This content will be released as a Kindle report in the near future. It is entirely based on experience, not theory, and especially what I've learned from my mistakes over the past three years.
In January of this year I was tired out. Working with 30 to 40 clients a month was exhausting. My energies were splintered in so many directions I wasn't helping any individual client nearly as well as I knew I could. My calendar was booked wall to wall. Up to this point, I'd thought this was a good thing: after all, busy meant revenue-generating, right?
Turns out I was wrong.
This write-up will show you how wrong I was.
By tying myself up in little projects of low value, I couldn't really get transformative results for anybody.
It kept me plateaued at what would be a reasonable income for most people, but was disappointing for me.
And worst of all, I never seemed to get ahead. I felt like a dog treading water in a pool, barely keeping my head above water...but not improving my situation.
Work was no longer fun.
I spent a week or two rethinking my entire approach to business. This changed my business model. I have to admit the first couple months were scary. I had to completely turn off my conversations with and efforts to sell to a market I was very familiar with...and turn my attention solely to another market that was not familiar with me.
Since the beginning of March, though, I have made more money than I did the whole of 2013. And I did it helping one to four clients a month--that's it. My lifestyle completely changed. Oh, I'm still living in the same place...but what I can afford has jumped. I have profits that enabled me to hire expertise I could only dream of before. The idea, for instance, of doing what an April and repeat client of mine did and hire strategist Rich Shefren at $2000 an hour is totally reasonable now. There's no 'gulp' factor.
This transformation has been personal. I have experienced it myself. No theory here: this comes straight from my life.
Sometimes I get frustrated with myself because I am so outwardly focused I easily see what my clients should do, but miss things I should do myself. I feel like the shoemaker whose kids have falling-apart footwear; I think I'm going to take another couple weeks off and redo my own marketing and funnels.
Because that's been another huge thing. I've had much more downtime...which is a great helper. You can't learn new things if you're busy fulfilling all the time. Since I've focused on only a handful of clients a month, I have achieved amazing results for them. There's a fine line to self-promotion in this forum; I'll stay away from examples here.
So let's get into this report. I call it
The Consultant's Ultimate Guide to Pricing and Business
Here's why I wrote this report:
I ran into a big problem after a couple of years running my own consulting business. And I saw many of my clients, and people who followed me who ran their own consulting businesses had the same problem, too.
We were all “successful” by the common definition of the term. We had plenty of clients. We were known in our marketplaces. We were good at what we did. We had products or services that did what they were supposed to do. Why, then, were we:
* Split in too many directions
* Not able to make a stellar difference for any one client
* Too worried about money—cashflow, revenue, bank account level
* Discouraged that the future would simply be more shovelfuls of the present
and even thinking about quitting?
If you're in this situation right now, you're not alone.
Surprisingly, these are all symptoms of one specific problem. This whole mess is the result of not pricing your services correctly. That's the one change you can make to fix these issues.
I have to warn you, though: this fix comes at a price of its own.
You will have to choose your clients much more carefully.
You will have to plan your future more consciously.
You will have to concentrate on getting transformative results for your clients.
If you're ready to do that, then join me in this report.
If you're just starting your consulting business, you have really lucked out.
This isn't some baloney theory you've stumbled across here: it's part of a high ticket training I'm developing. In fact, the main reason you have this report at all is that I need to write it down. That enables me to be clear about my thinking, and what's actually going on.
You have to use your brain.
People struggle with this. Me, too. I'm not saying I'm exempt. Hoping someone else will solve your problems for you is enticing. The idea that you can buy a Done-For-You product that'll fix everything is very attractive. But real change doesn't work that way. You have to do it yourself. Invest in yourself. Carry out the work yourself. Think for yourself.
Otherwise it just won't stick.
So get ready to use your brain. Yes, I can hear that Homer Simpson “Awwoohhhh...” groan. But if you want the results, that's part of the price.
People usually want to ask me about “closing techniques” first. This is wrong. Closing is the LAST thing you want to do. It's the final step in the process. If you haven't set things up right earlier in the funnel, you'll discover that even becoming better at closing won't help you. Your business won't make more money. All you'll do is spin your wheels.
