Hi, I'm Samantha Hartley, welcome back to the Profitable Joyful Consulting podcast. Today, we're going to talk about how to price your consulting services. There are many ways to price your services. When I was a brand new baby consultant, the client asked me what my daily rate was and since I didn't have one, I thought, well, how do I come up with this? I had just gotten the price for some tickets for a vacation that were $1,050 a day and I thought that sounds like a good number and the client said yes, so it was a pretty random way to price something.

Years later, I had a client and I was trying to come up with a price and while touring the facility, the marketing manager revealed to me that the marketing budget the client had per year was $68,000 and that also none the marketing was doing anything and so I thought, well, they're currently flushing $68,000 a year down the drain. So I think $60,000 would be a good amount to spend with me and they agreed, and flash forward to very recently, I had a new coaching client and she invested with me $60,000, coincidentally, and it was the most she said that she'd spent for anything in her life except her house. She got a really good return on that investment. But what I think was important is that she then turned around. One of the things she'd been struggling with was not charging enough for her services and working with clients who were too small. So she went right out, got a client and told them that the price was $60,000. Now, by investing with me, she'd expanded her idea of her own value of what she was able to invest in something and she was able to embody it and this client said yes to her.

So pricing is a very interesting area because we're dealing with both art and science. You can hear in the stories I've just told you that perception has played a big role. The art in art and science is about the perception of value. The price is communicating value , and in fact, when all else is the same, price tells you what the value is. So one of the things that is important to do when you're setting prices is incorporating that information, incorporating a lot of information, and also making sure that you're constantly working to elevate the perception of your value, that's the job of your marketing, that's the job of your brand.

Now, the science in pricing is the fact that, you know, there are costs, right? We have time, we have labor and sometimes materials. There are things that you need to consider when you're putting together a price. So I'm going to go through and share some factors that I want you to keep in mind, but before we do this, just speaking of the perception of value I want you to just just think about, is a $3500 car, is that a valuable car? Is that a good car? How about a $100,000 car is, let's say a $100, is that a lot of money to pay for shoes to pay for an app for your phone? Is that a lot of money to pay for dinner? You can hear that it depends. Is the consultant charging $15,000, is that a lot of money? Is that a good consultant? How about $100,000? Is that expensive? Is that a high valued consultant? It depends, right? It depends and so all of what we're doing in this pricing stuff, this whole art and science, is making sure that the client perceives the value and we want to communicate it through our price as much as we can. We also want to make sure that we're honored for the work we put in and for our value.

And that's not always easy to do, I had a client one time who said when she's talking to me about her prices as well, ‘I cost $125,000 for this and I cost $10,000 for this and I said, woa, you do not cost that , you are invaluable, You know, you're this precious gift from the universe to planet Earth you do not “cost” something, you are priceless. What we want to say is my services and then you can talk about cost. I prefer to say the investment in the services is X, but just remember that this is about the perceived value of your services. And because it gets associated with us, it gets really messy. But when we work to increase the perception of value of our services, that is something that we can influence and that is specifically what I want to talk about today. How to make sure that you're honored for your contribution and what factors should you consider when you're coming up with what in the end will just be a number.

Ok? So, let's start with cost, if someone says how much you're going to charge us for that, you're going to come in and work for a certain amount of time and you're going to do a certain amount of things and you're going to get us this outcome, whatever that promise is of what you're going to do, you can calculate the cost of that. And this is one of the things I think is really important, especially if you don't feel like you've been valued for your work enough yet you want to go back and look at what the cost is to you, how much time is it going to take for you to do this or you're going to have to involve other people? Or will there be materials fee? Will there be travel and things like that? Let's look at something like a one hour workshop. Client says, how much would you charge us to do a one hour workshop? Our budget is $1500 and you think to yourself, no, it's not $1500, I'm being paid for an hour, it's that you have traveled to and fro, you have the years of experience, of putting together this information for this workshop, and then you have an actual kind of like materials prep. Are you going to meet in advance with the client and kind of learn more about them and customize it? So you can see that there are many factors involved in cost and a lot of times people will say, sure they’ll do it for $1500 and then later on they feel ripped off and they're not sure why. So cost is one of the many things that is important for us as consultants to to look at to make sure that we don't end up undercharging.

