🎙️Show Notes for Episode 087 of the IC PodcastNov 10, 2022
This is the time when this is top of mind as you are thinking about your pricing strategy and what you want that to look like next year.
With so many pricing options out there to choose from, I want to present you with a risk-free pricing approach that you can take as an independent consultant to ensure that your pricing is in line with where you need and want it to be in commensurate with the value you're delivering with your clients.
This approach is something you can fold into your business and make it part of your operating system regardless of whether you have a value based, hourly based, daily based, retainer based, or fixed fee pricing.
Once you put this risk-free pricing approach in place you’ll start to see where you've got so much opportunity for yourself from a pricing perspective, from a sales process perspective, and ultimately from the way that you're describing the value, outcomes and benefits to your clients.
Key points in this episode
- [01:14] Why pricing is such a hot topic right now
- [02:50] Check out the Independent Consulting Pricing Assessment: ICpricing.com
- [04:12] Today's Agenda
- [04:30] Check out the Rate & Pricing Megatutorial: https://www.melisaliberman.com/blog/independent-consultant-rates-and-retainer-fees-guide
- [05:48] Why it’s important
- [07:36] What is this risk-free method
- [09:05] Why is the retroactive pricing strategy risk-free?
- [11:20] Why implement this retroactive pricing strategy?
- [14:44] 3 tips for implementing this method
- [14:53] Tip #1 - In regards to your pricing, think about what questions you would have asked with the benefit of hindsight
- [18:20] Tip #2 - Ask yourself, what was I thinking and feeling at the time I priced this out?
- [20:05] Tip #3 - Retrospectively going back and calculating the value of the project
- [24:10] Episode Recap
MENTIONED IN THIS EPISODE —
- Check out the Rate & Pricing Megatutorial: https://www.melisaliberman.com/blog/independent-consultant-rates-and-retainer-fees-guide
- Check out the Independent Consulting Pricing Assessment: ICpricing.com
- EP. 086 - Overcoming Value Based Pricing Fear
- Bill Rate Calculator
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
RATE, REVIEW, & FOLLOW ON APPLE PODCASTS –
If you love the content that I am providing, please consider rating and reviewing my show! This helps me support more people — just like you — to create a growing, profitable IC business.
Click here, scroll to the bottom, tap to rate with five stars, and select “Write a Review.” Then be sure to let me know what you loved most about the episode!
**note: This is an automated transcript, so please ignore spelling errors and grammar mistakes*
Welcome to this week's episode, I cannot wait to share this topic with you. It's making me almost giddy to explain this to you and share it with you. So you can go implement it in your business. What is it? It's the risk-free pricing approach that you can take as an independent consultant to make sure that your pricing is in line with where you need and want it to be for the value in commensurate with the value you're delivering with your clients. And this doesn't have to be value-based pricing, it can be any type of pricing, hourly-based pricing, daily-based pricing, fixed fee pricing, retainer-based pricing, any type of pricing; today, we're talking about the risk-free pricing approach that you can be taking as an independent consultant. So I cannot wait to share it with you. Like I said, this is something that's really important. We've been talking about the pricing Pricing on the podcast a lot lately. And that's because this is one of the biggest pain points I'm hearing for from you as an independent consultant right now. A hot button topic, right? This pricing thing is coming up so much because we're coming into if you're listening in the real time, we're coming up into the new year, thinking about pricing, what you want that strategy to look like next year. And even if you're not listening to the real time, and it's the middle of the summer, I know this is top of mind for you, because you are a business owner. And pricing is at the heart of your business. So with that, let's talk about today what this risk free pricing approach is for your consulting business. And I can assure you, this is not marketing hyperbole. This is not me telling you like a you know get rich quick scheme or that there's no risk when really there is or you know any of that just to get your attention. When you hear what I'm telling you today about the strategy, you will agree with me that it is a risk free approach. And and that what we're talking about is something you can fold into your business and make it part of your operating system. So that you're constantly thinking about the pricing and triangulating it against what you're delivering, who you're delivering it for, and the value that you're creating for that clients and those types of clients. Okay, so this is not a hyperbole, I am going to truly give you a risk free approach for you to structure your consulting pricing. Now with that being said, I want to remind you about the icy pricing assessments you're gonna hear me talking about a few times on today's episode, because it is so valuable. I've been hearing back from so many consultants who have taken this assessment, received their scores, and really understanding where their areas of opportunity are from a pricing methodology and strategy perspective. And also looking at where things are going well for them. So you can amplify it. It's a very balanced assessment, you'll get the scorecard, you'll see exactly what where things are going well, again, what you want to build upon, and then also where your areas of opportunity are so that you can continue to to address those and uplevel them. So go take that pricing assessment, you'll answer 12 ish questions. And then from there, it takes a couple of minutes, I get the data. So I know exactly how long