This webinar discusses pricing pitfalls and building a pricing system. It is presented by Gus Prestera, a mentor, consultant, and entrepreneur. The webinar will cover countering pricing pitfalls, building a pricing system, and providing a peek under the hood of pricing approaches. It includes slides on assessing various factors like cultural, leadership, timeline, and technical considerations when pricing projects. The webinar also discusses different pricing models like hourly rates, day rates, project rates, and deliverable rates.
2. • Countering the Pricing Pitfalls
• Building a Pricing System
• A Peek Under the Hood
In this webinar:
Gus Prestera PhD MBA
Mentor | Consultant | Entrepreneur
President, Prestera FX, Inc.
gus@presterafx.com
6. How do you drive
that value?
Your
Capabilities
Your
Value
(results)
Value
Drivers
(approach)
“I build
websites”
“…that help
clients grow
revenue”
“Our proprietary
Search Engine
Optimization tools”
“Proven templates
that have been A/B
tested to ensure high
impact”
“Time tested process,
producing 40-50%
revenue increases for
clients”
8. Hourly Rates Day Rates
Project and Hybrid Rates Deliverable Rates
Design Services: (Hourly Rates by Role)
• Instructional Design Associate: $$
• Instructional Designer: $$$
• Senior Instructional Designer: $$$$
Facilitation Services:
$$$$ per training day
Actor (video talent):
$$$$ per video shoot day
Media Services:
$$$ per web page
Media Services:
$$$ per minute of finished audio
Design Services: (Hourly Project Rates by Role)
• Instructional Design Associate: $$
• Instructional Designer: $$$
• Senior Instructional Designer: $$$$
• Hybrid Rate: $$$
Example:
• Your normal rate: $150/hr
• Client says she normally pays $100/hr
• Client agrees that normally the work should take 100 hours
• Client is willing to pay $100 x 100 hrs = $10,000
What if you’re so efficient that you can get it done
in half that time?
$10,000 / 50 hrs = $200/hr
9. Ask your client
contacts
Informational Interview:
“What trends are you seeing in our industry?”
“How has your business
changed over the past
couple of years?”
“What is it about working with
you that your stakeholders value the most?”
“What needs and concerns
are you most often hearing
from your clients?”
“Who are your
main competitors?”
“What do you think differentiates
you from them?”
Check with
Industry Groups
Ask colleagues
in your network
Google
competitors,
clients, pricing
Follow on
LinkedIn &
Twitter
10. On an Ongoing Basis Before Presenting Your Pricing
When Presenting Your Pricing After Presenting Your Pricing
Always meet to go over your pricing:
• Start with business needs, requirements—check
• Go over proposed solution, if applicable—check
• Deliverables, services, resources, process—check
• Pricing options and rationale—check
12. Why
“ ”
1. To respond quickly
2. To leverage my time
3. To gain visibility
4. To present confidence
5. To grow my practice
13. Know Thy Self
Create
Personal
Budget
Estimate
Startup
Costs
Create
Business
Budget
Set
Financial
Goals
Analyze
Rates &
Utilization
Know Thy Market Know Thy Value
Gather
Market
Intelligence
Define
Value
Proposition
Set
Rate
Structure
Upfront
Preparation
For Each
Project
Ongoing
Basis
Scope
Client
Needs
Estimate
Work
Effort
Estimate
Project
Costs
Estimate
Pricing
Bottom-up estimation
Gather
Market
Intelligence
Gather
Client
Intelligence
Gather
Competitor
Intelligence
Consider
Your Own
Situation
Top-down estimation
Apply
Pricing
Strategy
Defend
Your
Pricing
Track Your
Pricing and
Costs
Gather
Intelligence
Build
Estimation
Models
Refine
SOW
Template
Build
Proposal
Assets
Refine
Proposal
Template
Sharpen your tools
Validate
Estimation
Models
Build
Preso
Assets
Invest in sales collateral
14. PRICING YOUR SERVICES
M O D U L E S
1. Primer (20 min)
2. Establish Your Budget (3 hours)
3. Establish Your Rate Structure (2 hours)
4. Scope and Cost Your Projects (4 hours)
5. Apply and Defend Your Pricing (3 hours)
6. Consultant Panel Discussion (3 hours)
7. Write Your Statements of Work (launches Jun-1)
8. Build Your Estimation Models (launches Jun-1)
9. Build Your Sales Collateral (launches Jun-1)
10. Client Panel Discussion (2 hours)
11. Write Your Proposals (launches Aug-1)
12. Present Your Proposals (launches Aug-1)
13. Negotiate Your Contracts (launches Aug-1)
15. Talking Head Video Narrated Screencast
Narrated PowerPoint Animation Screen Text with Images
Picture-in-Picture
18. Bonnie Bell, SHRM-CP
Director, Staff Development
Ballard Spahr LLP
David Manning
Managing Partner
Performance Development Group (PDG)
Paul Schneider, Ph.D.
