How Consultants Can Cut the Cord on Hourly Fees

Hourly-based fees are like a security blanket for many consultants and clients, but more of them are coming to the realization that value-based pricing can provide more benefits to everyone according to the latest issue of The Guerrilla Consultant.

“Why shouldn’t consultants be paid based on the results of projects, rather than the number of hours they log on them?” asks Michael W. McLaughlin, co-author of Guerrilla Marketing for Consultants. “And to take the logic another step, if a consultant’s work generates big savings for a client, shouldn’t the consultant share in that windfall?”

Clients may find comfort in the hourly rate approach, because it allows them to compare one consultant’s hourly rate to another’s. To overcome this obstacle, says McLaughlin, you have to demonstrate a dramatic difference in measurable results as compared to the rest of the pack. Otherwise clients head right back to their comfort zone—the hourly rate.

McLaughlin identifies six questions consultants should ask themselves when determining whether to value-price a project. These include:

•Is the anticipated result (ROI) of the project substantial enough for the client to clearly understand the advantages of a results-based fee arrangement?
•Given the client’s environment, is there at least a 75% certainty that the project team will achieve the proposed results?
•Are you willing to put part of your proposed fee at risk?
•Can you wait for expected results to materialize before you ask for full payment?
•Does the client have the will to make the tough choices that a value-based project can demand?
•Have you considered the project’s best and worst case scenarios for you?

More information on the benefits of value pricing is in the November issue of The Guerrilla Consultant, available at http://www.guerrillaconsulting.com/newsletter/issue13-nov-05.html.

About The Guerrilla Consultant – a complementary, online newsletter dedicated to applying the principles of Guerrilla Marketing to the work and lives of professional consultants. Editor Michael W. McLaughlin is coauthor, with Jay Conrad Levinson, of the book Guerrilla Marketing for Consultants (Wiley, 2005). For more information, see http://www.guerrillaconsulting.com.