3 Types of CEO. Listened to a podcast interview here of Reid Hoffman sometime ago, but most distinctly remember his comment about the 3 types of CEOs. As the founder of Linkedin, he enjoyed the CEO role at first, but as the company grew, he enjoyed it less and less. Why? Because it was a different job – even… Read More »
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It rained last Sunday in Atlanta. Spent a few hours working on a jigsaw puzzle in the kitchen while drinking coffee and eating chocolate. The good life. Get a good puzzle. Sometimes, you want to do something mindless besides binge-watching Netflix. Yes, yard work is good. A 4 mile run is good. So are old-school, jigsaw puzzles. Easy ones. Attractive… Read More »
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Gap analysis is exactly what is sounds like – figuring out how far you are from a particular goal or target. Consulting firms do this all differently. It takes many forms, but is super common. In fact, I can’t think of any project where we did not include at least one gap analysis somewhere. Nothing fancy. While… Read More »
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We recently asked over 25,000 consultants about their approach to pricing and fees as part of our 2017 Consulting Fees Study.
Below you’ll find the results from our survey as well as my commentary and observations.
The most common pricing structure and approach for consultants is project based pricing.
However, when you combine hourly rate and daily rate pricing (both are often, but not always, driven by number of hours involved) the ‘Hourly’ driven approach has the majority at 41.3%.
Consulting fees based on a monthly retainer equal 15.1% of the total.
43% of consultants who participated in the survey earn $5000 or less per project.
About 15% earn $5,000 to $10,000 per project.
13% of consultants earn between $10,000 and $20,000 per project.
13.9% of consultants charge on average between $20,000 and $50,000 per project.
8% of respondents charge $50,000 or so per consulting engagement and about 6% charge over $100,000 per project.
A whopping 80% of consultants would like to earn higher fees. While about 20% are happy with that they are currently making as a consultant.
The chart represents monthly income.
Almost 50% of all consultants who responded to this survey are earning less than $60,000 per year as a consultant.
However, 22% earn up to $120,000 per year and 20% earn up to $240,000 per year.
A minority of this group currently earns between $300,000 and $1.2M or more per year.
54% of consultants run a high margin and usually very profitable consulting business and enjoy a 60% or greater margin.
The largest single majority, at 25.5%, enjoy an 80% margin or better. Few businesses have such a great margin.
About 22% of consultants run their consulting business at a 30% or lower margin.
23.7% of consultants have been consulting for over a decade. 35% or so have been consultants for over 7 years.
Close to 40% are new to consulting and have been consultants for less than two years.
A large majority, almost 60% of all respondents are based in North America.
While Europe, Asia and Africa being the next largest with about 33% collectively.
The next thing I did was look deeper into the data and cross-reference different categories. Here are some additional insights for you.
Consultants earning over $20,000/mo are split almost equally between project based fees and hourly and daily rate pricing structure. This is the same for consultants earning $10,000/mo or less. On question we’ll look at in a further study is “The intensity and number of hours worked to generate a certain level of income.” I believe we’ll see consultants using a project based fee approach will conduct their work with more freedom, flexibility and less time intensity.
While consultants who try to figure everything out themselves and don’t take the time to really learn how to grow their business the right way or are not committed to consistently implementing are the ones that struggle.
Another interesting finding is that many consultants are earning well into six-figures in their first 1-2 years as consultants. And this study showed that there are plenty of consultants who have been consulting for over 10 years and yet still struggle to create a high-level of income.
Why?
My observation from coaching and working with hundreds of consultants is that those that focus on their marketing and have a clear plan of action are the ones who most often reach six-figures, then into mid-six figures and then create million dollar consulting businesses – and this can happen quickly.
While consultants who try to figure everything out themselves and don’t take the time to really learn how to grow their business the right way or are not committed to consistently implementing are the ones that struggle.
The consulting industry continues to grow as we see the number of consultants who are new remains strong.
What other questions would you like answers to? Let us know and we’ll share them in the comments below or include them in our next Consulting Fees Study.
To all those that participated, a big thank you!
If you enjoyed this study and feel it would be helpful for people you know please click below to share it now on social media:
2017 Consulting Fees Study is a post from: Consulting Success
“That would absolutely freak me out,” my client said.
“Why is that?” I asked.
“Well, because lots of things could happen…” the client responded.
I went on to explain the reasons for considering offering a guarantee. And by the end of our coaching call, my client knew exactly what to do.
You can find plenty of research that suggests the benefits of offering a guarantee. Conversion Fanatics found that adding a guarantee increased sales 26%.