The problem is much farther up the line. If you've already got plenty of customers yet are feeling worked to death, you know what I mean. If you're brand new to consulting, imagine this: your prospective clients (“prospects”) want what you offer for cheap. They don't much value what you do, and you aren't great at showing them how your approach and results are different. So I teach you how to close some of them. Your experiences are painful. People complain about the cost, are difficult to deal with, and you're having to keep track of so many of them it's hard to focus on really helping any. You scrape by doing the bare minimum, and that's the result you get for your clients. You really become worth what they're paying...not a whole lot.
If I teach you how to close more of them, what is this going to accomplish? Accelerating your misery, that's what. A high activity level is not an indicator of success.
Let's start with Price.
That's what this report is about.
You're a consultant now. And with that mantle comes an hourly billable rate, right?
When you started your business—and even as every new month begins—what do you tell yourself about your income? “Let's see how much I can get.” Right?
Just about everyone makes this two mistakes. I did as well! And you know what? They will sink your business.
Heck, you don't need anything else, to sink your business!
Let's look at Mistake #2 first. What's wrong with “As much as I can get” as your revenue target?
Captain Obvious reports that it's not much of a target, is it. Certainly not specific. And to manage we must measure. If you don't have a number, you can't measure it quantitatively. So if you don't define your target income, you can't manage how you'll get there.
You're leaving everything to chance.
Tell me, does leaving your income to chance sound like the right move to you?
The stress or enjoyment you feel, the clients you get, the people you talk with, the projects you are involved with, the money in your bank account...they all go back to Price.
Tell the world out loud how important you now realize Price is, right now.
Let's look at the typical pricing models and how they lead you to starvation.
HOURLY RATE MODEL
Having a billable hourly rate is very common. It's a terrible idea, but we'll get to that in a bit. For now, let's review how people commonly arrive at this number.
It's pure fiction.
First, what are competitors charging?
Find someone who's doing similar work to you, and find out what their rate is. With a few bits of comparison shopper data, we can average them out and come up with something “reasonable”, right? For instance, let's say you're a graphic designer and you find three local competitors. $20/hr, $30/hr and a real pro, $68/hr.
So you as a newbie, what should you charge? $25/hr? Go gutsy at $28?
“Reasonable” will keep you in the poorhouse.
Basing your income off someone else's, who doesn't have a clue what they're doing when it comes to making money, is lunacy. Don't you agree?
And how do you think they developed their hourly figure?
I said this is fiction, and fiction it is.
MONTHLY EXPENSES MODEL
You'll see this nonsense shared frequently, too. Total all your bills—housing, food, vehicle, etc.—and there's your minimum income requirement. Say it's $3000.
Now assume you'll be working a standard 40 hours a week. 40 x 4 weeks in a month = 160 hours. Divide the money total by the number of working hours and presto, your billable hourly rate.
3000 / 160 = $18.60 per hour.
Congratulations, you're broke.
In more ways than one.
There are so many things wrong with this model. Are you going to be able to bill all 40 hours? No. Many of those hours are going to be spent hunting for clients. How can you bill those? And will it really top out at 40 hours? Likely, you'll be spending a lot more than that in your business.
And what about unexpected expenses...your car breaks down...you have to buy a gift...you adopt a cat and it needs to be spayed. Where does this money come from?
You're in the hole already. You just don't know it yet. And every month that hole gets deeper.
Did somebody say taxes? You'd better be setting aside a standard percentage from every dollar made. This is a pretty dark hole.
And Heaven Forbid we should want to make a Profit! Where does that come from?
No, the Monthly Expenses model is a failure. It's missing so many parts you constantly end up dipping into savings or credit, and that's a road you do not want to start down.
The price figure in this model comes from adding up the costs of doing what you do, and adding a profit margin (the “Plus”) to get to the magic number.
So you have overhead: office, power, internet, phone.
Expenses: training, outsourced tasks, new laptop, courier fees.
Add all that stuff up. Of course, it's just an estimate. We won't know the true costs until the beancounters are done with the tallying-up, far in the future.
So you figure a project is going to take you 20 hours. All the costs you estimate to be associated with it total $750. Then you apply your “Plus”...50% is reasonable, right?
$750 + $375 = $1125.
This time you get a billable hourly rate of $56.25; much better. But it's still fiction. What relation does it have to the project—the problem you're solving? None beyond your hourly estimate.
