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What’s the Smallest Project Your Consulting Firm Should Take?

What’s the smallest project your consulting firm should accept? Should there even be a minimum? Absolutely! Sort of.

Brrrrng, brrrrng. It’s Phyllis Phinsternoodle calling to inquire whether you can take on a quick, two-week project at her petunia plant.

No, she’s called back: it turns out she only needs you for one day.

Oh wait, actually she’d like to just pick your brain for half an hour.

What should you do? When a diminutive consulting opportunity pokes its tiny head into view—regardless of whether a current client or a new prospect presents it—accepting the project for a low fee is a bad idea.

Small fees for small peas may work for farmers, but not for consultants.

Instead, your three good choices are:

  1. Walk away. You could politely brush off Phyllis, while congratulating yourself on remembering that small projects crowd out large projects.
  2. Fold it into a larger project. Educating Ms. Phinsternoodle on the benefits of a broader scope could pave the way to a more attractive, valuable engagement.
  3. Perform the project gratis. In the right circumstances, a few hours, days, weeks or even months of work “on the house” could pay out handsomely.

At the boutique firm where my consulting career started, we never accepted a project under $25,000 and rarely below $50,000. At Ascendant (my firm), pretty much the same standards hold for corporate clients; on the other hand, I do perform work gratis on occasion.

To make sense of these choices and respond to opportunities correctly, you need to establish two standards for your consulting firm:

  • Your Free Line – You complete projects with an insignificant scope–smaller than your Free Line–at no charge to the client.
  • Your Fee Line – You absolutely charge an equitable fee for substantial projects; i.e., those above your Fee Line.

Your Free Line and Fee Line are not adjacent. Between them is a No-Go Zone. When you face an opportunity in the No-Go Zone, either walk away or fold it into a larger, paid project.

Why do any projects for free? Because accepting tiny, for-fee projects diminishes your stature as a consultant and creates a precedent for the client to nickel-and-dime you.

A small effort for free shows you’re generous. A small effort for a small fee shows you’re minor league.

Set different Free/Fee lines for low-potential prospects, high-potential prospects and current clients.

A few days of work or even a couple of weeks may be a reasonable gesture if Phyllis generates $500k or $1 million or more in annual revenue for your consulting firm.

One caution with current clients: your Free Line applies to requests unrelated to your current initiatives. Requests for additional work on your existing projects is verboten (it’s scope creep).

Where should you set your Free Line and Fee Line? Take the smallest engagement you’ve accepted over the past 18 months and double that number. That’s your new Fee Line for prospective consulting clients. In another 18 months you can double your Fee Line again.

Your Free Line for prospects can be as low as you’d like– perhaps limited to only ten minutes of guidance. Where you set the line is less important than you have a line, you know it, and you stand by it.

Have you accepted a tiny project? What was your experience?


 

17 Comments
  1. PA Hardee
    March 28, 2018 at 6:03 am Reply

    Boy, I wish I’d had this advice year’s ago. when I was actively freelancing. Here’s what happened: Client A, a long-ish time, steady client with several account execs. One of those execs needed a proposal written in a short time, but had only a small budget. I took it as a favor to him. Fast forward. He changes jobs and goes to Client B, a larger firm that had also been a steady client. When I started working for Client B, the acct exec I worked most for insisted ion paying more than I was used to asking for similar projects. We worked a couple of years together under that arrangement. Then comes the guy from Client A, which btw had been a competitor of Client B..A-guy tells B-guy that I’m being paid too much, that I wrote a proposal for A-guy for a ridiculously low fee. B-guy is livid–at ME–despite my explanations that I was doing another long-time client a favor and B-guy was the one who insisted on raising my fee above what I normally asked. Well–upshot–I never got work from either of them again. 191 words 🙂

    • David A. Fields
      March 28, 2018 at 7:54 am Reply

      Well, there’s a cautionary tale if ever I heard one.

      As a general rule it’s probably not worth worrying about what might happen if one of your clients joins another company that also contracts with you. If you work off a rate sheet and your rate sheet varies by company, that can come back to bite you in the butt, but if you set your fees based on value, then fees for different clients will naturally be a bit different.

