Your soft, consulting heart practically bursts when your client crows, “Investing with you was the smartest move we’ve made on our business.”
Woe is you, therefore, when your client begrudgingly, reluctantly scratches out a check to your consulting firm after you’ve delivered a monster-sized win for them.
Dratmuffins! What’s up with that negativity?
Fee structures, outcomes and expectations, that’s what’s up.
Elsewhere you can read about the basic fee structures and learn why the ideal fee structure for most consulting projects is a hybrid, fixed/success-fee engagement based on the value you’re providing. (There’s an excellent chapter on fee structures in this book.)
When you cross results with fee structure, though, your clients’ reactions may be more frustrating than cold, French onion soup.**
In reality, not every consulting project succeeds. In fact, studies suggest the majority of consulting projects miss the mark on timing, cost or desired outcomes.
Bad results (i.e., your consulting firm’s work disappoints the client) lead to unhappy clients, regardless of the engagement’s fee structure.
Of course, your consulting firm usually delivers high-quality work that pleases your clients. And if your typical contract leverages fixed fees, then your happy clients grin goofily while distributing your payments.
However, even if your consulting firm produces an excellent result and exceeds your promises, you may end up with a disgruntled client. Particularly if your consulting fees were based partially or entirely on success.
In other words, if you employ the optimal, hybrid contract structure, and your consulting team performs admirably, your client may still glare at you and grumble under his breath while processing your final payment.
In the Results vs. Fee Structure chart, three out of four possibilities lead to potentially unhappy clients. Phooey on that.
Why Can Good Results Produce Unhappy Clients, and What Should You Do?
Unfortunately, semi-rational notions of “fairness” taint many clients’ perceptions of your consulting firms’ fees.
Even if you provably deliver $100 million in value and six pallets of strudel for your client, he may balk at writing you a $10 million check. (And have a stomach ache.)
Why? Because, when an executive whose annual income comprises a small fraction of your consulting fees looks at your bursting, treasure chest of success fees, he instinctively feels like the fee-for-effort equation is out of balance.
Yes, you sold your project with a compelling message that your consulting firm only receives the treasure chest if you deliver massive value.
Unfortunately, along the course of the project, your client may forget your compelling, skin-in-the-game pitch. Ruh roh.
We need a new quadrant chart that compares Results to Fee Expectations.
Unsatisfactory consulting firm work still produces unhappy clients. However, a client’s level of misery deepens when you’re a Mugger popping out of dark shadows with disappointing news compared to when you’re a Dentist whose unfortunate message was expected.**
On the flip side, you’ll notice that when your consulting firm is exceeding expectations you can show up like a Wedding Crasher. Your “unexpected” request for your ginormous success fee steals the joy away from the successful project celebration.
Your client agreed to the fee structure, so is it fair for him to view you as a Wedding Crasher? Fairness is irrelevant. He’s aggravated when he should be delighted.
What you need your consulting firm to be is the MVP (Most Valuable Player). The super-star whose value skyrockets in plain view.
When you’re an MVP, you earn large success fees and follow-on projects and referrals.
The path to MVP is simple:
- Regularly update your consulting client on your project’s progress. “The project’s going great. I think we’re going to exceed the objectives!”
- Simultaneously remind your consulting client that he’s going to be forking over success fees. “I’m really looking forward to a massive payday for you and for us when we nail the objectives.”
Don’t be afraid of the fees you’re going to earn in a hybrid, success-fee project, and don’t allow them to sneak up on your client either.
When you manage your consulting clients’ expectations all along the way, you’re likely to emerge as an MVP. And, as a quick reminder, MVPs earn the big, big bucks.
How does your consulting firm manage clients’ expectations?
Text and images are © 2020 David A. Fields, all rights reserved.