And most time estimates I've seen over the past 20 years have been grossly understated. That hourly rate is, in actuality, going to drop down, down, down.
So we've looked at three common pricing models—remember, this is what everyone is actually doing—and gotten quite a range for you: $28, $18.60 and $56.25 per hour.
The methods can't even agree; their results are nowhere near one another!
Now to flip your mind about this whole idea of pricing.
Your price should not have anything to do with the number of hours you need to put in to the project. The time it takes you to do the work has zero, zilch, nothing to do with the solution.
Say you have a client with a problem that's costing them $500,000 a year.
You have fixed this kind of problem before, and know how to do it quickly. I'm talking in a few hours.
What should you charge?
Should you charge for three hours of your time at $56 per hour?
Is that fair? To you? For your expertise in solving a half-million dollar problem?
Just because you know a quick solution doesn't mean it's not worth very much. Look at the value you're creating in this situation. Don't you deserve to be rewarded for that?
Stop looking at it from the client's perspective. Or rather, look at it from the client's perspective of you solving the problem, rather than the time it takes you to do it.
Protect your expertise. It's the valuable thing you're selling. Never forget that.
You want to know what my price would be? In my opinion, you should charge between $25,000 and $50,000. Maybe even more. You're crazy if you're not.
The right PRICE fixes a whole bunch of problems.
It ensures you target the right prospects.
It ensures you only take on clients who have problems large enough that they can invest in your solution to fix it, and who value what you do.
It ensures you get projects that, in Tom Peters terminology, can be WOW! Projects...where you can make a real difference. And you can build a series of these to showcase your talents and grow your skillset, by deliberate choice.
It ensures you make enough money to cover your bills, pay your taxes and make a profit...and that spells R-E-L-I-E-F.
Are you with me now?
“As much as I can get” is no target at all. To manage we must measure, and if we can't measure because we're without a target there's no progress to manage.
So I want you to develop your target income. You can adjust this number as you go.
We went through the elements of your revenue target in the last section, though you may have missed it. There are three components.
Planned and Unexpected Expenses
If you don't build these into your target income figure, you will dig yourself deeper into that hole every month. Your savings, if you have any, will be consumed; then you'll move into credit. Sooner or later you'll crash and the business with be dead. Back to the job market for you.
I assume you want to avoid this fate and all the negative things with it.
So get your numbers together. ALL of them.
This process is surprisingly straightforward, but if it's so easy then why does nobody do it—or even think to do it?
Get a written budget. Figure out every Planned Expense: haircuts, rent, birthday presents, office supplies, internet bill, dog food, tires for the car. For the unexpected, you need a safety net of at least $1000 as soon as possible. The total Unexpected Expenses will vary depending on your lifestyle; there are many online tools to help you with this.
Profit is a real thing. You have to start thinking of it that way. Not as an ethereal, maybe-someday-if-I'm-lucky idea. It's real, and you plan for it. Don't wait for it. Built it right in. The total is up to you, but if I'm working I really want to be making a profit of at least half my typical monthly expenses every month. And that's LOW.
Taxes are dependent on the state you live in and the Federal government. Figure on at least 30% of the total of the Expenses + Profit figures you just came up with above.
Wow. Can you see how much you've been missing, and why it's been such a struggle every month? There's a lot of money here that hasn't been directed to come into your business.
Planned Expenses: $2500. Unexpected Expenses: $500 (for the safety net; can be removed after 2 months, and this will also lower the Taxes figure) + $300. Expenses Subtotal: $3300.
Profit: 50% of $3300, which is $1650. And remember, this is on the low end. It's less than $20K a year.
Taxes: $3300 + $1650 = 4950 X 30% = $1485.
Total Monthly Income Target: $3300 + $1650 + $1485 = $6435.
This total ensures you are COVERED. Barring totally catastrophic events, all your bills, surprises and taxes are completely taken care of...and you have a basic emergency fund, and a growing profit pile to use as you see fit. No more worrying.
I'll bet you right now that this total above, and the one you're about to develop, is much higher than you had in mind before picking up this book.
In fact, it may be outside of your comfort zone. That's something we need to address now.
