Back to the List
15 Comments

A Two-Step Process for Raising Your Consulting Firm’s Rates

What do you think about raising your consulting firm’s fees 30% or 50% or 100% or more? Does a little voice in your head protest, “No way! No one’s going to pay <insert number> an hour for a consultant”? We’re going to name that little voice and give you an alternative.

The dissenting voice in your head is your internal Quarryman. The voice we’re going to amplify is your internal Sculptor.

A Quarryman is a person who carves mammoth slabs of rock from the earth. (Not to be confused with a member of the Quarrymen, who were an awful cover band…that became the Beatles.)

From the Quarryman’s point of view, rock is rock. For instance, marble typically runs about $150-200 per ton, though high-end marble could set you back as much as $700 per ton. So, what’s the upper limit on a six-ton piece of marble? Five thousand bucks? Maybe ten thousand?

The Quarryman pushes back, “No way. No one’s paying $1,500 per ton of marble.”

Your internal Quarryman still sees your consulting firm’s work as blocks of stone. He views your product as generic and he believes your customers harbor similar perceptions.

Hence, he believes there’s a firm upper limit capping your consulting firm’s prices, with competition and market rates clamping down the lid.

He denies that marble can actually be priceless or that high fees could apply to your consulting firm.

The Quarryman’s modus operandi is denial.

But there’s another voice: the Sculptor. The Sculptor points to Michelangelo’s David, which weighs six tons and would fetch a fair bit more than ten grand at auction.

The Sculptor views your consulting firm’s engagements as having the potential to be magnificent works of art.

His modus operandi is experimentation.

Two Steps to Raising Your Consulting Firm’s Fees

The Sculptor takes two steps while the Quarryman is pouting stubbornly in the corner:

  1. Search for Evidence. He looks for any indication that the block of marble could be more than just a rock.
  2. Experiment. He bangs away at the rock and sees what emerges.

A quick case study: the Quarryman held sway at a mid-size, Boston-based consulting firm I started working with a number of years ago. At the time, their average project was around $250,000 and seven-figure projects were very rare.

Over the years, their work has remained fundamentally the same; however, we fired the Quarryman and put the Sculptor in charge. They started asking clients for bigger projects and higher fees. Now, their average project is around $1 million and it’s not unusual to win $3+ million engagements.

If they can do it, why can’t your consulting firm?

Heck, you already took step 1 of the two-step process by reading about the Boston firm. They’re evidence a firm can dramatically raise fees. (I have plenty more examples.)

Now it’s time to take step 2: Try asking for higher consulting fees.

If your consulting firm charges based on an hourly or daily fee, then quote a 30% higher rate on your next four projects. If you win at least twice, try raising the rates another 30% on the subsequent four projects, then raise them again so that you’ve doubled your current rate.

Your consulting firm might not win as many projects (though I think you’ll be pleasantly surprised), but you don’t have to. Imagine winning half the projects, working half as much and raking in the same revenue. Not a bad picture, right?

If you charge based on value, follow a similar process: determine fees however you normally would, then raise them 30%. Are you still offering at least a seven-to-one return on risk-adjusted value? If so, then propose the higher fee.

Step 2: Just try it.

Your Choice

You can settle for the Quarryman’s view that your consulting firm is churning out blocks of stone, and accept the limits on your revenue.

Or, you can climb out of the quarry and act like a Sculptor. Look for evidence that higher rates are possible, and give it a try.

You don’t need to be Michelangelo—even a simple headstone commands ten times the price of raw rock.

Have you been able to raise your rates recently? Do you believe you can? Let me know in the comments.


 

15 Comments
  1. Brad Forester
    February 27, 2019 at 9:03 am Reply

    David – I ‘want’ to believe this is true, but my internal Quarryman is saying ‘nah…probably not.’

    I think one big thing to consider is your firm’s differentiated position in the market. If your prospective customers are shopping around 3 quarries for marble, and the marble is largely consistent from quarry to quarry…then why would the buyer choose a quarry with a higher price per ton?

    The only reason(s) I can come up with are – differentiated process (we use environmentally friendly mining technology) or a better relationship (though this seems pretty weak, I do think it’s important to most).

    In IT consulting – specifically systems integration, where we hook up commercial pieces of software that someone else has already developed – we compete against large global consultancies (low rates x huge numbers of resources) with rates that are perhaps ‘marginally’ higher (premium for craftsmanship, service, attention, etc.). But – we’d get laughed out of the room in comparison to a Big4 if our rates were 30-100% higher than the next firm who can do the same job (all other variables being largely equal).

    If you’re talking about solving ‘greenfield’ strategy type problems like fixing a chocolate production output problem – then sure, value-based pricing all the way. But in a rather ‘commoditized’ delivery of services? I’m always going to pay in the range of $X,XXX for ‘tax preparation’ services. But, if the ‘tax advisory’ services can save the business $XXX,XXX then that is likely worth $XX,XXX in fees.

