Should your consulting firm be rewarded for your hard work on behalf a client? The simple answer is:
The more nuanced answer is, “Mostly not.” We’ll get to that in a minute.
The confusion between effort and money-owed runs rampant on both sides of the consulting table. Clients often believe they are paying for effort. They presume they should pay your consulting firm by the hour or day.
That’s silly. Good quality delivered fast can be preferable to slightly better quality that takes longer. Hence, paying based on the amount of time invested is a deeply flawed approach to management consulting, internet searches and pizza.
You are (or should be) quite practiced in explaining the difference between time and value, and adept at closing projects with value-based fees.*
However, clients aren’t the only perpetrators of the time-equals-value myth.
Consulting firms are also prone to confusing exertion and benefit, and believe they should be paid for their effort. We frequently hear consultants justify their fees by saying, “This is hard work” or “This takes a lot of time.”
To which a client can rightly respond, “So what?”
An hour of your hard work has no inherent value. Only the benefits your consulting firm produces merit remuneration from clients.
(That does not mean your consulting firm should only be rewarded for “successful” projects. Engagements with high outcome risk may create substantial value even if they fail, because of the learning and the upside opportunities.)
Decouple value, effort and time at your consulting firm.
Explain to clients that they’re paying for the benefits of your expertise, not hours of labor.
More importantly, clarify your consulting firm’s internal thinking.
Not every hour of effort you expend produces the same value for clients.
To help you sever the mental link you’ve forged between time and rewards, follow the steps below.
Step 1: Assess Value and Time
(This task is very important.) Analyze your work, tasks, time and outputs. What creates the most value for clients with the least effort from your consulting firm?
Step 2: Handle Inefficiency
Step 2A: Based on your analysis, where is the value-to-effort ratio low?
Step 2B: How can you cut those low value steps out or hand them off to some other party so that you produce more revenue for less effort. (This is back door way into focusing your consulting firm around what you do best.)
Step 3: Leverage Strengths
Step 3A: Based on your analysis, what combination of high-value, low-effort activity could you package up and sell to clients as a freestanding offering?
Step 3B: How can you produce more of that high-value offering and transfer it to more clients with even less effort?
Time is a limited resource. Therefore, you need to consider its consumption during a consulting project in the context of the value of that time.
Once you’ve determined which of your efforts produce the most value for clients, then the time spent on those efforts is one guide (not the only guide) in setting your fees for your projects.
This approach ensures your consulting firm is being compensated for the value you generate while appropriately acknowledging a linkage between time and value.
Virtually every consultant occasionally falls into the trap of feeling they should be paid for their hard work, and forgetting that only the client’s perceived value matters.
You’ll succumb to that thinking less often when you’re acutely aware of how, precisely, your consulting firm creates value.
What low value, high-effort task can you eliminate from your workflow?
Text and images are © 2023 David A. Fields, all rights reserved.