Senior Vice President, Business Development
dominKnow Inc. (makers of Claro)
Jeff Dorman
Gazelles International Certified Coach
Jeff Dorman & Associates
Belen Bilgic-Schneider
Interactive Courseware Consultant
and Communications Specialist (freelance)
Rich Waite, M.Ed.
Vice President, Learning and Performance
Delta Point, Inc.
John Shaw
Vice President, Customer Success
BravoSolution
Michael Noble, PhD
Chief Learning Officer
Allen Communications
Jim Williams, MS
Director, Talent & Organizational Effectiveness
Carpenter Technology Corporation
Karen Clay Basile, MS
Sr. Director, Learning
Tyco University
19. How much personal income
do you need?
How busy and what rates would you
need to charge to achieve your goals?
What are your business’ monthly and
annual costs?
What are your target rate, discounted
rates, and minimum rate?
What are the project tasks, resources,
timeline, costs, and estimated pricing?
What questions will you ask your client
when scoping new projects?
20.
21. B U N D L E D PA C K A G E S
PRICING YOUR SERVICES
M O D U L E S
Per Unit
Price
Essentials
Bootcamp
$ 199
Professional
Class
$ 499
Master
Class
$ 999
1. Primer (20 min) FREE X X X
2. Establish Your Budget (3 hours) $ 59 X X X
3. Establish Your Rate Structure (2 hours) $ 59 X X X
4. Scope and Cost Your Projects (4 hours) $ 59 X X X
5. Apply and Defend Your Pricing (3 hours) $ 59 X X X
6. Consultant Panel Discussion (3 hours) $ 69 - X X
7. Write Your Statements of Work (launches Jun-1) $ 69 - X X
8. Build Your Estimation Models (launches Jun-1) $ 69 - X X
9. Build Your Sales Collateral (launches Jun-1) $ 69 - X X
10. Client Panel Discussion (2 hours) $ 199 - - X
11. Write Your Proposals (launches Aug-1) $199 - - X
12. Present Your Proposals (launches Aug-1) $ 199 - - X
13. Negotiate Your Contracts (launches Aug-1) $ 199 - - X
Welcome to Pricing Your Services, an online course that gives you a unique inside look at the best practices, processes and tools that enable business consultants to scope, cost and price their services quickly, effectively and confidently.
Welcome to Pricing Your Services, an online course that gives you a unique inside look at the best practices, processes and tools that enable business consultants to scope, cost and price their services quickly, effectively and confidently.
I’m Gus Prestera. In this Introduction section, I’ll introduce you to the Pricing Your Services course.
First, we’ll talk about common mistakes that we make regarding pricing and how this course can help.
We’ll talk about what it means to develop a pricing system and how it can help you grow your business.
We’ll look at the course and how it flows and introduce the toolkit, the workbook, and the panel of experts that will chime in throughout this course.
Let me share with you the five most common and damaging pitfalls that I encounter:
Commodity Trap: This is where you go with the crowd, charging market rates for a standard service that is comparable to what others are charging…while that may sound reasonable, it’s a slippery slope to letting your service become a commodity. And commodities wind up competing primarily on price. That’s not a good place to be if you’re trying to grow your consulting practice.
Falling Short of Awesome: This means you did a good job with your project but you fell short of the client’s expectations, because you didn’t really address their business need. In other words, you gave them what they asked rather than what they needed. This often comes from acting as an order-taker, rather than as a real consultant. It’s important to understand your client’s business needs and tailor your solutions and services to those needs.
One-Size-Fits-All Pricing: Many consultants make the mistake of thinking they should have a single rate that they charge everyone for everything. Price should be a reflection of your value, and your value varies based on the client and which client needs that you’re solving. There needs to be flexibility in your pricing to address different needs and value propositions.
Blindfolded on a Bridge: Some consultants make the mistake of assuming that their price is based solely on their costs. Clients don’t care about your costs. They gauge value based on their own criteria and by comparing across different vendors. You need to understand your client’s business needs and stay on top of the constantly-changing competitive landscape. If you don’t look outward, you are like a blindfolded person walking on a bridge.