    • David A. Fields
      February 27, 2019 at 9:11 am Reply

      You’re absolutely right, Brad, that the more commoditized your offering is, the less room you have to play with pricing. To the extent you’re solving easy-to-solve problems, your value is relatively low. However, the more you focus your consultancy on difficult-to-solve problems, the more opportunity you have to command a premium.

      The Quarryman plays in the world of stone blocks. He doesn’t do anything with the stone, he just makes blocks. The Sculptor creates something of higher perceived value. Keep in mind, though, that many an artist has passed off a block of stone as a sculpture… and those plain blocks of stone are housed in museums. The definition of art is influenced by the artist.

      Great point you’ve brought up, Brad.

  2. Martin H Imm
    February 27, 2019 at 9:42 am Reply

    I love your metaphor, especially for how it helps focus on another issue: Am I spending my time and energy in client presentations describing the big things I’ve done pretty well (hauling in big hunks of granite) or am I asking enough questions that get the client to tell me about his/her concerns or problems (to allow me to describe a sculpture I can create)? If I can do the latter the potential client will be handing me the sculpting tools and helping me begin chipping away at the solution he/she wants to find. http://www.CapitalAccessStrategies.com

    • David A. Fields
      February 27, 2019 at 10:01 am Reply

      Very, very well said, Martin. Clients tend to focus on the rocks, particularly when they’re hiring consultants. It’s incumbent upon us to return the conversation to the larger, higher-value questions at hand.

      Thank you for the eloquent expansion on this article, Martin.

  3. Robert Friedman
    February 27, 2019 at 12:45 pm Reply

    David – This is a great (and succinct) post. I think we all have to ask ourselves “Am I being fully compensated for the total extent of the value I’m creating?” If not, it’s incumbent on all of us to frame our value (and pricing) in more powerful ways. I do agree with Brad’s point – if a client can find someone else to do the same thing and get the same result for a lower price AND the other resource is relatively easy to find, then you don’t have a lot of leverage to raise prices. If so, what can you change to make your value more unique? For a lot of us, however, it would actually be relatively difficult for a client to find the same expertise from one of our competitors. I’m going to take you up on your challenge, David. I’ve recently raised my rates, so another 30% makes me swallow hard. But the new rate is NOT insane. I see other kinds of consultants and executive coaches charge at that price and even higher. Like you said in Step 2: Just try it. Thanks!

    • David A. Fields
      February 27, 2019 at 1:33 pm Reply

      Hooray for you, Robert! It’s outstanding that you’re letting the Sculptor grab control and you’re jumping into Step 2.

      We’re not living in a magic land where no competition exists and clients will pay insane prices for low value work. The truth is your first priority is to provide value. That said, consultants tend to overthink competition. Be confident in your skills. Recognize that the value you’re providing goes beyond some monetary gain, and remember this:

      Two consultants that provide the same solution don’t necessarily provide the same value!

      There’s more to value than solving the problem or achieving the aspiration.

      • Robert Friedman
        February 27, 2019 at 2:23 pm Reply

        Yes – so right. With highly customized consulting the experience between one consultant and the next will be very different. We have to think about that harder to quantify type of value and ensure that it gets communicated to prospects quickly.

  4. Elaine
    February 27, 2019 at 4:39 pm Reply

    I have found there are always people who say I charge too much no matter what I quote. I don’t work with them. There are more than enough clients who appreciate my expertise and see the value in my work. I do work with them. And, I’ve raised my rates about 20% this year. Whomever said, “No asky, no getty” was spot on.
    BTW, I look forward to your posts each week, they are always fun and informative.

    • David A. Fields
      February 27, 2019 at 5:55 pm Reply

      “No asky, no getty.” That’s precious.

      Congratulations, Elaine, on raising your rates. We don’t have to work with every client–let the cheap clients work with other consultants!

      Thank you for being the perfect case study and for being willing to share.

  5. Donald Garvett
    February 28, 2019 at 1:33 am Reply

    sell value – not time – when circumstances permit. Both clients & consultant can win

    • David A. Fields
      February 28, 2019 at 8:09 am Reply

      You’re right, Don, though value and time are not mutually exclusive. For certain types of consulting, billing by time is inescapable and, in a few cases, even preferable. (Yes, I know that’s heresy in some circles.)

      When we focus the client on the value–regardless of our fee structure–we create room for premium fees. Thank you for underscoring that point, Don.

Leave а Comment

Your email address will not be published. Required fields are marked *

Prev Article

A Common Problem for Consulting Firm Rainmakers is Easy to Fix

Next Article

One, Powerful Model that Explains Why Your Consulting Firm Wins Projects

NEVER MISS A GREAT ARTICLE ON CONSULTING

Subscribe to receive insiders’ access to information and resources that will help you grow your consulting firm.

Note: By subscribing you are confirming that you have read and agree to our terms of service and privacy policy. You are also confirming your consent to receive emails from David about his articles, programs and recommendations.