I realize that not many folks are reading my somewhat lamented blog (primarily because this will be my second post) but I’m optimistic that this year will be the year that I start publishing more about the journey from employee to consultant. SkoobMark will pass the two year mark in just a matter of weeks and I’ve learned a great deal that I hope will help someone else make the leap to the consulting world. Because it’s awesome. This post talks in general about three different ways to view how you work with clients and structure your agreements.
By the Hour
While this is a helpful way for you to think about pricing agreements (estimate # of hours X hourly rate = contract value), it has several shortcomings if you present hourly agreements to your clients. Hourly pricing:
- doesn’t take into account the differing values of the work provided and you can get caught up in discussions re: the perceived value of an hour. There’s a big difference between cutting and pasting copy vs. developing strategy but how much of a difference is certainly up for interpretation. BTW, determining an average price is also not a great way to determine work value. What happens when you plan for a 50/50 split and you end up doing nothing but strategy?
- doesn’t allow for “scope creep” or any changes post contract signing without a change order. Anyone who’s worked in the agency space knows the dreaded scope creep discussion with clients is one of the worst discussion to have – and clients hate them too…
- locks you into a discussion of “what days / hours will you be in our office / working on our business?” or (god forbid) the need to complete an actual time sheet
- doesn’t truly represent the value of what you bring to the table as a consultant. How do you put a price on the experience you’ve gained that allows you to complete tasks or plans much more quickly than someone new to marketing? What takes you 30 minutes might take someone with less experience 3 hours…how do you appropriately price this difference and explain it to a client in a way that makes sense?
By the Project
This is my current favorite way to begin (and in some cases, complete ongoing) work with a client. We agree on a list of deliverables, then agree on a price for these deliverables. Post-contract signing, it’s up to me to complete these in the agreed-upon time frame. Rinse and repeat. I’ve done projects that have taken a few weeks and projects that have taken several months. Setting a price at the beginning for the entire project provides a level of comfort for me as the consultant and the list of deliverables gives my clients an understanding of what they’ll receive and at what point in the project each deliverable will be completed. This strategy also helps control scope creep because you as the consultant are working towards the list you both agreed on and nothing else. Worth considering is that project-based work:
- tends to be shorter term and can make longer-term cash flow prediction challenging (which also impacts your pipeline)
- may limit how the client views you and your contribution. If you are focused solely on your list of deliverables, you may not know how the business is evolving throughout the time you work with your client and make the deliverables you are providing less valuable
- can be as rigid as hourly based projects, just in a different way
My husband will tell you that this is his favorite way for me to work with clients. Long-term retainers are great for reliable cash flow and open doors within client organizations that remain closed for consultants that may be viewed as short-term, stop-gap support staff. I execute longer-term retainer agreements when there are likely to be shifting client needs or with smaller organizations that need help in a variety of areas. This allows me to step in where needed without having to talk price or deliverables and eliminates the discussion around scope creep. There are some pretty significant drawbacks to these types of arrangements though, if you fail (as I do) to set and re-set boundaries for this type of work. You can easily get upside down, giving more time to a retainer client than you planned or budgeted for, driving down your income potential. Retainer agreements:
- provide good value to clients that aren’t looking for a specific project to be completed or need longer term support in a variety of areas
- reassures clients that you are around for the long haul and can be involved in meetings, projects and planning to support a variety of initiatives, not just the agreed upon project work
- can quickly turn disadvantageous if you don’t establish boundaries to keep a retainer client on track
- can result in client dissatisfaction if you aren’t religious about status meetings and ensuring the client knows what you’ve been working on and delivering to grow the business
Hopefully this gives you some food for thought as you draft your next client agreement. I’m always happy to talk shop if you have some ideas to share or any questions about how I’m structuring my current agreements and I’d love to hear from you: [email protected]