Pricing 101: Fee advice for consultants, coaches
Not getting the income you need from your consulting business? Bonita Richter says you may need to change your mind set.
That means taking what for many entrepreneurs is a serious plunge into reality and, gulp, raising fees.
Although Richter's Palatine-based business, BonitaRichter.com, focuses on women who run consulting or coaching businesses, small business pricing issues aren't gender specific. For that matter, Richter's concepts apply to restaurants and widget makers as well as coaches and consultants.
Richter knows. Until she left in April, Richter had been the first manager at the Illinois Small Business Development Center at Harper College's Schaumburg offices. Previously, the SBDC at Harper had been a branch of the SBDC at Elgin Community College.
The business owner's mind set can be a problem. "Women have less confidence charging what their services are worth," Richter says. "Most undercharge. Their mind set is the biggest obstacle to getting the fees they want."
Eureka moments do happen, however. Richter's ideas "clicked in my brain," says Andrea Herran, principal, Focus HR, Port Barrington. "I started my business because I know HR, but I didn't know much about selling and marketing my services."
The click came when, with Richter's help, Herran realized, "It's not about me. It's about what my clients need; what's going on in their heads; what keeps them up at night, and how I can help.
"By listening, I started to understand. It's not the number of hours I put in (and charge for); it's the value I present to a client."
That's an important realization. The business owner "must realize the value of her services and (often) package them in a different way. It's 'How can I help you?' rather than 'What can I sell?'" Richter says.
There are two ways to raise fee income, according to Richter. One is simply to up the rate.
"I tell them to raise their fees 20 percent," Richter says. "Most business owners are afraid to do that, but the truth is that most clients won't complain," especially when the conversation "focuses on the results someone is getting.
"Looking at the value (a consultant provides) justifies the price."
Repackaging services — perhaps a flat fee solution to a client's problem rather than a list of hourly, often a la carte services — can generate more income. Herran's small business clients, for example, "wanted HR projects with a beginning and end." Such projects, aimed at achieving positive results rather than detailing hourly fees, have made Focus HR's services easier to sell.
There is one other issue: How much should you charge? "What do you need to live on?" Richter counters. "If you need $4,000 a month to pay expenses, add 50 percent for a cushion and aim for a $6,000 monthly income."
• Jim Kendall welcomes comments at JKendall@121MarketingResources.com. © 2012 121 Marketing Resources, Inc.
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