If that total figure makes you uncomfortable, acknowledge that fact. Being aware of it is the first step to overcoming it. Now realize that what looks like a lot of money to you is chump change to someone else. For the right customer, $6500 is a very small price to pay to solve their problem, and they make that number in a day's profit. Let me say that again: ONE client can meet your monthly revenue target.
If you've been living in the world of hundreds rather than thousands of dollars or even more, you're going to have to change your comfort zone. It's just too hard to try and serve enough clients at $250 or even $500 apiece to hit that $6500 target. I'm speaking from personal experience. The effort to prospect, qualify, sell and fulfill takes too much time and energy. There's a much better way.
And your new pricing will show it to you.
At the beginning of this report I said that people want closing techniques from me first. And that this is wrong. We looked at how closing more and more low quality, low revenue clients merely leads to more frustration. Not wealth. Not well-being. Not security.
If you didn't believe me then, I'm sure you agree with me now.
So how the heck are we going to find a $6500 client, Jason? Let's split it in half: even that is tough. TWO $3250 clients?!
Doing so is actually not that hard. But you do have to change the people you're talking to.
Continue to do the same thing as you have been until now, and you'll keep getting the same result.
No doubt you've heard that quote attributed to Einstein: Insanity is doing the same thing over and over expecting a different result.
So you are going to have to change your behavior.
I'm not talking about a personality transplant. I mean the activities you do on a daily basis, and who you do them with. Keep doing what you did with the same people you have been communicating with, and you'll continue to have low value clients. And be not only poor, but losing money every month.
Let's look at what you must be doing to hit that new revenue target.
First, it's obvious that, in the beginning at least, you are going to have to spend time finding those high value clients. Later on when you've learned where to look and who to talk to, it'll be easier. And you should be getting some referrals, too, at that time. But now, at the start, it's going to be time-consuming.
And time is one thing we do not have much of...and it's a fixed amount.
Say you won't work weekends: that leaves you 20 working days in the month.
And you have to fulfill your projects. That will take some days.
Still, if we don't have the clients we won't have any work to do, so prospecting and qualifying and selling should be our top priority, right? Well I'll give you a number which is an industry statistic. It's fact. To find the kind of clients that will pay you the money you need, you need to be spending 70 – 80% of your time prospecting.
70 to 80%!!
How much have you been spending on this vital task?
No wonder you've been getting such poor results.
You see, you don't get to do what you love all day when you run your own business. As a consultant, especially at the beginning, you must spend your time finding great clients.
Later on this number will drop. Good leads from other sources will come in, and significantly reduce the time you need to spend on sales and marketing activities. But for now, this is almost all you'll be doing. You have to. You won't survive otherwise.
70% of 20 is 14. Fourteen working days, you'll be finding those clients.
That leaves you six to do fulfillment work.
Think about this. Deeply. Really consider it, in relation to our pricing figure.
$6500 / 6 = $1083 PER DAY you need to make when you're working, to hit your target.
Now if you're thinking you have to bear down, hunched over your desk and keep at it 16 hours a working day to earn this money, you're mistaken. Throw that mental picture out immediately.
Remember what I said above. It's the size of the problem that determines the the price of your solution, not the time or other resources it takes you to do it.
Start disconnecting time from money in your head.
You're not getting paid for your time. You're getting paid for your expertise.
What's common to you is unheard-of to others.
So when you're earning $1000 a day or more, YOU DESERVE IT. If you're not completely sold on why, we'll cover that in a bit.
For now, realize that if you're offering workshops, doing projects, or working on anything else, you don't wheel out the battletank for less than that figure. It's just not worth your time—and you won't reach your income target if you do.
Let me say that again: If you take on projects paying you less than the daily amount you must make with the very limited number of fulfillment days you have in your calendar, you will miss your revenue target. This is very important to your survival. You have to get it into your head that if you do work for less than that amount, especially if it takes you longer than a day, all you're doing is digging your own grave.
It's that serious.
This concentration of work does have many benefits. It forces you to focus. And it leaves you the rest of the month to find your clients.
Note that I am not saying “Take the rest of the month off.” This is not an excuse for laziness. But you don't have to rush. You know exactly what you have to do, and how long you have to do it. Parkinson's Law can't push its way in here.
So you have 14 days to find clients with 6 or fewer fulfillment days of work on projects paying you $6500 (or whatever your target income is).
How's that for clarity of purpose?
Clarity is usually what brings results.