it takes the average is like 2.1 minutes or something like that around two minutes. And then you'll be able you'll get a report that gives you your scores, and very specific actionable resources to go address that will you will be able to use to address the scores that are in the lower ranges that you want to move, improve. So go take that at I see pricing.com. And we'll put that in the show notes as well. So, today, our agenda, today we're going to focus on this risk free price pricing approach. And to talk a little about about why it's important. I'm going to share with you what it is. And then we're going to talk about three tips, very specific tips for implementing the method that I'm going to give you today. So that's our agenda. Again, before we get started, I want to make sure that you've got a couple of resources that complement this topic today. The first is the rate and pricing mega tutorial. I've talked about it on the prior episodes a little bit I'll go over to my website, we'll put this link in the show notes as well. But on my website, there is a blog. And in there is a combination of show notes. And also this, this guide, the independent consultant rates and retainers fee guide, it's, I don't know, 20 pages or so of everything you might need to know about pricing and rates and fees for your consulting business. So and there's hyperlinks in there. So you can jump around to whatever topic is relevant to you right now. But that's an incredibly rich resource that you can go and grab off my websites, so that you can figure out where you might have some holes with your current methodology relative to pricing and what you're charging your clients. And then again, don't forget to go take that pricing assessment, and I see pricing.com, I'm gonna keep reminding you because I've been getting a lot of really good feedback on the assessment itself and the results that it's giving and how actionable they are. And I don't want you to miss that. Because it goes hand in hand with what we're talking about today. So first, let's talk about why this is this risk free practice, the strategy that I'm going to share with you today is so important. Why it's important is that you don't, I know you don't want to be leaving money on the table, there is nothing worse than that feeling or that knowledge of, you know, I hear this. So often. consultants come to me and say, you know, most I thought I was charging quote unquote, market rates or what was you know, what was appropriate for my skill set and what I do, and then I came upon some information, however, however you come up on it, right? Might be talking to a colleague up here who does something similar, or you even sometimes your clients might tell you, when your client tells you you're not charging enough, that's probably a very big sign that it's pretty bad, to be honest with you. They're doing you a favor, because it's so bad, right? This happens, this happens, not shaming you, this happens, we don't want you to be leaving money on the table, like that punched in the gut feeling we don't want that for you. And the regret that comes with it, of how long you might have been doing that. And what it all adds up to. We also don't want you to lose a deal because your price so high that the client doesn't, doesn't, doesn't see the value in paying you that much money. And we definitely don't want you to lengthen your sales cycle, because you've got some misaligned pricing and you've got to go back and you know, you've proposed it, and they say no, and then you've got to go back and forth and back and forth, and almost start over again, to get where you need to be. And now months have gone by that you could have been working and helping that clients and making money for yourself, right. This is why the strategy that I'm going to share with you today is so important. It's like a build up, right. The build up, I'm going to tell you now what the approach is it again, it is a risk free approach. That pricing approach is called retroactive pricing. What that means is you're not going to change what you're we're not retroactively pricing, what you're charging your clients, your retro maybe the work should be retrospective, retrospectively going back and looking at your past deals and repricing them repricing those projects that are in the past where you've probably completed it already, or are close to completing it. And now you know so much more than you did, when you priced it. You know about the people and where the you know where the challenges lie, and what their skill sets are. And if the client brought the right amount of people to the table, let alone the right skill sets to the table to to complement or support what you're doing as a consultant. You know so much more about their internal processes. You know so much more about their technology. And you know so much more about what their actual objectives are versus what they told you their objectives were in the beginning, you have so much more data. So going back and doing a retrospective from a pricing perspective, and repricing those projects that are already over for yourself or your own business to inform your pricing strategies going forward. That is the risk free approach. Retrospective pricing. So why why implement this type of retro spective pricing? Actually first I'm going to before I dive into why, let's talk about why is it risk free? Just want to really It feels a little obvious, but I also want to point this out. Why is this risk free retrospective pricing. There is no chance of ramifications for you If you get to, you have all of those data points, you have the ability to compare what you knew at the time and what the assumptions were upon what you built your pricing. And now you have all this other knowledge that you didn't have at the time that you wish you would have some of it you could have had and you didn't realize you needed it. And some of it they might not have been willing to be forced. So forthcoming, right?
