Are you running into clients who say you are too expensive? Then you need to lower your prices, right? WRONG! First, you need to make sure your target market can afford you. You may need to make a shift. Second, you need to learn to spot the bottom-feeders quickly and move on. This may not be easy, but it is necessary. I want you to replace or exceed your corporate salary.
We Interrupt this Program for a Brief Message on Price
If you’ve heard me talk about pricing before, you know I’m going to start you at $150/hour and take it from there. If you do your homework and have data to support why you need to charge less, okay, but I’m going to make you work to prove it to me. If you can get more than $150/hour, go for it!
Some Clients Really Can’t Afford You
When I think of small business, paying $150/hour for consulting services does not immediately come to mind. My mind jumps to something in the range of $35-$50/hour. I have a small business and I rarely pay $150. Most of my service providers are in the $35-$50 range. If you do target small business, make sure you have carved out a clear niche that can afford you. There are some small companies that are highly profitable, these can be great clients. There are also small companies on a high growth trajectory. High growth companies are usually willing to invest in results and can be ideal targets.
A Story from the Trenches
I recently had a meeting with a prospective client that provides high-level technical services. Their target project size is headed into the multi-million-dollar range, so they are interested in getting more serious about project management, which is my specialty. I had meetings with the Executive Vice President of Sales and then the CEO. I really liked these guys and I was impressed with their offering. My skill set is an ideal match for their need and I was feeling excited about working with them.
Near the end of the meeting, I realized they wanted to resell my services, rather than hire me as part of an internal budget. I would effectively be a subcontractor and not a true consultant. When a company resells a subcontractor, they are typically looking for a 50-70% mark-up. Now, I am happy to subcontract, but the client must pay me my full rate. Otherwise I will sell those hours to someone else. I recognized this client would have a hard time making their target mark-up with my full rates.
I felt crushed when I got in my car to drive home, like a deflated helium balloon. I had promised to follow up with some ideas on how we might work together. I let the disappointment marinate for a day and then tried to think creatively. I quickly cut off any thoughts of discounting. That would not serve either of us.
I responded thoughtfully with my position and rates. I explained that I am a consultant, not a contractor, and that I have a big business development engine that requires a lot of gas. That gas is paid for with billable work. And I never take my foot off the gas. Even if I sold them all my capacity, I know from experience that I can never stop networking, marketing and business development. I suggested that they might be able to use me more sparingly combined with a less expensive resource. I’m hopeful that they will decide to use me if they land a big deal. I’ll keep you posted.
A Separate Note on Start-Ups
Start-ups are sexy and fun. They are hard to resist. Good founders are charming, charismatic and persuasive. NEVER. WORK. FOR. FREE. PERIOD. It doesn’t pay the mortgage or the health insurance or the college tuition. As soon as you become a consultant, smart people with good ideas will come out of the woodwork looking for your free expert help. Make a rule now that you will never work for free.
Funded start-ups are a different story. More than half of my projects are with start-ups. I have a wide range of industry and cross-functional experience, so my utility player appeal is perfect for start-ups. But they must be funded well enough to afford me or have a founder with very deep pockets.
Target Deal Size
My target deal size is $30,000 – $50,000 or more. But that’s not where I started. In the early days, I didn’t realize I should have a target deal size, so I chased anything. And I learned the hard way that it can take more work to close a $3,000 deal than a $20,000 deal. And all too often, those $3,000 projects are clients who are stretching to afford you, so they don’t lead to more work. I recommend starting with a target deal size of $10,000 or more.
Here’s something interesting about deal size. My most typical proposal is for a three-month project. But most of my projects run 9 to 18 months. Once I get in and start working, the client almost always finds more projects for me to do. Speaking of proposals, here are some great proposal tips.
What to Do If Your Client Stops Paying
My best advice here is to avoid being in this situation. If you are chasing a deal and it starts to smell like they may not be able to pay you, run. Do not stick around. The only reason to stick around is because you are afraid you may not have other options. You will! And what’s the point in doing the work if you won’t get paid? You have good instincts, follow them!
In my 15 years, I have been paid for all my hours, except for a few hours at the tail end of one project. In this case, the client had already paid me several thousand dollars. Then he literally disappeared off the face of the earth and never paid the last invoice for a few hours. I still don’t know what happened to him and neither do the colleagues who referred him.
If a client stops paying you, STOP WORKING. Don’t run the risk of working more hours that may not get paid. Ask the client what is going on. You can be polite and professional. I start by alerting the appropriate person that invoice number whatever has not been paid. I mention that perhaps the check was lost in transit or my invoice slipped through the cracks. Usually this does the trick. Sometimes the client has a cash problem. If the lost in transit inquiry doesn’t do the trick, I put things on the table. I let the client know that I am going to pause my work until they get caught up paying my invoices. Usually they find the money quickly because I am doing mission critical work. Be a polite but squeaky wheel to get paid. It may take a few reminders. Be professional but persistent.
Go Big or Go Home!
Don’t go after the little guys because you’re afraid to chase the big boys. I don’t mean it has to be Fortune 500 companies, just make sure your clients can pay you without a major strain.
STOP right now and repeat after me:
I earned it.
I deserve it.
I am worth it.
If you need to up your game, this FREE EMAIL COURSE will walk you through three action steps to generate revenue now. I use this exact process every quarter. It is a foundational piece of my business development strategy.
The mission of Billable at the Beach® is to help you find the courage to start your own consulting business so you can have the freedom and flexibility to live life on your terms. You can meet or exceed your full-time corporate pay. I am excited to meet all the new consultants as we grow this Build Your 6-Figure Consulting Business Community! Please join our free group of 6-figure earners starting and running successful consulting businesses, Build Your 6-Figure Consulting Business Community. Selfishly, I am hoping lots of you join me, so I will be surrounded by even more like-minded people.