Where else can they achieve a 5X return on their investment?Ī simple question to your buyer: “Would a 5X ROI be an acceptable yield for you?”Īnd if you encounter hesitation, ask: “Where else are you getting a 5X ROI in the company currently?” Your fee is determined by the value you create ($1.5M) and what the buyer sees as a fair ROI. Once the value has been established you’re able to communicate how the investment, your value-based price and fee, is a significant ROI for the buyer and their company. The key here is that you’re not telling the buyer what that number is - you’re asking them questions so THEY are telling you what the value is and they agree to it. It’s based on their current production numbers, employee turnover rate, sales numbers (the list of examples keeps going). They agree that $1.5M is a conservative number. Through these questions, your buyer shares with you that the value for their company as a result of solving the problem at hand will result in a gain of $1.5M over the next 12 to 18 months. “OK, I get that…but how do you get to that $1.5M number? And how do you get the client to agree that $300,000 is fair compensation?” How Value Based-Pricing Worksĭuring your consulting value conversation, you ask the buyer a series of deep and meaningful consulting questions. Your value-based fee for that, you decide, is $300,000. You might identify through meaningful conversation with a buyer that $1.5M in value will be created for them by solving the problem they are facing. You will also be notified when new complimentary consulting trainings and resources are available With value-based pricing, you charge based on the value and ROI you create for your client as a result of the project. It’s based on the project and is most often calculated by the number of hours and days the consulting project will require. You might charge $50,000 for an 8-week engagement. With a fixed fee, you charge by the project. It’s based on how much time you spend on deliverables. Or, you might set your daily rate to $1500. With an hourly fee, you charge by the hour. How is this different from other pricing strategies? Value-based pricing is a pricing strategy where the price you charge is determined by the value you create. Learn To Implement a Value-Based Pricing Strategy.“What if I’m not able to deliver the value?”.“What is a value-based formula or framework I can use?”.“What if I’m not sure about how to approach it?”.Value-Based Pricing vs Cost-Based Pricing.(Most popular fee structures for consultants - data from our 2023 study)Īnd if you don’t think it will work for your business, then there’s a good chance you don’t understand it well enough.īy the end of this article, you’ll understand what value-based pricing is, how expert consultants use it to determine their fees, and know how to implement a value-based pricing and fee strategy in your consulting business.Īnd by doing so, you’ll be able to charge (and earn) far more - all while creating more value for your clients. Many consultants are interested in value-based pricing, but they don’t know how to use it in their business. “I’m not sure I can deliver on the value.”. If you’re not charging based on value and the ROI you are delivering, chances are that you’re severely undercharging. Here’s the truth - you could be earning far more by implementing value-based pricing. You might be familiar with the principles of value-based pricing - but for whatever reason, you’re not applying the principles in your business. You, the consultant, want to earn more money in your consulting practice. She upped her price from $65,000 to $300,000 - and won the project. We discussed the impact the project would have on the client: the value it would create for their business.Īs a result of this conversation, my client learned that they were creating much more value than they thought. They were about to send out a consulting proposal for $65,000. Want to increase your consulting fees with value-based pricing?Ī few years ago, I was speaking to one of our coaching clients.
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