There are zero ramifications here of you going back and re looking at a past project, and basically treating it as if it was a new project and repricing it and thinking about how would I priced this? Would I price it on a daily basis rate? Would I price it on an hourly rate? Would I price it as a value based pricing or some form of a fixed fee milestone pricing or a retainer, the sky's the limit, you get to decide, maybe you look at multiple models. But there's no the only ramification here of you going back and doing this retrospective pricing is that you're going to feel bad, you're going to feel bad, because you might have some regrets. Or you might feel stupid, or you might feel, you know, anyone embarrassed, whatever those emotions are, right. That's really the only ramification that you might have in implementing this method that I'm sharing with you today. And quite honestly, you're going to feel bad in some way or another. You might if you don't do this, you're gonna feel bad because you because you are questioning whether in the self doubt around the pricing without having gone through this type of exercise. So if we agree that you're going to feel bad in one way or another, you might as well go forward and do this exercise. So that you're treating your business like the date, and all of this past project data like the goldmine that it is. So that's why it's risk free. Okay, so now let's talk if we can now agree that it's risk free, and I haven't, I haven't embellished or giving you any marketing hyperbole. Now, let's talk about why implement this retrospective pricing approach? How are you going to get data to inform your pricing? Usually, the advice is, quote, unquote, do market research, which is sort of a waving your hand at the problem, because where do you go do the market research? I mean, there are definitely tools out there, I've shared some of them before, there's a tool called the envio market, or sorry, that bill rate calculator, we can put the link to that in the show notes. And it can be really good, but it's not based on market research. It's more so based on what do you need your rate to be, in order to pay all of your bills in your business? There are very few tools out there. And from a market research perspective, that would give you the type of 360 degree data that you need in order to triangulate your pricing and buy 360 degree data, what I'm talking about is the different types of inputs, right? Like what is the industry? What is the skill set of the person charging this rate? What is the or this type of fee? What is the what kind of problem? Does the client have? You know, is it very high level? Or is it more tactical? I mean, there's so many different components. So what goes into pricing? This quote unquote, like go do market research is, is not very helpful. Or accurate. Even if you do figure out, you know, find yourself some data points, try, you know, I don't even go out there looking for them, because I think they're, it's such a waste of time. Other common advice is talk to peers and colleagues. And yes, that can be a great data point, because in a form of market research, obviously, because at least you can ask some questions and get more qualitative information around what they're telling you. But at the end of the day, this, these are, that is a data point. And there's so much more to that goes into your pricing that you want to take into account. And that's why this retrospective pricing that I'm sharing with you today, this method, the strategy is so important, because you have your own case studies. And of course, they're going to be the best inputs for you for your business, because they take into account what I like to call your business DNA. It's you, you, it's your style. It's your approach. It's your methodology. It's the framework that you use, even if it's kind of an off the shelf framework. It's how you, how you implement it, what you've tailored about it. It's the types of clients that you work with. And I'm not talking about just the kind of on paper it's all So they're, you know what they care about. And they're both both the client organization and the actual stakeholders themselves. All of that creates this almost DNA that you're going to be able to mine from a case study perspective, that's so