Here's how you find those clients. It's very, very easy to get a prospect to say “Yes” to a project when the problem is ten or more times the solution. If your solution costs $6500, and the problem is worth $65000, you won't have much trouble. And if the problem is $130000 in size, even better. Your solution is best priced at 5 – 10% of the problem for maximum selling effect.
It can be higher, but that typically takes selling skill to pull off.
Are you starting to see how you can earn and deserve these fees? Look at the value you're creating for these people!
At the same time, notice how the fees you're able to charge are much higher than your competitors. The secret is to sell on Value, not price—or features and benefits.
Selling is a huge topic best left for another time, but I will give you one critical tool for identifying and selling to the clients you're looking for. It's called Monetizing the Problem.
“If they say it, it's true. If you say it, you have to defend it.”
If I say, “I can get you 10 more clients a month,” how do you react?
With skepticism? “Prove it to me.”
And what if I get you to say, “I think you can get me 10 more clients a month”?
Well now it's true, isn't it. After all, it came out of your mouth. Not mine.
Any time we can get a prospect to figure something out on their own, rather than us saying it ourselves, we must do that. This is a very powerful thing. There's nothing unethical about it; after all, they said it themselves.
Trying to persuade or convince people of anything is a waste of time and energy.
Let's have the prospects persuade and convince themselves.
Ask the prospect what the average value of a sale is for them.
Then ask them how many sales they make a month now, typically.
Alternatively, you could ask what their monthly revenue is per month now. Divide this number by the average value of a sale, and you'll have their number of sales made during that time.
That's the baseline.
Now ask the prospect—do not tell; ask—conservatively, if you could wave a magic wand and get them more sales, how many more a month do they think they could get?
You'll discover this is much more effective than you saying how many new sales you could get for them.
There's no arguing. After all, they gave you the number.
Now if the number they give is too low, and you know you could easily achieve a better result, let them know. “That IS a conservative number, Ms. Prospect. Can I share with you that with businesses like yours, we've seen average results around $X?”
You're modifying now, and getting approval to do so—not telling or imposing your own number.
If your prospect says they have no idea, you can suggest a conservative number you know you can achieve. They key here is to be realistic and not pie in the sky. Ask if this number is OK for them. Do not proceed until you have a new increased sales figure they agree with.
Take this number and multiply it by the average sale value, and you'll have the bump in monthly sales resulting from your effort. Watch how the prospect reacts. Is this number impressive for them?
When considering Return On Investment, the payback period is an important factor. For how many months will your effort result in a bump in revenue for the prospect? My recommedation is a year for typical situations. But you see the situation in front of you. It could be just one month, say for a postcard campaign. That's fine. If you can extend that payback period, though, great. Some software programs I've sold have had a FOUR year payback period! In other words, the prospect agreed it was OK to attribute the bump in revenue every month for four years to this new software (custom college student records database). Now that was an impressive figure!
However, most people are comfortable imaging a year payback period.
For example, if I develop an online marketing campaign to drive traffic to a redesigned website and funnel, the prospect and I agree that a conservative 300 unit increase in sales of a $997 item is reasonable over the next year.
300 x $997 = $299,100, or just under $300,000.
To make investing in your solution a no-brainer for your prospect, price your solution at 5-10% of this revenue bump figure.
5% of $300,000 is $15,000.
If your prospect truly came up with the 300 unit increase number, they will have no trouble understanding the value in the $15K investment.
I want you to consider this $15,000 price tag in comparison to what you would have done the project for before you read this.
I'll bet you would have done some sort of hourly billing calculation. Figured $45/hr or $100/hr was what you're worth, compared to industry standards (and we talked about those and their value before, didn't we)...and estimated the time required to complete the project. Say 70 hours. 40 hours for the web design, 10 hours for the funnel, 20 more for copywriting. 70 hrs x $45/hr = $3150. At Even at $100/hr, you'd be at $7,000.
Look at how much money you've been leaving on the table. Think about how long you've been leaving it on the table for. YEARS.
Here's a video I made about Monetizing the Problem:
The value of the project doesn't come from the time it takes you to do it.
The value comes from the results!
And this leads to my final point:
It's easier to sell a high ticket item than a low ticket item.