This is my price! Sorry: Too often, consultants give off this vibe of being apologetic for their prices. They are ill-prepared to answer pricing questions and stumble their way through these conversations. Their lack of confidence gives a shrewd negotiator an opening to negotiate their price down. Worse, they fear and avoid these conversations and are anxious to get out of them, so they often give up too much too quickly during negotiations. Confidence without arrogance is a key success factor in negotiations.
Many consultants make the mistake of assuming that they define their value…that their value is pre-determined based on their knowledge, skills, experience, education, and credentials. Many consultants have started consulting firms based on that assumption and have been very disappointed.
In reality, value is in the eye of the client. Clients determine your value by agreeing to pay for your services at certain rates. You could have great credentials, but if you don’t satisfy a need that the client values, then it will be difficult to get work from them.
Clients gauge your value based on their own criteria, not yours. Consultants who don’t make it a priority to understand their client’s criteria and adjust accordingly tend to experience a lot of frustration.
Those criteria change over time as their business needs and priorities change, so what they value most today is not necessarily what they will value most next year, so we need to adapt over time. Consulting practices that fail to adapt often falter and wither.
So, if you want to maximize your value, you’ll start by trying to understand what your clients value most today, given the realities of what is happening today in their organization, their industry, and the broader economy. In other words, you need to put yourself in their shoes and assess your value from their perspective. That’s even tougher than it sounds, and yet it can make all the difference between a struggling consulting practice and a booming one.
What the client is really paying for is the value derived from your services. So you need to understand what that value is and highlight it. Otherwise, you risk that the client’s decision will be based solely on price.
Value can be derived from a few different sources:
Growth: How do your services impact the growth of the client’s organization? Do they increase sales, profit, speed-to-market, sustainability?
Productivity: How do your services make the client’s organization more productive? How do they reduce time, costs, or waste?
Peace of Mind: How do your services make your clients feel? Do they reduce anxiety, relieve concerns, increase prestige?
Once you have a handle on what value, or set of values, you provide your clients, then figure out how you’re going to drive that value in your consulting practice. In other words, what are you going to do differently that is going to yield the results that clients value?
Your Value: In this example, a web site developer starts with a set of capabilities—building websites—then looks at it from the client’s point of view and figures out that the reason clients want websites is to help them grow their revenue. That’s what they value in a website and that’s what they want from a web developer.
Your Value Drivers: Next, the web developer looks at what specific things she’s going to do differently that will help clients grow their revenue from their website traffic.
That leads her to brainstorm a number of tools and processes that help drive the valued results.
Your Value Proposition: She can now put all three of those together into a value proposition statement that she can use in her sales and marketing efforts as well as internally in terms of structuring her services and solutions…and all of that then leads to her pricing structure.
As you are scoping the project, part of what you are doing is assessing the risk and complexity of the project, so that you can ensure that your timeline, costs, and pricing are adequate. In your scoping conversations, learn as much as you can about the organizational culture, the leaders involved with your project, the client’s overall timeline, and their internal resources. All of these will potentially have a big impact on your work effort and costs, so the more intelligence you can gather upfront, the better you can anticipate and mitigate the challenges.
Cultural Factors: Each organization has its norms around how they interact with projects like yours.
Collaboration: How collaborative is the culture? Is everything decided in committee or are individual leaders able to make decisions that stick?
Inclusion: How inclusive is the culture? Will you need to involve a lot of different stakeholders or just a few?
Pace: Are they a hurry-up-and-wait culture, a fly-by-the-seat-of-your-pants culture, or a tortoise-wins-the-race culture?
Leadership Factors: The project sponsor, champion, and other key leaders will have enormous sway over the project, so it’s helpful to understand how they typically operate.
Power Dynamics: Who and what will influence decision making and approvals?
Committed/Flexible: How do they handle commitment? Once a decision is made, do they stick with it, advocate for it, and follow through on it or are they wishy-washy and flip-floppers?
Structured/Fluid: How much formality and structure do they need/want? Will you need to document everything or do they operate loosely?
Timeline Factors:
Deadlines & Milestones: What are their internal deadlines? Work backwards from the end state to the rollout date, and backwards from there to the beginning of the project.
Criticality: What is the perceived criticality of this project? Is it mission-critical—linked to a business imperative—or is it only critical for the function you’re working with (e.g., HR), or is it someone’s individual pet project?
Flexibility: How feasible are the project deadlines? If they’re not, do you have room to negotiate those dates? Or, are the deliverables negotiable? Or do they have the budget to do what would be required in that timeframe?
