one of the keys here is to notice the emotion from which you are pricing.
When your emotion is based on fear, or lack of competence, and you're working on a proposal from that headspace, that emotional I should say that emotional space, you're going to discount what you're doing. Versus when you're able to get into the emotional state of confidence and clarity and feeling abundance versus scarcity. When you're able to get into that notice the emotional state that's most likely driving the undercharging which is fear or lack of competence, and then shifting that into a confident emotional state. And this is I'm touching on this at a high level here. This is the type of work that What I also do with my clients is really helping them to see where their emotional state is, is something that they can impact. Without anything else needing to change in order for you know, any of the circumstances to change in order for them to get the outcome that they're looking for. It's a, it's a formula that you can use to do this. So for you, you want to start working on that, start noticing from an emotional perspective, where are you when you're writing these proposals or going through sales processes with your clients? And are they in are you working from a lack of confidence and fear as you're doing that work, because you're going to give yourself that discount, or you're going to discount the pricing, what the result of that is, most every single time in some way, whether it's discounting the amount you're charging, or the number of hours you're estimating against it or whatever your process is, or both. versus getting yourself purposefully into that confident, abundant state in order to charge for the value that you're delivering for that client. So that's the mistake number four, under charging, and again, you can go listen to those other three podcasts as well after this, if that's something that you're struggling with, like so many consultants are, okay, the next one, number five, this is Miss assessing or miss understanding risk in your business. It is common for you and every consultant that, you know, that I talked to almost every consultant that I talked to, to assume that non time based consulting strategies are riskier. Right. So we assume that if we just base things off of time, it's the least risky. Because no matter what the client asks us to do, you know, we're covered, right? Scope creep isn't as big of a deal, or we don't have to put as much in upfront process because, you know, scoping it out doesn't matter so much or understanding the client's you know, what they're wanting to achieve isn't, doesn't have to go so deep. So it feels less risky. And so a lot of times, we'll find that independent consultants will stick to time based strategies in order to feel safer. And those time based strategies might be charged by the hour charged by the day, or they might even be you building up a project based on the estimated number of hours to get to some more of a form of a fixed fee type of an engagement. So whatever type of engagement that you're doing, when you're thinking that you're that this is less risky, then this is something that you want to look at, because you could be very well be Miss assessing, and misunderstanding the risks. And here are the risks that you need to consider when you're thinking about your pricing strategy that are often overlooked. And these need to be taken into account. When you're, when you are associating your, your pricing strategies around the time you're going to be spending on that client, there's such a greater chance of you getting burned out because you're working to deliver for these clients and you're running your business and you're quite frankly incentivized to work more hours than less to generate revenue. So of course, you're going to have a much higher chance of being burned out.
You're also in a lot of ways, it's very common, the risk, the risk that is very often not seen is that you end up having less influence than with the client, because they see you as more junior than you are, especially if you're charging more on a hourly basis or even a daily basis, that client may be seeing you as an extra pair of hands as a contractor versus as the consultant that you are, and then you being able to price accordingly according to your expertise. The other risk, these are like hidden risks, right? The other risk of time based strategies is that the client is going is incentivized to hold back work from you. In the sense of, you know, her, you know, should I pay it? Am I gonna want to pay her or him to do this work or not. Maybe I'll just give this to this internal person or we'll just try to figure this thing out on our own. They'll give us the strategy and we'll we'll kind of take it from there. So then you're not able to be as embedded or as much of a trusted adviser to them, because they're constantly wondering, should I should I engage this person or not? So these are some things that you that are important to take into account as you're pricing out your work, and not just going with that kind of automatic assumption that time based fees are strapped for time based strategies are safer, and really looking at this picture more holistically. So when we look at it more holistically, at the end of the day, all the fee structures have both risk and reward, right. And so it's your job as a consulting business owner, to mitigate, to really identify and mitigate the risks of what ever pricing strategy you choose. And you're choosing the pricing strategy based on what's most lucrative to your business, and also aligned with what will help the client achieve their their desired outcome. So that was number five, number six, delaying the involvement, or avoiding the involvement in some cases of your client of your potential client in pricing discussions. So this is about the sales process. I, this happens so often, I'll start working with a client and they'll tell me about, you know, hey, can you look at this proposal? I'm about to send over to a perspective, you know, to a prospective client, I say, Sure, no problem. I asked them for some context. So tell me a little bit about this. Tell me what, you know, what you've done so far with this, with this client to understand and get to the point of our proposal, tell me what the client's you know, budget is, Tell me tell me all the things and and then they're like, I don't know, I don't know about, I don't know, especially about the budget. I don't know what the client has in mind, from a pricing perspective. I haven't been able, I haven't set any expectations, or kind of preceding discussions about pricing is going to kind of be this is the first time we're pulling back the curtain. So that's not what you want to be doing in terms of getting their buy in getting their inputs, getting there getting a good understanding and alignment. From a proposal perspective, we're going to be in a position where you're co developing with this clients. And the proposal is a is a, what's the word? formality. That's the word I'm looking for a formality. So it is so common for this to happen, I see it over and over and over again. But if you can get to the place where you are embedding the questions about value about what how, what the the client is, you know, do they have a budget, about what they're thinking from a pricing perspective, there's not nothing is boxing you in? But under what is the internal approval process? What are the thresholds, you know, when for getting additional approvals involved, just really understanding about how you can be a partner with the client who is buying your services and helping them navigate internally, versus surprising what them with the pricing at the end and crossing your fingers that they're they don't have sticker shock.