      Either way, your 191-word tale (nice one!) illustrates another downside of doing a project in the No-Go Zone. Thanks for contributing your experience.

  2. John
    March 28, 2018 at 10:17 am Reply

    This is excellent advice. I’d also be interested to hear how you fold your current level of activity into this mix – when very busy I find it hard to justify doing any work for free, but I wonder if that’s a mistake in terms of cultivating future business.

    • David A. Fields
      March 28, 2018 at 11:44 am Reply

      First, congratulations on being very busy, John! That’s a nice problem to have. In terms of doing “free work” when busy, it’s all a matter of scale. As a general rule, I will offer a bit of advice for free (that doesn’t take long), and for a very high-potential project, I’ll do investigatory work for free, but I don’t deliver any output for a prospect for free.

      Good clients are another matter. I see a day or two of effort to help a client that’s generating $3-500k in income for me as something I’m absolutely willing to do to foster the relationship. The caveat is it must be on something unrelated to the current initiatives. Free work is fine. Scope creep is not.

      Does that help?

      • John
        March 29, 2018 at 6:19 am Reply

        Yes, helpful, thank you!

  3. David Burnie
    March 28, 2018 at 10:49 am Reply

    One approach I take is to have a “discount” line for new prospective clients. My goal is to find a way to make it easy for a new clients to do a first project to get to know our work, and from there we can hopefully build a long-term relationship. Frequently I will show them what our full fees for the initial project are as a starting point. If they balk on price I will then ask them – “what kind of budget do you have for this project”? I can then a) re-work our approach to streamline our approach (important to call out the things you are no longer offering to do) and/or b) provide a discount on the full fees. This way the client understands what your fee structure is and that you’re doing them a favor to get that first project.

    • David A. Fields
      March 28, 2018 at 11:48 am Reply

      Great case study, David. Finding a way to work with a client demonstrates you’re thinking Right-Side Up and it fosters a bond between you and your new client.

      One consultant I work with let’s the client determine what fee will keep them coming back for at least three years, then they build an initiative that fits within that spec. It’s an interesting and effective approach.

      The caution when issuing discounts is to be wary of giving discounts to Procurement departments unless you are insanely clear that the discount is a one-time, never-to-be-repeated offering. Procurement folks see any discount as precedent and will beat you over the head with it on future projects if you’re not careful.

      I appreciate you contributing your experience, David!

  4. Lav Goyal
    March 28, 2018 at 11:37 am Reply

    David, well said, how articulate about generosity vs minor league. And by the way, there is another yardstick I use to opt out of small projects and that is if the simplistic nature of work diminishes the brand image you hold out irrespective of a decent margin, because the market will give you the kind of work they will see you do.

    • David A. Fields
      March 28, 2018 at 11:49 am Reply

      Lav, that’s a message many consultants need to hear. You’re absolutely right that the type of work you take on begets the type of work you’ll get in the future. If you take small projects, you’ll be presented with opportunities to do more small projects. Live large and a large life will show up at your door. Thank you for bringing that point to the fore, Lav.

  5. Kyle
    March 28, 2018 at 3:21 pm Reply

    As someone who is just getting started in the consulting field, I imagine this is a scalable concept. In other words, my projects are in the $1000-5000 range so my free/fee lines are much different (my time scale is 10-20 hours per contract typically). What are your thoughts on someone just starting a consulting business and structuring their fees? I do hiring screening, communication training, and team development.

    Thanks.

    • David A. Fields
      March 28, 2018 at 9:09 pm Reply

      Great question, Kyle, and thanks for sharing your situation. The Free/Fee Lines absolutely scale with your business. A boutique firm capturing $15m in revenue establishes a different floor for acceptable projects than does a newly minted, solo consultant. That said, even a new consultant shouldn’t set the Fee Line too low. Projects that are yielding $1k are costing you time you could be devoting to winning $10k projects.

      A quick suggestion: For the type of work you’re tackling, take hours off the table–it shouldn’t even be a point of discussion–and set your fees (much) higher. Consider a $5k minimum for your projects. Just a thought. I’m glad you chimed in on the discussion!

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