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#381: Negotiate Your Consulting Fees

Posted By Mark Haas CMC FIMC, Monday, August 30, 2010
Updated: Monday, August 30, 2010
While no one wants to say the economy is still in recession, clients in my primary market are negotiating harder on fees this year. How can I maintain my fees and still appear like I am sensitive to their economic pressures?

Fee pressure is more likely if you price your services on an hourly or daily basis. When you bill by time, that time becomes a commodity. Unless you differentiate your "day" from that of others who provide similar services, your client will go for the cheapest substitutable commodity. Make sure you can show that your "day" is different (and more valuable) than that of your competitor.

If your services are not priced as a commodity in the first place, you will avoid a lot of the desire to negotiate. Setting fees based on the value of the project to the client means the client is more likely to have to give up some value to lower price. Even if you estimate the fee based on a combination of daily rate (to make sure you are pricing it high enough) and value based fees (to make sure you are compensated for the value you bring to the client), be prepared to quote a fixed fee.

Have a set of alternatives ready, both as add-ons as well as decrements to the original offer. If the original offer is unacceptable, show how more or less (depending on the mood of the client) creates greater value.

Tip: Don't just show how you can cut your fee, even if you are removing corresponding services to match. Human nature tends to shy away from extremes (the highest cost option seems "too expensive" and the lowest cost option seems "too cheap"). When you only cut back your proposed fees, your original offer becomes the most expensive and a client's tendency is to find it even less attractive. When you offer add-ons, they may reject the most costly option, but the original offer appears more palatable.

© 2010 Institute of Management Consultants USA

Tags:  customer understanding  fees  proposals 

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