much more dimensional than just looking at a rate sheet on a piece of paper, or talking to a peer who has their own DNA. So that's why this retrospective pricing is so invaluable, because this is all centered around what you do and who you attract, and your personal value and approach to the projects that you deliver. So now, we've talked about what is this approach, the retrospective pricing approach, we've talked about why do it, why it's risk free. So let's end today's episode with the those three tips I promised you so that you can go implement this retrospective pricing strategy. So the first thing is that you want to just look back at the completed project with fresh eyes, right? No judgment, agree with yourself, not judging myself for what I did or didn't do. I'm not going to even like entertain regret here. This is simply like, put your CFO hat on. As if you weren't even the guy who or person, woman guy, whatever who priced it. Put, put your take your sales hat off the version of you who priced it and put your CFO hat on, who didn't price it. And look at this from a set fresh set of eyes. And ask yourself some really meaningful questions about what it is that you priced? And get yourself to the place of how would I do this differently, when you know if I were to do it again, or something similar again. So with that, the way to have three tips of how to implement what I just described, is with your CFO hat on, think about in hindsight in looking at this in the at this pricing, what questions would you have asked, knowing what you know, now, with the benefit of hindsight. I'll give you an example. I had a client who was working on this with and what she realized that when she gave them the final proposal, she had no idea what their budget was or what they were thinking this the project will cost or what they had approval authority for no clue. So when she proposed it, it was like 5x, what they were expecting. And so then she had to start over again. Luckily, it didn't, didn't kick her out of the process, right. But it did, because she was really a sole source. There was no competition, that's where you want to be. That's a topic for another day. But when you're in that position, which is phenomenal. You're not competing against anyone, but it does lengthen the sales cycle so much when you and then you almost overcorrect when you don't know some of these data points as you go. So when she was doing this retrospective approach, we realized that this that she was getting the budget, there are thoughts about money way too late in the process. And so she ended up reverse engineering that into her sales process. And getting that information kind of slowly, as you know, in the in those couple of meetings that she was having two to three meetings that she typically had as part of the sales process, little you know, little bits and pieces as she went. So it wasn't kind of a felt like a big conversation. But she got the data points that she needed, that that made her proposal at the end, really a no brainer, a formality. So that's the first tip that you want to take is map out the questions that you wish you had asked in looking at the pricing now versus the pricing. That's, you know that now that you know what, you know, what would the questions be that you would want to ask in order to inform your pricing in a different way, and then fold those back into your sales process. Kind of like last week when we were talking about reverse engineering your process. This is a flavor of that. So you can go back and listen to that episode as well after this, okay, we'll put that link in the show notes too. So that's the first thing you want to really get clear with yourself about what questions you wish you would have asked, knowing what you know now and being really thorough with that so that you can fold that into your regeneration and sales process. The second tip that you want to use in order to implement this retroactive a pricing strategy is to ask yourself, What was I thinking and feeling at the time I priced this out. I'll give you an example of a client, as they went back and did this, they realized that they were really afraid of losing the deal. And so they undercut themselves B. And the reason why they were afraid was that their pipeline wasn't that full.
