Value-Based Fees. Alan Weiss

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      Taking a percentage of some arbitrary figure is no better than time unit billing. Why not be paid for the true value you bring? If you don't believe that, the client won't either.

Professions that focus on commodity billing—be they legal, financial, architectural, search, design, consulting, or any other—are those that don't believe their own value proposition in terms of client outcome and therefore can't adequately make a case for it.

EDUCATING THE BUYER INCORRECTLY

      An inherent problem in the lunacy of time-and-materials billing is that we educate the client incorrectly from the first meeting. Buyers are willing to believe that we operate in certain ways—just as the client does—and that those methods of operating will somehow have to be accommodated.

      Yet we often show up as supplicants and fawners, obsequious in our determination to get the business. We position ourselves as vendors and “salespeople” from the outset, not as credible peers of the buyer with our own valuable trove of expertise.

      Hear this: In true client-consultant partnerships, neither party wants to put the other at a disadvantage. Partners simply don't do that to each other. But in superior-subordinate relationships, the superior usually doesn't care, either out of callousness, noblesse oblige, or indifference.

Our job is to educate prospects from the outset about how we operate. That means that certain steps are important to take and others important to avoid. Use the following as a checklist to assess your own effectiveness in educating buyers.

       Prospect Education Checklist

      1 Never quote a fee before project objectives and their value to the client are stipulated (we'll discuss this in a bit).

      2 Don't quote any time unit basis at all.

      3 Explain to the client, if pressed, that single, value-based fees are in the client's best interests.

      4 Resist comparison to other consultants by pointing out that your potential client probably also operates differently in many respects from his or her own competitors.

      5 Never commit to arbitrary amounts of time for the accomplishment of objectives.

      6 Focus on results, not tasks.

      7 Never accept a prospect's conclusion—stated or implied—that you will constantly be onsite or that you're available “on call.”

      8 Emphasize results, not deliverables; in fact, minimize deliverables.

      9 Don't accept contingency fees or “pay for performance”; you're not a seal. Variables are often outside your control, and besides, you're being paid for your best advice. It's up to the client to implement it effectively.

      10 Provide value immediately. Shift the focus to how much value you provide, not how much work there is to be done.

      I've found that in most cases, consultants create their own quicksand by undermining any possibility of establishing value-based fees at initial meetings by ignoring or acting contrary to the rules just stated.

      If you explain to the client that you're a performing horse, the client will understandably ask you to jump over hurdles and stand on your hind legs. If you explain that you're a partner interested in helping generate results, the client will understandably ask, “How do we do that best?”

Two parties are concerned about maximizing results—you and the buyer. But only one of you is concerned about maximizing your fees. If you emphasize the former, the latter will occur. But if you treat these as two separate considerations with the buyer, that person will try to maximize the former and minimize the latter every time.

      Wouldn't you?

THE MERCEDES-BENZ SYNDROME

      People believe they get what they pay for. Moreover, emotion makes them act, while logic only makes them think. Put those two immutable theorems together, and you have what I've termed the Mercedes-Benz syndrome (MBS).

      When people enter an auto showroom today, no matter at what economic stratum, the salespeople don't launch into intricate pitches about the electronic fuel injection or the wonders of rack-and-pinion steering. They encourage the potential buyer to sit in the car and then mention, with a straight face, “You really look cool in that car!” Yes, and the more expensive the model, the cooler we tend to look.

      No one needs a Mercedes-Benz for transportation. Not at that price level, they don't. But a car purchase is, after all, a lifestyle statement, and a Mercedes can begin to look quite reasonable in that light. When women try on a new frock, the sales help always say, “That was made for you; it brings out your eyes!” Despite the fact that I've never understood why a woman wants her eyes brought out, this ploy is always effective, even though it's repeated 26,000 times every day in the same department. When a man orders wine at dinner, the captain always says in response, “Excellent choice!” as the guy preens in that complimentary glow. (Never mind that he ordered Wild Coyote Road Kill or that May wasn't such a good month.)

      Fees are based on perceived value. That perceived value is in the eyes and the cerebellum of the buyer. Consequently, the buyer's perception of value is the first point of attack for a consultant who wishes to maximize income.

      Psychologically, people believe they get what they pay for. Consequently, there is tremendous power in helping the buyer stipulate his or her perceived value from the project and then working to maximize that perception.

Consultants are almost always remiss when it comes to obtaining some agreement from the buyer on the value of the results of the project. Sometimes the consultant is too anxious to attempt to close the sale; sometimes the relationship isn't yet strong enough to do it; many times the consultant feels inferior and not enough of a peer to suggest it; sometimes the skills are missing; and often it's plain sloth.

      Here are some basic questions to use to help the buyer arrive at some measure of value for any given project. You don't need to ask these interrogation-style, but it is a good idea to have them written somewhere and work them conversationally into the discussion until you're comfortable that you've obtained a clear expression of value.

       Thirteen Questions for Establishing Value with the Buyer

      1 What will be the difference in your organization at the conclusion of this project?

      2 What if you did nothing?

      3 What if this project failed (or have these attempts failed in the past)?

      4 What will you be able to do that you can't do now?

      5 What will be the effect on revenues (sales, profits, market share, and so on)?

      6 What will be the difference for your reputation (image, standing, stature, and so on)?

      7 What are the three greatest impacts of the result of this project's success? (People love to think in threes.)

      8 What will your boss's reaction be to this success? (Even economic buyers have a boss; sometimes it's the board.)

      9 What СКАЧАТЬ