Program development is something really interesting. I worked with some clients who do a lot of training and what they were doing at the time was customized training. So they felt like it was important for every single client to develop the training and they really had a point of view and I said, you don't need to redevelop this every single time you have a point of view, you know the right way to do it. So let's codify that as a signature system. And then when you go into work with the clients, you can say, here's what we're going to do and you bring in what you know is the best way to get the results. Now, the interesting thing was that before, if they were charging, for example, $100,000, about 50% of that cost was the hours of time that they were developing the materials. And so it felt like by going in and taking in a signature system, they were just going to charge like $50,000, not all of the development part and I said, no, you're bringing in those materials that have already been developed and the value of them is at least $50,000. So if you go in and charge $100,000 and that work has already been done to develop the materials, you now profit more than you did before when you were developing, doing the work new every single time.

For them it was the first time that they understood value based, it’s the value of the work it's already done and it contains its own value, like their signature system is worth $50,000 and then taking it in and working with the client is the other $50,000. So that's something that I want you to consider. What's the cost of what you've already done and how valuable is that, that's included when you're going to go in and work with clients.

The second thing that I want you to look at is, it's going to seem weird, an hourly rate, You don't necessarily need to charge the hourly rate, but it's important when you're costing out your services that you have a theoretical number in mind whether you ever tell that to anyone else or not. It's like $500. I want to make $500 an hour,ok good. Well, then make sure that everyone you're charging that all of your numbers come back to at least you clear, at least $500 an hour.

So when I'm costing something out as a project that I haven't, for example, done before, so I don't really know how long it's going to take me. I'm estimating things and I will say I think this will probably take me about 10 hours to do. So personally, and this is a little tip for some of us. If you are a time optimist and you always think things take less time than they end up taking, then you'll do what I do, which is I add 50% or a 100% contingency fee on. Sometimes things take me 50% longer or 100% longer than I think they're going to take. So I will multiply my original 10 hours by, you know, point five or by 100 to get to twenty hours. So if I think it's going to take me 10 hours, I will estimate and put down 20 hours and that way I don't end up, through my own optimism, undercharging. When you're using this hourly estimate, you need to make sure that at least that part of the work that you're doing is covered ok, so thinking about how many hours it is.

In some cases, if you're new or if you have no idea how many hours it will take you, it's acceptable to charge an hourly rate to someone. We won't anger the consulting gods if you say for work on this project, I'm actually just going to charge them by the hour because I have no idea. And over the years, you will learn how long things take sometimes like me, you'll still be an optimus. But you will learn how long things take you and you'll be able to charge either a flat rate for that or something else. But I think it's not a problem if you have had issues in the past with undercharging or underestimating your time or if you're new and you don’t just have no idea how long something will take on a project and it's let's say it's a six month project and they want a flat rate, well, if you were locked into a number, you can really go wrong on something like that. Another time when you might want to look at hourly is the main project work has concluded and the client says, we just want to be able to call you from time to time. Can we do that and will you give us a number that we can use for that? That's why I think it's important to have a theoretical number. Now, what you can say is, if you want to say like $2,000 an hour and they're like, whoa, ok thanks bye, then you know that at least you have a number that you can make available and sometimes that will help you to sell into a package as opposed to an hourly service, or you can say, listen, normally I don't do anything for an hour if I did, it would be for $2,000 an hour but since we've worked together already, I'm happy to charge $500 an hour and just see what works with that. All these numbers are theoretical, you can, you know, your mileage may vary.

