There are consulting projects, there are advisory engagements, and there are chocolate covered almonds. Your consulting firm’s clients may consume all three, however, the rules for pricing are different in each case.
Advisory engagements are 90-100% “on-camera,” where your clients can see you. Behind-the-scenes work—research, planning, creating deliverables, shelling nuts—is the world of consulting projects.
Your consulting firm can deliver advice and recommendations as one of the outcomes of your consulting project, of course; however, that does not make your project an advisory engagement.
As noted in this article, avoid mixing advisory engagements and consulting projects into one consulting contract. Blending the two types of work produces unhappy clients and stressful client relationships.
In that same article, I recommended you use a stipend fee structure (i.e., periodic, time-based payments) for advisory engagements.
That raised a question: How do you set your periodic fees for an advisory engagement?
9 Pricing Rules for Advisory Engagements
The broader the range of topics on which your client can solicit advice, the higher the fee. If only they can only inquire about melting point temperatures, the fee may be low. If they can go nuts and ask you about anything, you’ll demand a higher fee.
2. Who Contacts Whom
If your contract specifies that one person at your client can reach out only to a low-level member of your consulting firm, you can charge a pittance. Opening your senior partners’ doors to dozens of your clients is, of course, a different kettle of bananas.
Narrow, limited communication channels merit a lower fee. Multiple channels, including personal phone numbers, warrant larger stipends.
What days and times of day will your consulting firm be reachable? Clients may not pay your consulting firm much for access only at 11:00 p.m. on the second Tuesday of each week.
5. How Often
Is there any limit to the number of times your client can turn to your consulting firm for advice? Some clients prefer unlimited access whereas others may be very happy to dip into your wisdom once or twice.
6. Response Time
Your consulting firm’s clients value instant gratification. Generally speaking, you’ll be rewarded for appearing uber-responsive.
7. Total Time
You can control your risk and manage your consulting firm’s capacity by limiting the time available to your clients in your advisory contract with them. However, you’ll earn far more by decoupling fees from time.
Few clients abuse your time if you offer unlimited time to them, and remember you want your clients to avail themselves of your consulting firm’s smartitude.
An engagement that ends a few minutes after it’s executed may not earn your consulting firm high fees. In contrast, an agreement to provide advice until humans establish a settlement on Mars offers you and your client more space to create value.
9. Risk Sharing
Your consulting firm can offer advice in exchange for cash, shoes, or cashews. Your reward could be fixed in advance or depend on your client’s performance.
Generally, I’m not a huge fan of taking equity in return for advisory services. You can join a client’s Board of Directors, of course, but then you’re acting as a Board member, not a consulting firm.
I’m sure I’ve forgotten at least one rule or consideration for pricing advisory engagements. Definitely add your thoughts and fill in missing pieces in the comments section.
How have you determined your fees for advisory engagements?
Text and images are © 2021 David A. Fields, all rights reserved.