So you want to start folding in and defining your sales process in a way that creates this buy in and this feeling of, you know, I've helped contribute to the pricing by asking the questions related to value and what the client's tangible, you know, the tangible quantifiable outcomes are and the intangible qualitative outcomes are, and how the client thinks about the value of each of those, so that you're then setting a stage for, you know, for example, it might be that, at the end of the day, the value of the work that you're doing is, is in the millions for your clients, potentially multiple millions over the course of several years. And beyond, you know, just based on even three or four months that you've worked with them that lifetime value, and then when they're seeing those kinds of when they're thinking about it from that perspective, that you're getting that you're helping them to get to the place that's contributing multiple million a million There are multiple millions of dollars to the, to their business, then when you're coming at them and, and talking about the pricing of your, of your proposals, and it's in the six figure range, it feels it feels so much less, right, it feels like oh, that's like 10% of, of whatever it is that they are that the value would be as an example. So you're creating that perspective, right? Consultants don't do this because it's uncomfortable. We're taught in society not to talk about money, we don't like talking about money. So we delay it and avoid it. And then we get ourselves into these problems. So I want to help you avoid that problem. Okay. And then the last one is number seven. Not understand I've touched on this in different ways, but it's so important, not understanding. And or not selling the value incorporating the value of what you're doing into your pricing. Why is the client undertaking this engagements? What is the impact of doing the work? What is the impact of not doing the work? How does it impact the stakeholders, personally and professionally? What's the emotional toll that you would lift off of them? Why do they even why do they care about the solving this problem? There's a million problems they could be solving why this one. And what's the ultimate ROI. So if you're not, you know, if you're not understanding that value, to them, it's going to be really hard to develop a pricing price, you know, a pricing set of proposals for that clients in a way that really reflects what you're ultimately going to do for them. If you do that work upfront, where you're really understanding that value and articulating it, you'll set yourself up. As I was alluding, as I was describing, even in that last example, you'll set yourself up to price your services at a level that's so much more in line with what they're the outcomes that they're that they're experiencing, through working with you, versus just thinking about it as some as you as a commodity you as them as you know, buying your time. So it's so important. And I've touched on this in so many in several different ways throughout these seven mistakes. But if I were to give you any one takeaway, it's really you getting to the place where you're taking yourself out of the equation, and thinking about this client, and what the value is, and getting deeper in your sales process to understand those value drivers so that you can price your work accordingly. So and one other thing, I'll tell you just around this topic, it's so important. Next week, stay tuned, because next week, we're going to dive more into selling the value and talk specifically about the fear overcoming the fear around value based pricing. So don't miss that episode next week either. So let's just recap here, let's recap and send you off to go and work on your pricing under estimate. So the seven mistakes that I see So, so common with independent consultants.
And if you would love help with this, reach out to me, we'll see I would love to talk with you, and see if it would be a good fit to bring you into coaching in order to help you one on one to recognize where these problems are happening in your business, as I've described to you on you know, throughout these examples today. So often it's hard for us to see the challenges in our own business because we're in our own heads. This is why I personally have my own coach to help me see where I'm in my own head and making it a lot of times making the same mistakes over and over. But just in like different ways. You know, my brain gets smarter and crafty are about getting around some of the things that I've been trying to make it stop doing. And so it gets, it gets more sneaky. So those are the kinds of things that we work on from a coaching perspective. So if that's, if that's something you feel would benefit you and you want to explore, go out to my calendar and book a call at consultmelisa.com And we can talk about you specifically. But in the meantime, let me just recap these seven mistakes that I see so commonly with consulting consultants making with our pricing. The first is under estimating what you do The second is undercutting yourself. The third was making the pricing about you. The fourth was you under charging. The fifth was Miss assessing and misunderstanding risk in your business. The sixth was it delaying involvement of your potential clients in pricing related topics and money related topics. And the seventh is not understanding or selling the value of what you do. So, hopefully this is helpful. I am looking forward to you going and putting this into business into place in your business and you making more money and I will see you again next week where we'll talk about the value based pricing, fear and how to overcome it. Alright, see you there.