So cost and having an hourly number, those are things that I definitely want you to consider. The third thing, and we're really in the science part of the pricing here is like a market analysis, competitive analysis, as someone, me who is inside of a lot of other consultants' businesses. What I can tell you is a lot of people have no idea what other people are charging and that costs them a lot. So I'll have clients who are charging $275,000 and they think that's you know, it's not that much. It's actually reasonable and I have people who are charging $35,000 and they think, well, it's no big deal and something reasonable for pretty much the same stuff. So it's important for you to see what others in your field are charging, I think it's a good reason to be in the community. So you have people that you can call on and I want you to always feel expanded, not diminished, but expanded by what's possible when you look at those numbers. If you're pricing something for a client and you want to benchmark it, that competitive analysis can help but something else to look at is not exactly at what others who do what you do would charge, but look at the solutions the client is looking at. So, for example, if they have a people problem, they might be looking at you to come in for a leadership development program, but they also might be looking at this like e-learning that they could buy. They also have this kind of like, let's say, a tutorial program or something like that and they might be looking at buying books just for everybody. You know what I mean? So there could be a variety of solutions that people are considering or would consider and that's a place that you can kind of benchmark yourself, so that's a market analysis.

The fourth thing that I want you to consider, and here is where we start to get into the art of pricing, is what does your gut say? If you had an intuitive answer to the question, how much do I think this is worth? What is that number? I will ask that every time and very often that number is almost exactly the same as what I charge and I've done this with clients as well. People have, you will have an intuitive answer to what do I think this is worth? If it is crazy, crazy different from what you end up charging then that's the thing to get more aligned with because you know, your intuition is telling you your personal truth and I want you to be charging what your personal truth says.

Another thing to look at before we get too far away from science is reality. If you want to charge certain prices and the reality is just, there's no one in the market who will pay that, that's the thing for you to know. I have talked to people before who are attracted to talking to me because I talk about high tickets and then they'll say, well, these are the numbers that I want to charge. And I feel like, you know, a lot of people think I'll just say yes to whatever, I never because I'm being encouraging but I'm you know, I don't want to be poor, I want you to be rich. And so someone says to me, I think I can be charging like $25,000 an hour and I don't think they are, I don't think they embody that yet. Then I'll say that to them, because I don't want you to go hit the reality that nobody's going to pay you that.

Having said that, a very confident consultant will command way higher fees than someone who isn't standing in the confidence of what they can do and cannot yet embody that value. So confidence is going to get you way further but you still have to look at, is this something that anybody would ever pay this much money for? You know, let's continue to live on planet Earth and make sure that you can get that number if you can try it out. The way to learn is to, you know, to test this out. If you try it out and you constantly get nose to it, then you might find that the reality is it just isn't possible. And I say that, again, like I mean, anything is possible kind of person but I also want you to be rich and not to have to test everything and find everything out the hard way. So there is a reality of the limits of a market.

And last of all value based pricing, so this is probably what you expected to hear on this episode, is for me to talk about value based pricing but there's so much more that goes, as you can hear, into pricing. Value-based pricing basically means that the client pays you for the perceived value, right not for your value, but for their perceived value. And your brand and your marketing can elevate the perception of your value but in the end, value based pricing can be attached to the value of the deliverables or the outcomes that you get.

So let's say it's based on a percentage of growth or percentage of revenues, a percentage of savings. You can track it based on any of those numbers, whatever is the desired outcome of the client and I've seen it attached to all of those things that $800,000 engagement that I told you about was based on what they could save the client. And the client was saving like $35M dollars or something insane, which is why I felt like that project was underpriced, that should get a $3.5M project at minimum, but that was what she could embody. That was reality for her, so that's one of the ways that we arrived at that number.

As far as you know, how do I come up with what I charge based on that value? Will you and the client agree on the value, which is a whole lot of conversation we'll have another day. Once you know what that value is, you can charge any percentage of it, 10, 50%, that's usually the most common, as much as that number you feel like you can get, I had a consultant that I knew who would go in and save clients $10M and they would pay him a million dollars. Could he have charged $3M for that? Sure. If they felt like that was hard or if he felt like he could stand in that value, if the perception was this is the only guy who can do it and it's really important to us to get this done, it is worth $3M. Ok so 10, 50% of that value is going to be the most common range and, you know, see where you land in that.

