If your consulting firm’s offerings are suited for it, Colorado Pricing could increase your revenue and profitability while smoothing out the up/down cycle of consulting.
2-Constraint vs. 1-Constraint Consulting Projects
Quite a lot of consulting consists of discrete, one-and-done projects.
For instance, Cadbunny’s chocolate chips are melting, so they hire your consulting firm for $150K. You lower the thermostat on their chiller. Done. You and the Cadbunny execs shake hands and move on with your lives until/unless another problem crops up.
This type of consulting work operates under two constraints:
- A fixed scope with reasonably well-defined boundaries, and
- The client’s willingness to pay.
However, certain clients and certain types of consulting practices operate with only one constraint: the client’s willingness to pay.
One-constraint projects present no meaningful limit to the scope of work. Perhaps the client’s needs are ever-present, evergreen and recurring, or perhaps the scope of work is so large and the timeline to complete the work is so long, that limits aren’t worth considering.
For example, say Cadbunny situated their chocolate chip factory in a location with wildly fluctuating temperature and humidity. Further, every batch of raw cacao has slightly different melting points, and Cadbunny’s broad, ever-changing roster of customers specify inconsistent requirements for chip meltiness.
In this instance, your client needs ongoing analysis and support, plus a deft, experienced touch to keep operations running smoothly.
Other examples of one-constraint consulting opportunities include:
- Technical/IT-work that is perpetual and somewhat commoditized;
- Annual strategic planning;
- Ongoing pricing support for a large company with numerous offerings;
- Perennial voice-of-customer research;
- Training-heavy transformation efforts for organizations with a steady flow of new personnel.
One-constraint consulting lends itself to Colorado Pricing.
Since the work is ongoing and, for all intents and purposes, limitless, your goal is to engage with the client for many years, earning a steady stream of profitable revenue.
Colorado Pricing anchors on a single question to your prospect:
“What fee would make it easy for you to say we could work together forever?”
In context, it sounds like this:
“Ms. Chocoman, there’s a ton of work to do here at Cadbunny, and your needs are perfectly aligned with our expertise. I’d like us to be partners for the long term. So, what fee—monthly or quarterly or annually—would make it easy for you to say we could work together forever? I’ll scope out what we can do for that fee to constantly produce a fabulous return. If you ever feel less than thrilled with the arrangement, we’ll adjust.”
After the client offers you her forever number, you determine what work your consulting firm can deliver for that periodic fee and confirm it with the client. Then you lock in a long-term, steady, reliable, profitable contract.
Your client’s periodic fee will usually be lower than you’d like for a short-term engagement, and much lower than you’d want for a two-constraint project.
For instance, instead of $150K for a project or $35K/month for a four-month engagement, Ms. Chocoman might suggest $15K/month as Cadbunny’s “forever” fee.
Jump on that $15k/month. Over your multi-year partnership, your consulting firm will have earned far more from Cadbunny than you would have collected for the short-term project.
Plus, since you’re constantly engaged with Cadbunny, you’re very likely to find expansion opportunities or supplemental, short-term projects.
A dollop of dependable, predictable work for your team creates a platform for your consulting firm to experiment with more speculative projects and firm-building ventures.
Will Colorado Pricing Work for Your Consulting Firm?
To employ Colorado Pricing effectively, your consulting firm must deliver well and efficiently. Ideally, your combination of people, approaches and systems allow your firm to over-deliver on expectations vs. “typical” market rates.
If your consulting firm’s work is average, or slow, or you strive to deliver totally bespoke work with expensive resources, Colorado Pricing won’t work well for you.
We’ve seen some firms absolutely thrive with Colorado pricing. Have you tried anything like it at your firm?*
Text and images are © 2024 David A. Fields, all rights reserved.