For years, I believed and said “It's just as easy to sell a high ticket item as a low ticket item.” Over the past year, my experience has proven I was wrong.
It's easier to sell a high ticket item compared to a low ticket item.
And if you're in the consulting, coaching, luxury, or many other marketplaces, much more personally profitable, too.
If you're doing low end, commodity retail sales—like Walmart—then you're in a different ballgame...and I'm not talking to you.
But if you work with clients one on one, where every project is a little bit different, where you have to apply your brainpower, this is how you want to organize your business for maximum effect.
Let's go right back to Chapter One.
Price is THE most important factor in your business. Get this right, and everything else falls into place.
All you need is real skill and the ability to truly help people.
You know from Monetizing the Problem your solutions are valuable—more valuable than you have thought.
So start feeling totally comfortable charging the right amount for them.
The right price stops you from worrying about paying your bills.
The right price makes it possible for you to afford marketing for your own business.
The right price forces you to stop wasting your time with the wrong prospects.
The right price directs you to find and speak only with people you can really help and get amazing results for.
The right price filters Out struggling, failing prospects and filters In successful, action-taking prospects.
Who would you rather work with?
Here's the real secret: having a high price relative to the rest of your market attracts those prospects who are already doing well. They have money. When someone has money, is it a fight to get paid for your services? No! The struggling prospect is at death's door. For them to pay for your help, they have to figure out how. The already-achieving prospect has money. They simply hand it to you. No wrestling.
Understand how transformative this is. Instead of struggling for every order, you will seek out and convert people who have no trouble at all sending over large sums of money to you. This can NEVER happen with struggling prospects—but it's commonplace with achieving ones!
In Chapter Four, we discussed how much time you will need to invest in sorting. What's the payoff, though? Tremendous. Just one client like this can replace three, four, or even more difficult clients who are fighting to make ends meet. And you get paid right up front. So is it worth it? Of course.
Instead of having to do all your fulfillment work for many customers at in the same few days at the end and beginning of the month, which is when people make decisions, you can work at your own pace. Since you only need a small number (one to four) clients a month to hit your revenue target, you'll have all the downtime you need to recharge, get focused, and create truly remarkable results for them.
If you've been overwhelmed with far too many clients and not being able to get really great results for any of them, it's probably going to be tough to imagine how powerful this change is. When your energies are split in 20 or 30 different directions trying to serve so many clients, it's exhausting. I know. When you start the month having already made your revenue target figure, and all your bills are already paid, you are relaxed in a way you might not be able to feel yet. But once you get your first “big” client, it will totally change your life for the better—and after a few months of repeating this success, you'll find it impossible to go back to the old, struggling way of doing business.
So set your price, and start filtering by that price.
If 5-10% of a prospect's problem or opportunity is not at or above your price bar, move on. Find this out as soon as possible. Don't waste time with small fry. You can achieve this in four minutes or less—I do it over the phone all the time. People have no problem discussing these figures.
For instance, if your revenue target is $4,000 that is 5% of $80,000. In a real business, $80K is a small “bump” figure; you should have no trouble finding a prospect with that size of problem or opportunity. Before reading this report, though, I'll bet you would have been content to have charged a tiny amount for your services and fixing their issue. Now you know how to have the client arrive at the investment figure themselves, so there's no arguing.
Let's get a bit more ambitious. With a revenue target of $10K, you need someone with a $200,000 problem—or perhaps two clients with $100K opportunities. Again, not difficult to uncover...but you must put your prospecting time in as explained in Chapter Four.
Part of the problem here is you may have trouble believing you can close clients for these amounts. I caution you to remember that the way they buy is not the way you buy; the number you think of as “a lot of money” is not the number they think of as “a lot of money”. $10,000 might seem like a big number to you. To a profitable business, $10K is spare change. Lunch money. You can get them $200,000 with your solution? They're happy to hand the $10K over. Happy to.
Figure out your price.
Calendar your time so you spend most of your time finding and sorting through prospects to find the high value, achieving, already successful prospects.
Use the Monetizing the Problem tool to get them to come up with the numbers including the price.
Filter who you will take on as a client by price.
Enjoy your money.
Reinvest some of it in your business every month.
Keep it this simple.
I hope you got a lot out of this report. Go back and figure out your pricing. I want to see a bunch of action-takers run with this and really transform their lives.