What is also important in looking at value based pricing is when the value isn't a tangible number. So this is going to be something like executive coaching where it is about life coaching or anything that can't be measured, but what I love about working in businesses is that almost everything can be measured. And honestly, I think you can put a value on anything in life. My brother is an insurance, so I know he's putting values on life all the time. But specifically, if you're something like a life coach or an executive coach and you're just helping someone feel better I suggest right?. Only helping them have a better life, then, you know, you can charge a flat rate for that, it is supposed to be an hourly rate and that's going to be the value. So I would ask someone, well, what would it be worth to you to have, you know, to feel better in your relationships and your health to achieve some of your personal goals, to achieve your professional goals? Well, that's what we're going to work on this year and they say up, it's you know, they'd be great. Ok so, it's $100,000 and I say that because I have life coaching friends who are charging that, I don't think that's too much for a successful person to invest in their own personal development over the course of a year. So that is an option as far as value based pricing, it doesn't always have to have a tangible equivalent, it doesn't always have to be a percentage of something. It just needs to be based on the perceived value the client receives.

So I'm going to recap those, it was cost, you need to know the cost to you. You can base that on your hourly rate, knowing how much it's going to cost you your hours and how many hours you're going to spend on the work needs to be considered. You want to know a market value relative to what others are charging. You're going to check in with your intuition or your gut, which is where the true truth is. You want to pass it through reality because if it won't work in reality, it's all fun and games.

And then lastly, value, checking out that value based price that you can get to. Now, I presented those in a certain numerical order you'd have to run through in that order. It's mostly the things I want you to consider and not necessarily sequential. At a certain point you will be able to develop packages. I mean, you can do this in the beginning, too, but usually after you've worked for a few years and you know how long something takes to get a certain result with a client, you can have a standard amount of time you worked, so standard packages and prices so that you don't have to calculate this every single time for every single client. And this is, by the way, what a lot of my clients come to me for is like, oh, my gosh, we have to price everything individually every single time and it's exhausting us, can we please just build some consistency into this thing?

So that is something that you can look forward to is, you can’t create packages and what you need to know is what's the value to that client? What tends to be your ongoing cost for this? And as you go, your costs are going to be less because you're going to get better at what you do. You're going to have efficiency in it. And that means your profit will be higher. You don't have to charge less because your costs go down. And the thing about packages is resisting doing custom work every time, our work is to take out our signature system, our IP, the way we know how to get results every time and then to apply it to the clients, the work and this is them saying, but how does that apply to me? Or here's what happened to me this week. How do we work with that? If you're on site with a client, and you know you're working with their people, it's like, how does this particular manager apply these principles that you've shared with us, those kinds of things. So the value, I would say, is in that as an application at that point and the information that you need to pull when you're talking with clients so that you can come up with a price. Obviously, you need to know the costs of these things, the value that you're able to bring, what's the problem costing them with their desired outcome, with the timing on this, how quickly do they need this and then use these factors to come up with a price? I think it's going to help you to be more comprehensive with your thought process and after a while, you'll just get in a groove where it will be easier for you to think about these things. And you'll probably be able to just go straight to your gut instinct without having to do a lot of the other math and reviewing when you have a consistent flow of clients who come to you for specific value, which is meaning that your brand is known for something in particular, then you're going to be able to package your work better and you're going to be able to deliver more consistent results and that's just going to make for a more profitable and joyful consulting business.

Years ago, I had a client who I worked with on all of this Pricing work and she said, she was a relationship coach and she had an epiphany in a work and she wrote something to me and I just want to read it to you because I thought it was beautiful she wrote, ‘I am not selling me or even my services, I am selling the promise of fulfilling, enduring relationships and knowing that I am not selling me or my time, depersonalizes the whole issue of money, so much has clicked into place for me, including a higher degree of comfort with fees’. You are priceless, keep that in mind and that is what I wish for you.

If you have any questions, always feel free to leave me a comment or get in touch with me through the profitable, joyful consulting group on Facebook or through wherever you find this podcast. It's been my pleasure to talk with you about this subject. I hope that it enriches you in every way possible.