You’ve heard it before, “Sure, we'll pay you in seven days.” Too often those words…
An Agreement Is an Agreement
We make agreements every day. Some are as simple as agreeing to pick up milk on the way home from work whilst others may be more complex and subject to lengthy legal documentation.
I believe that once you’ve made the agreement, you need to stick to it unless you negotiate a variation to that agreement.
When you’re in the business of serving others, the temptation is to massively over deliver. We’ve been told to provide value and where possible to deliver just that bit more value than the client was expecting so that they want to do more work with you and become a raving fan.
Value-based pricing has been an option to how you price your services, and Alan Weiss was the first person I came across who promoted the concept in 2002 in his book, Value-Based Fees. The key being to identify what financial gain your client will receive (whether increased revenue or reduced costs) and then put a price on it that is a percentage of the financial gain.
One consultant I know does this extremely well and his fees would at first glance appear extremely high, but when you take into account the training and thinking he puts in as well as the time involved in preparing the advice, the fee is actually very reasonable. His expertise is unique, and you wouldn’t be able to get it elsewhere.
Growing up in Canada I remember the story of “Red” Adair, a notable American oil well firefighter who was asked if he would come and cap an out of control fire to which he replied that his fee was $1 Million (I don’t recall the figure, but it was in the 1970’s, and it was an astronomical amount of money at the time).
The oil company agreed, “Red” flew to the site and in a very short period of time capped the oil well. The oil company executives were appalled that they’d paid so much for so little work. Red’s reply became a classic line,
“If you think it’s expensive to hire a professional to do the job, wait until you hire an amateur.”
Just recently I was working with a consultant who had quoted an hourly rate to do a specific project for me. The first phase was time spent with me to discuss the details of the project and scope out in more detail what was required. During the course of our time together the consultant suggested we do some other work that was related and would potentially assist in the direction of the project.
The consultant on a number of occasions throughout the day said that the value being provided was so much more than the hourly rate being charged and whilst I thought it was mentioned a few too many times it seemed to me that the consultant was seeking affirmation about the work being done.
At the end of the session, the consultant asked me to determine what value I had got from the session and to pay that amount, that the value provided was so much more than the hourly rate we had agreed beforehand.
I was shocked. Firstly, the project that I had hired the consultant to do wasn’t done, and now I was being asked to change the agreement after the event.
There was plenty of opportunities to have renegotiated the fee during the course of the day. As the consultant, it is your responsibility to have the discussion around fees and any variations to the agreement.
I learnt a few lessons that day that you may find useful when entering agreements when you’re the consultant:
1. Make sure that the objectives and outcomes of the work are clearly stated and agreed.
2. Once you’ve set your fee, live with it.
If you want to give more either do so with no expectation of further recompense or offer the additional service as another project with a value-based fee to deliver at another time.
3. Over-deliver on the value.
I do this regularly. My consulting clients often get hours of extra work from me because I want to help them succeed and I love what I do. So, I put in the extra hours without ever charging them for it.
4. At the time you entered into the agreement you were happy to do so.
Don’t then give so much of yourself that you feel cheated and try to put the guilts on the other party that they haven’t paid you appropriately and leave them with a sour taste in their mouth.
Whether you quote in advance using a value-based pricing approach, agree on an hourly fee or a flat fee, you’ve made an agreement.
The only way, I believe, to change that agreement is to have a conversation about it before doing additional value work.
“The opinions expressed by Smallville Contributors are their own, not those of www.smallville.com.au"
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