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Got a Consulting Gig from Your Blog? Don’t Make this Big Mistake

This guest post is by Bill Zipp of Billzipponbusiness.com.

You’re so excited!

The blog you’ve been writing faithfully, the list you’ve been building consistently, the newsletter you’ve been sending out weekly just paid off. You got a call from a reader who’s asked about the Holy Grail of blogging success: consulting.

When you actually talk with this person, you get even more excited.

What this company needs is exactly what you provide, and, unknown to you, many of the employees at this firm regularly read every post you write. They’re ready to work with you and ask this question, “What’s your hourly rate?” (or words to that effect).

Stop!

Any answer—and I mean any answer—you give to that question, no matter how ridiculous $500 an hour sounds to you right now, sets you up for ultimate failure.

Here’s why.

Charging by the hour is unfair to your client

What could be more fair than a simple exchange of time for money, right?

Wrong.

When a consultant charges by the hour, that consultant is best served by a project that extends for many hours. The client, however, is best served by exactly the opposite. The client is best served by the quickest possible solution to the problem.

Do you see the conflict of interest here?

Yes, I know, as bloggers we are an honest, ethical bunch, but the moment a system of charging by the hour is implemented, all of us become blinded by our own self-interest to simple solutions that may serve the client best.

Charging by the hour is unfair to you

Not only is charging by the hour unfair to your client, it’s also unfair to you.

Case in point. I was speaking with a solo consulting client of mine who’s a leading coder for WordPress plugins, and I asked him this question, “Over the years as you’ve done this work, have you become faster or slower as a coder?”

“Faster,” he said (really fast).

“So,” I replied, “when you charge by the hour, you actually get paid less for doing more. Am I right?”

“Yes,” he said (really slow).

But, you say, you can charge a higher hourly rate when your get faster, right? Wrong again.

People will only pay so much money per hour, and there you are getting faster and better at what you do and receiving less for it. Or doing it fast and lying about the actual hours you spend on the project to get paid what you’re worth.

Charging by the hour is unfair to your business

Finally, charging by the hour is unfair to your business.

When solo consulting, there’s only one you with only so many hours in the day and only so many days in the week. You must do the work of your business, write your blog, market, sell, attend to bookkeeping, administration, professional development, and a whole host of others things that come up.

When you charge by the hour, you instantly limit your business’s growth to the time you can trade for money. Your business will be capped by your personal capacity to work.

So you do.

You work and work and work and work, pay your taxes, buy health insurance, invest in technology, and go to the occasional conference or two. Then you come to the end of the year with very little to show for it. Not to mention the fact that you failed to put anything away for retirement.

Remember? You’re a solo consultant and no one’s going to do that for you.

There is a better way!

Yes, there is a better way. It involves not going down the path of charging by the hour in the first place, and learning the secrets to value-based pricing instead. Alan Weiss is the premier thought leader on the subject and presents this approach in his book Value-Based Fees.

Here are four lessons I’ve learned from Alan’s book:

1. Build a trusting relationship with the economic buyer

Many times in the initial conversations of arranging consulting work I’m not talking with the economic buyer, that is, the actual person who will make the final decision and write a check.

This is tricky, because the person I first talk to usually influences the buying decision in some way, so I don’t want to alienate him or her. But that person isn’t the one who can approve the project.

Graciously, but firmly, I work to arrange a conversation with the actual decision maker and begin building a trusting relationship with that person.

2. Identify objectives and outcomes

The next step in this process is reaching conceptual agreement with the economic buyer around the work that needs to be done. Conceptual agreement is found in outlining what objectives will be reached and the measurable outcomes for those objectives.

One of the biggest consulting mistakes I’ve made is rushing this step in my excitement to get started. Lack of goal clarity, however, has ruined more that one consulting project for me. Projects where I ended up doing stuff the client didn’t even want, and not doing stuff that, from their perspective, was absolutely essential.

Invest time up front clearly defining objectives and outcomes. It will pay off in big dividends later.

3. Agree on value

Here now is the very heart of value-based pricing and how I begin to determine what to charge for a project.

If the objectives agreed on are fulfilled and the outcomes for these objectives are achieved, what difference will it make? What monetary value will be gained by the organization?

I’ve found that I don’t need an exact number for this, a range will do, but I do need a number. I even use this discussion as a way to differentiate myself from other consultants by helping my clients understand exactly how they will benefit from working with me.