Resource Factors:
SME Accessibility and Responsiveness: How accessible and helpful are internal subject matter experts? They are always difficult to secure and engage, but some projects are more dependent on those individuals than others.
Source Materials: How accessible and helpful are the source materials you’re going to need. Are they available and in useful condition.
Internal Cooperation: How accessible and cooperative will other internal resources be? How responsive will they be to your project needs?
Your pricing will be expressed in terms of an hourly rate, a day rate, project rates, hybrid rates, deliverable rates, and sometimes a combination of these rate structures. By the time we’re done, we’re going to explore all of these. For starters, here’s an overview:
Hourly Rates: At first, if you’re a freelancer, you might just have a single hourly rate that you establish. In this course, you’ll establish a range for yourself, representing the lowest you’ll accept to the highest you can reasonably hope for.
Note that rates can also vary by the type of service you provide or the type of role you play on a team.
Breaking out your rates this way gives you more flexibility to stretch different capabilities and expand your offerings.
Day Rates: A per-day rate makes sense for some services that do not generally break down well to hourly work. For example, actors for video shoots are generally hired for the whole day, since you don’t know exactly when you’re going to need them on set.
Project and Hybrid Rates: Project rates are the equivalent of bulk discounts for your clients. When they buy your time in large blocks, you can offer them reduced hourly rates. Likewise, when they hire you to provide a variety of services that cut across different roles and hourly rates, you could extend a hybrid rate that can be applied universally. This reduces some of the complexity in the pricing.
Deliverable Rates: As your business grows, you’ll find that certain services come up again and again, and it makes sense to simplify pricing by establishing a per deliverable rate structure. Clients generally prefer to pay on a per deliverable basis rather than based on time.
It can be extremely difficult to gather intelligence on what your customers need and are willing to pay, let alone what your competitors are selling and how much they’re charging.
If you had clear visibility into all of this, it would be much easier to figure out how much to charge for things, but you don’t, so here are some hacks to help you gather market intelligence.
Google it! Research online for articles, examples, calculators, etc.
Ask industry groups
Ask colleagues in your network
Ask your client contacts
Don’t just ask people about pricing. Ask them questions that will help you better understand your market.
Be more intentional in how you interact with industry colleagues by working into your casual conversations questions about trends they’re seeing and client needs they’re hearing.
As you meet with different contacts, these conversations will help you start to form a mental picture of the market landscape.
Defending your pricing isn’t about getting defensive or using hardball negotiating tactics. It’s about doing everything possible to anticipate and mitigate objections before they arise; and when they arise, treating them as opportunities to clarify and gain alignment with your client.
On an Ongoing Basis
Defending your pricing is an ongoing effort:
Build your brand (i.e., reputation, differentiation)
Generate strong referrals
Deliver results and value to your clients
Continuously improve your capabilities
Before Presenting Your Pricing
When scoping, costing, and pricing your project:
Listen carefully to your client
Focus on client’s desired business results
Give your client choices to make
Anticipate your client’s needs and objections
When Presenting Your Pricing
Always meet to go over your pricing:
Start with business needs, requirements—check
Go over proposed solution, if applicable—check
Deliverables, services, resources, process—check
Pricing options and rationale—check
After Presenting Your Pricing
After presenting your pricing, tease out objections:
Trial close
Treat questions/objections as opportunities
Solicit feedback
Define next steps and follow-up
Let me share with you the five most common and damaging pitfalls that I encounter:
Commodity Trap: This is where you go with the crowd, charging market rates for a standard service that is comparable to what others are charging…while that may sound reasonable, it’s a slippery slope to letting your service become a commodity. And commodities wind up competing primarily on price. That’s not a good place to be if you’re trying to grow your consulting practice.
Falling Short of Awesome: This means you did a good job with your project but you fell short of the client’s expectations, because you didn’t really address their business need. In other words, you gave them what they asked rather than what they needed. This often comes from acting as an order-taker, rather than as a real consultant. It’s important to understand your client’s business needs and tailor your solutions and services to those needs.
One-Size-Fits-All Pricing: Many consultants make the mistake of thinking they should have a single rate that they charge everyone for everything. Price should be a reflection of your value, and your value varies based on the client and which client needs that you’re solving. There needs to be flexibility in your pricing to address different needs and value propositions.
Blindfolded on a Bridge: Some consultants make the mistake of assuming that their price is based solely on their costs. Clients don’t care about your costs. They gauge value based on their own criteria and by comparing across different vendors. You need to understand your client’s business needs and stay on top of the constantly-changing competitive landscape. If you don’t look outward, you are like a blindfolded person walking on a bridge.