It turns out for that particular client, like a week later, or their pipeline just, like refilled it, again, it's you know, it can be a can be a little bit of a, what's the word I want to use, it can be a little bit, take a little bit of courage, I guess, if that's the right word, to say, You know what, I know that this, I'm doing what needs to be done to create a solid, consistent pipeline, and sometimes it's going to be lower than other times, but I 110% know that it's not going to be a problem to find to fill refill my pipeline. So I'm not going to price things off of, you know, worry, and fear. Because my pipeline at this moment when I'm pricing something isn't as full as it could be. And so you can ask yourself, as part of this tip to implement the retrospective pricing strategy? How would I price that? How would I have priced this, for example, if my pipe pipeline was full? But go back and ask yourself, that's an example right? Go back and ask yourself, What was I thinking and feeling at the time that I priced this out? And how did that contribute to the the way that I priced it? Did I undercut myself? Or was I feeling so competent in my pipeline that maybe I pushed it? That's not a problem, either? Do I want to continue with where I pushed it to? Or do I want to pull it back a little bit, really thinking about it from this perspective of evaluating that pricing? And then the third tip to implement the retroactive retrospective, rather pricing strategy is to go back and use the data mind that that this is to calculate like, what is the value of the project? So again, I'm not trying to force you into value based pricing, it's not for everyone. It's definitely not for everyone. So definitely not for every type of engagement. But it's a very important data point for you to know as you're deciding what your pricing strategy is, what is the value of this project? What was the value of this project in this case, so that you can do a few things, give yourself some perspective for the type of pricing you are delivering, if it isn't value based pricing. And also, so that you've got that you've got that data point to from a sailing, selling perspective, to fold into your proposals about what are the types of value that you deliver for clients, we'll also create a case study for you. There's no reason not to do this. So retroactively, or going back retrospectively, and calculating the I'm sure I've butchered those two words, today doesn't even matter, you know what I'm talking about. So retrospectively going back and calculating the value of the project. Thinking about it from the perspective of what was tangible? What's the tangible value that I could calculate? What might be the value quantities that I could attach to intangible value that the client enjoyed that they that they experienced? That they benefited from? I think about it both for the client company perspective, and also your client personally, your stakeholder set personally, how did this benefit them? Did you? Did they get promoted as a result of the project that you did? Or get a huge bonus? Those are things that to take into account? As you're thinking about why would someone buy my services? You know, they come this is a factor, how, what is the risk reward for them? And having these data points can help you to inform future sales processes. One of the questions I love to ask is just what are the 25 Just pick a number 25 ways that I created impact from this engagement? When you force yourself into a certain number? Usually the the the best answers come late, you know, after the first 10 or so. So go answer find yourself 25 ways that you can create it impact from this engagement. I'll give you an example. Here I had a client who we did this exercise with. She went through the intangible, the tangible, quantified everything, both from a short term impact as well as the lifetime value impact. And it and it shocked her, it came out to $3 million in the 12 month impact and $30 million in a lifetime value. So then, when she looked at what she was charging for her happened to be 20 220. Sorry, yeah, I think was $225 per hour. So it was around 260k. in Billings for that particular engagements. Think about the perspective. I charge 20 to 65k in Billings for this particular project. And I delivered $3 million in 12 months of value, and $30 million in lifetime value, the 265k, which probably felt high, potentially, at the moment that she was pricing it, now all of a sudden is put into this perspective. And so she was able to see so much room for herself, that, that she was able to then double her pricing as she moved forward, and changed it into an offering, like a more of a fixed fee type offering. It was a little less than double, I think it was like 425k as an as her new offering. So you can see where now those data points can really inform your pricing strategy. You've got all of this data where now you have new so much more than you did at the time when you were pricing it. And so you know, you can improve the types of questions that you ask your client during the sales process, you can improve your qualification process from you know, as you're generating new leads, this data can be folded into so many different processes throughout your business. So hopefully you can see now why this is such an important strategy for you to implement as part of your business. And some of the tips for you to to implement or you know, to utilize as you're implementing the strategy to in as part of your business routine. So what I wanted to say, we want to make sure this is folded into your business routine. So think about it for your business, how would I go about, you know, putting this retrospective pricing strategy in place, and start to see where you've got so much opportunity for yourself from a pricing perspective, from a sales process perspective, and ultimately from the way that you're describing the value and the outcomes and the benefits to your clients. So that's what I have for you today. One last reminder to go take that icy, independent consulting, pricing assessments. Really, really another complement to what we've been doing today and today's episode. Again, it's at I see pricing.com and I will see you again next week. Take care.