I bet you’re asking this question right now (because I’ve been asked this question scores of times by the solo consultants I coach), “How in the world do I get people to talk about money like this?”

Remember, you’re a blogger, and they’ve been reading your blog. These people know, like, and trust you. That’s why bloggers have such an amazing advantage in arranging consulting work. Also, you built a trusting relationship with the economic buyer, so they’ll tell you this stuff. They really will!

4. Present multiple options

Armed with value-based information, I present a proposal with three graduated options—Tall, Grande, and Venti.

These options are created from achieving some, or all, of the client’s stated objectives and outcomes. Each option is priced, not on an hourly rate, but on a 10:1 return from the first year’s revenue in completing the project.

I used to present proposals with one solitary option and had terrible acceptance rates. One solitary option has a binary, take-or-leave-it effect (so they leave it). Multiple options create what Alan Weiss calls, “a series of yeses” that lead a buyer into the consulting alternative that makes the best sense for their business.

There’s lots more to mastering value-based pricing, but these are the fundamentals.

It starts with a different mindset

For most of the solo consulting clients I coach, however, the biggest shift they need to make in mastering value-based pricing is the way they think about their business. That’s probably true for you as well.

Ask yourself these questions:

  • What’s the true value I bring to the marketplace?
  • What are the measurable results I deliver my clients?
  • How are people’s lives different when they work with me?

When you have real answers to these questions, you’ll have a value-based mindset and become convinced that you’re worth much more than a mere exchange of time for money.

In other words, if you don’t take your work seriously, don’t expect anyone else to. Ever.

It’s this mindset that’s the key to building a successful consulting practice and the starting point to enjoying the life you’ve always wanted, as a blogger and a consultant.

Speaker, coach, and consultant, Bill Zipp helps busy leaders do what matters most in business and in life. He also helps other solo consultants build a thriving, successful practice. To learn more about Bill’s work visit: http://billzipponbusiness.com/consultants.

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Comments

  1. I would never have thought about this had I not read it here. Such a great point. I don’t offer consulting on my blog, but should that change in the future, I’ll at least have a heads up on what NOT to do.

    Thanks

    Kimberly

  2. Interesting post Bill, i love all the tips you just outlined here. I’m actually working on being a freelancer although i haven’t decided yet, but i must confess that this is really a helpful post as i don’t know most of these things before.

    Thanks.

    • Bill Zipp says:

      Theodore, Freelancing can be a terrific and rewarding way to make a living. As you start out, however, avoid the temptation to trade time for money. Master the steps outlined here and you will quickly have a robust business. I also recommend reading the book by Alan Weiss I refer to.

  3. Ron says:

    Brilliant, wow this is like a super post!

    I think the key here for me is ‘starts with a different mindset’
    And the fact that before giving an hourly rate you just need to stop!

    Thanks for the post, always a great read!

  4. Amy Hagerup says:

    This gave me a lot to think about. I can see the danger in charging by the hour but I am also not quite sure what to in my line of consulting to offer 3 alternatives. Have to think on that more.

    • Bill Zipp says:

      From a quick look at your site, Amy, I see these alternatives:

      1. A group training class

      2. A group training class with 1:1 follow-up coaching for 3, 6, or 9 months (also 3 options)

      3. A group training class with follow up coaching and on call availability for a year

      Thoughts???

  5. Shelby Roth says:

    This is really interesting Bill! I most especially loved the point about charging by the hour is unfair to you. I find it so helpful to me. A t least every bit of your content sounds so encouraging, I look forward into applying the same! Thank you!

  6. Brilliant post Bill. You sounds a very inspiring person indeed. This is the mistake I ever made and it haunted my blogging life for long. The charging hour is a fair thing when you don’t do to either yourself, your business or your clients. It is save me I save you game and we better watch out what we provide to our company and what we get in return. Thanks a lot for saving me. Very encouraging indeed. I look forward for more.

  7. Charging by the hour; it is quite a topic; right? I am actually glad you brought it up. I am running a sole business and this post got me thinking… of amplifying my mindset! You know, starting by stopping first. I am glad you brought this up. I could say this book you are recommending, Alan Weiss’ Value-Based Fees could be a breakthrough towards attaining my goals. I am thinking of reading it; especially for my business. Thanks a lot.

    Tabetha

    • Bill Zipp says:

      Tabetha, The only way to achieve your dreams as a solo consultant is stop trading time for money. Read and re-read this article. Get Alan’s book, and start applying it. Email me with any questions, as well. The difference will be dramatic!