Neil Patel also found that offering a guarantee increased his sales by 21%.
Now if you’re following this discussion closely, you’ll notice these examples are for products, not services.
So, can consultants benefit by offering a guarantee on their services?
Here’s the thing. Don’t guarantee something you can’t control.
Well, let’s consider the example of BBBK, a pest-extermination company owned by S.C. Johnson and Son. In a HBR article many years ago, Christopher Hart shared how BBBK was able to charge ten times more than its competitors and still maintain a disproportionally high market share in the areas where it was operating at the time.
“But Michael, I’m a consultant, not a pest killer,” you might say.
Yeah, I know, but look for the similarity in the situation, not just the differences.
When you open your eyes to opportunity, you will see it all around you.
BBBK provides services to its clients that include restaurants, high-end hotels, and other businesses. Like a consultant, they are serving the B2B market.
One consultant in the big data and analytics space has a low-key guarantee that reads:
“We bring experience in big data and analytics to help ensure that your business can access data for insights that enable better decisions and create value. We guarantee results.”
Another consultant in management gets much more specific with his guarantee:
“My fees are based on your unconditional satisfaction: If you do not feel full value was received, you can decide how much value you received and pay only that or nothing at all.”
And here’s one from a consultant in the engineering space:
“I will deliver the results we agree to. If we don’t achieve them within the timeline agreed, and as long as you’ve followed my recommendations, I will continue working with you to deliver the results at no additional cost.”
Some consultants worry that guarantees are risky and choose not to offer them.
I think that’s short-sighted and a weak reason not to offer one.
Think about it. If your clients weren’t happy with the work you’ve done together, wouldn’t you do whatever you could to ensure they were happy?
Even without a formal guarantee your goal, if you care about your clients, is to always provide them with value.
If you agree with this, it’s as if you are already offering a guarantee but simply choosing not to state it – which means you’re not getting the benefits that doing so provides.
The main concern consultants have is that each project comes with variables that are out of their control. Which means that even if they do their best and perform their work flawlessly, the project may still not be completed on time.
Not necessarily because they didn’t do their part, but simply because something happened with the client or company that delayed or changed the timeline.
Here’s the thing. Don’t guarantee something you can’t control.
You see, a guarantee will help you win more attention, interest, and trust. It will probably create more opportunities to have conversations with your ideal clients.
If your guarantee states that you will complete the project on time and on budget every time, ensure that you also state this is based on the client keeping up with their responsibilities and timeline agreed to.
A guarantee is a two-way agreement you make with your client. Both sides must stick to their obligations for the guarantee to be valid. If a client doesn’t put in the work or implement your recommendations, there’s no way they will get the results you both discussed and agreed to.
Some consultants mistake a guarantee for a contract. The two are not the same.
While you may choose to add a guarantee to your consulting website, you certainly aren’t guaranteeing that it applies, or is offered, to any company in the world.
You see, a guarantee will help you win more attention, interest, and trust. It will probably create more opportunities to have conversations with your ideal clients.
And it is those conversations that will enable you to determine whether the buyer is the right fit and whether you feel comfortable extending your guarantee to them.
If you’re going to offer a guarantee, do it with pride and make it count. Here are x tips to keep in mind:
That is the question my friend.
Offering a guarantee is not a requirement for success in the consulting business.
There are many examples of consultants who do not offer guarantees and run thriving practices.
… and there are plenty of consulting firms that do offer them and do exceptionally well.
So should you offer a guarantee?
It depends. Consider these questions to guide your decision:
If your answer is yes to any of the above, you could benefit significantly by offering a guarantee.
Would you like my help to develop your marketing and messaging together so you can attract your ideal clients and create a marketing system that keeps your pipeline full of opportunities with high-paying corporate buyers? That’s exactly what we help consultants with in our Accelerator Coaching Program: Apply Now
Should Consultants Offer Guarantees? The Answer May Surprise You… is a post from: Consulting Success
The Financial Times wrote a short scathing article on the management consulting industry here. Some valid points, but clearly a quickly assembled article with a Warren Buffett quote and visual used as a wrapper. If you are going to argue that a $133 billion industry is a “curse”, do a good job. Calling consulting a curse is 1) odd… Read More »
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Everyone understands inventory. It’s the stuff sitting on Home Depot’s shelves. It’s the frozen pizzas in the freezer. The unsold house in the neighborhood. The empty hotel rooms and empty movie seats. Non-billable consultants are no different. Non-billable consultants should either be selling new projects, or they are inventory. It’s complex. Inventory can be tricky… Read More »
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