This is my price! Sorry: Too often, consultants give off this vibe of being apologetic for their prices. They are ill-prepared to answer pricing questions and stumble their way through these conversations. Their lack of confidence gives a shrewd negotiator an opening to negotiate their price down. Worse, they fear and avoid these conversations and are anxious to get out of them, so they often give up too much too quickly during negotiations. Confidence without arrogance is a key success factor in negotiations.
There’s nothing inevitable about the Pricing Pitfalls. They’re all things you can address with practice and by putting some thought into your pricing system.
Developing a pricing system means thinking through your pricing targets, rates, and approach in advance, so that you are prepared for the next client request. Doing this legwork will help you in a number of ways:
Respond Quickly: Business opportunities often emerge quickly and with little warning, and having a system enables me to respond quickly. I can sometimes scope, cost, and price projects in a matter of minutes or hours, where others might take days or weeks. Clients notice the difference and appreciate my responsiveness.
Leverage My Time: Business opportunities often emerge at the worst possible times—while I’m really busy doing work for another client or getting ready to go on a vacation. Passing up opportunities simply because I’m too busy to price the project is not acceptable. My system enables me to produce a professional looking proposal very quickly and with minimal fuss.
Gain Visibility: My system enables me to get some visibility into future profits, which helps me plan and better manage my business development efforts. I can make educated decisions about what types of work to go after and which types to avoid.
Present Confidence: My technical know-how and experience are of course important, but closing deals is also about confidence…my confidence in myself and the client’s confidence in me. My system helps me get up close and personal with my business process and costs, and that in-depth understanding of what drives my business gives me a lot of confidence.
Grow My Practice: My system includes a lot of professional looking templates, sales collateral, and proposal assets, which enable me to produce a polished proposal that wows and helps me win deals.
At this point, we’ve worked through the Upfront Preparation and the For Each Project segments of the pricing system. If you decide to continue with the Pricing Your Services course, you will focus on sharpening your tools and building your sales collateral. These will help you refine and streamline your process.
About the Workbook
Included with your purchase is this Workbook (PDF) that you can download (if you haven’t already), save and print, if you like, then use as a companion to the lectures, tools, and templates provided.
The workbook contains any of the slides that have visual aids.
At the top of each page is an outline of the course as a frame of reference.
The bottom right of each page contains the talking points covered in the course.
The bottom left provides open space for you to take notes.
As we were designing and building this course, we got input from a variety of professionals who deal with pricing constantly, some as consultants, some as sales professionals, and some as clients who hire consultants.
Many of these folks agreed to be videotaped on camera to share their insights and experiences.
You’ll see some of these videos sprinkled throughout the course while others are organized into quasi panel discussions, where each person answers the same question but offers their own unique perspective.
Early students have raved about these video interviews.
Since this is a how-to course, we’ve made sure to include lots of tools and examples. The Pricing Your Services Toolkit includes a variety of spreadsheets that you begin using right away without being a spreadsheet whiz.
Turnkey Tools: We walk you through them step-by-step, and each contains detailed instructions. The calculations and formatting are all handled for you, so you just need to input the information relevant to your business.
Full Customizable: If you are a spreadsheet whiz, you can take these tools and build on them, enhance them, and customize them to your preferences.
Be sure to download the Toolkit and other files provided in the course.
Download and save this file.
Input data for your business to help you answer key scoping, costing and pricing questions.
Make any customizations needed to personalize this to your consulting business.
The toolkit will help you answer important questions, including:
How much personal income do you need?
What are your business’ monthly and annual costs?
How busy and what rates would you need to charge to achieve your goals?
What are your target rate, discounted rates, and minimum rate?
What questions will you ask your client when scoping new projects?
What are the project tasks, resources, timeline, costs, and estimated pricing?
And more….
In case you’re not already aware of it, the Pricing Your Services course is designed to help you build your own pricing system, including all of the elements we just discussed. It is made up of multiple modules, each of which is centered around helping you build a key element in your pricing system.
Though you can purchase these modules individually, we’ve grouped them into bundles that will enable you to reach your goals.
Just need the basics? Take the Essentials Bootcamp. Its modules will enable you to develop your budget and rate structure as well as scope, cost, and price your projects.
Going to be doing this often? Take the Professional Class. You’ll learn how to write effective statements of work as well as how to create estimation models and calculators that enable you to streamline your pricing efforts and save time.
Going to be competing in RFP processes? Take the Master Class. You’ll learn how to write and present winning proposals as well as how to negotiate your deals. These are critical skills if you’re going to grow your business in a significant way.