  8. Wow! These are quite immense points. I am thinking of running an online business and it should be dynamic; you know kind of stout. It is more of self motivated and I am definitely going to follow the steps outlined here in to run it. I am actually glad I dropped by to check this out. I will keep dropping by to follow up in case of any updates. Thanks!

  9. Stephen says:

    Hi Bill,

    Thanks for an interesting post. It’s got me thinking a lot about my own pricing structure (hourly), and even though I am brutally honest about the time I spend on a project, there is the perception from potential clients that I might not be, and therefore, I could be losing lots of leads simply because I make it known I charge by the hour.

    Food for thought, thanks again.

    • Bill Zipp says:

      Stephen, you’re good enough to start charging by the value you deliver your clients. Do it! It’s not about honesty, it’s about the return on investment you bring to the market. The transition will be challenging, but the freedom you’ll experience will be amazing.

  10. Linsey K says:

    Yes, yes, and YES! This is exactly what I’ve learned when setting rates, and I find that offering three pricing “packages” almost always results in both the client and myself being happy with the decided upon price. Thanks for making it so clear why you should always project price (or at least get a monthly retainer to “hold” services.)

  11. I have been in insurance sales for over 25 years. My industry has a 96% 4-year failure rate. That means that if 100 rookie agents start this year, only 4 will still be involved in insurance sales in 4 years. The ones that last are the ones who understand your pricing strategy. We may use different words but all sales comes down to meeting objectives and offering solutions that our clients can afford. In the days before computers agents were trained that they need to visit with people at least twice. At the first meeting they needed to establish a rapport with the decision maker and do a “Fact Find” to see what they wanted to accomplish. It wasn’t until the 2nd meeting that they were to present solution options.

    I wish that insurance agents who try to force people to buy a policy rather than listen to their problems would read and modify this article to our industry.

  12. Great post Bill!

    I’m with you, I wouldn’t charge an hourly rate, but more of a value rate if I was a consultant. What if your project will only take 20 hours to do, but is worth much more in value than what you charge by the hour? You could hike up your rate to match that value, but that would only scare off the client.

    Mutually agree on a value based compensation, and things will be much better for both parties.

  13. Bobbi Klein says:

    Great post! Definitely gives me a new perspective on how I should change the way I charge for marketing consulting. I find that clients usually get large amounts of benefits (sales and brand awareness) from the ideas that I give them in consulting. What are your thoughts on this value based tiered level: starting with 1) Is my marketing idea ok and does it have the ability to be successful?, 2) Create a new marketing idea together with action points, 3) Starting from ground up: marketing ideas, action points, and how you can successfully see the ROI on marketing?

    I will check out the book you mentioned. Thanks!

    • Bill Zipp says:

      A good start, Bobbi, but the options you create for clients are specifically customized to their exact circumstances, they are not preset packages. Sometimes I will spend as much as 5 or 6 hours putting a good proposal together for a client. The investment is worth it, however, because it allows me to meet their needs at a very deep level and receive appropriate competition for my work.

  14. Hi Bill,

    I dig what you wrote and agree with pretty much every word. Andrew Badenoch took this even further in a blog post he wrote a couple of years ago called, “The Psychology of Charging Clients by the Hour”. It’s a great free supplement to what you have here and I think anyone who got something out of this will get something out of that.

    The link is here in case you or anyone else reading the comments want to check it out: http://evolvify.com/human-psychological-bias-impacts-pricing/

  15. Thanks contributing solid advice – my feed is usually filled with fluff articles and rehashed content, but this was unique and helpful – you actually changed my perspective! It’s especially difficult not to rush the objectives/outcomes part when you conduct business on the internet – clients just want to know upfront what they’ll be paying before spending time on lengthy, descriptive email discussions. While I understand their concern, I think you’re right in building the relationship first. How do you get clients to slow down and talk with you when they want a price upfront, even a ballpark one?

    • Bill Zipp says:

      Great question, Mandy. Your automatic response should be this: I don’t know. I customize every project I propose, and it would be irresponsible of me to even guess a price (diagnosis before prescription). Here is my promise to you: I will spend the time to determine your exact business needs and create three reasonable options from which to choose.

      Helpful?

      • Very helpful! Wording it like that makes it sound like a selling point that you’re *not* giving them a quote upfront. You sound confident in your proposition, and I think as a customer I’d feel I was in capable hands.