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Why sticking to old pricing strategies could be the biggest mistake in your consulting career

Published about 2 months ago • 6 min read

Welcome to a deep dive into the art of crafting compelling proposals and smart pricing strategies for consultants.

This guide is designed not just for quick wins but to fundamentally reshape your approach to consulting pricing and proposals.

Decoding the Essence of Proposals in Consulting

In our program, we break down proposal creation created via two distinct approaches:

  1. Proactive Contact: This involves actively reaching out and initiating conversations, perhaps via LinkedIn or other channels. This approach is about planting the seeds for future opportunities, which will eventually lead to proposals. If you have a less experienced team selling for you or you yourself don't want to master the art of conversational sales calls, you should consider a standard pitch deck - the topic of a different newsletter!
  2. Current Conversations: This hinges on the discussions you're already having with senior executives. Here, you've established a level of trust and have begun diagnosing their issues, paving the way for a tailored proposal based on the unique circumstances you've uncovered.

[ This newsletter edition has also been published on Linkedin HERE - You can read it in your inbox or head to Linkedin and get involved in the conversation]

A successful proposal in consulting bridges the gap between these proactive strategies and ongoing dialogues, culminating in a document that confirms and solidifies the mutual understanding reached during these interactions.

Navigating the Pitfalls in Proposal Creation

Creating a proposal can be a minefield and here are some common pitfalls I see Consultants make, and how to avoid them:

  1. The Blind Proposal: One of the cardinal rules in proposal writing is never to surprise your client. Your proposal should be a natural continuation of your previous conversations. It should reflect a deep understanding of the client's problems and offer solutions that you've already begun to explore together. It should be a written confirmation of what you've already discussed and agreed in principle. Never send a completely blind proposal.
  2. Personal Touch in Presentations: Wherever possible, present your proposals in person. Even if they are a simple 1 page page text style proposal. This approach adds a personal touch and allows for immediate feedback and clarification, thereby accelerating the decision-making process.
  3. Competing With Yourself: I see this simple to fix error very regularly and it's easy to fix. Here. you are presenting a shopping list of options which leaves the prospect uncertain which ones they need. If they choose Option C, do they still need that line item for training?. If they choose Line item 6, do they still need the data analysis? This causes confusion and a situation where you are competing against yourself. Keep it simple! Have a 3 tiered option where the wording in Option 2 is exactly the same as Option 1 but with an additional service item at the end. See the image below for a good example of this.

Crafting Proposals That Win

A winning proposal is not just informative but also persuasive. Here’s how to structure your proposal for maximum impact:

  1. Highlight the Current Challenge: Delve into the client's immediate challenges. Address both the direct and indirect costs and the opportunities they might be missing. Most importantly, emphasise the cost of inaction.
  2. Paint the Vision: What does success look like for your client? Define the rewards and outcomes of achieving their goals. This section should be aspirational yet achievable, providing a clear contrast between their current state and what they could achieve with your help.
  3. Methodology and Approach: Detail how your services will bridge the gap between their current state and their desired future. This section should showcase your unique approach and why it’s effective. A potential client is going to be sceptical - even if you have pages of social proof. They need to see that you have a model or process that will operationalise the results in their business.
  4. The Action Plan: Include a clear plan of action in your proposal. This should cover the scope of work, timelines, and, crucially, the pricing. Be transparent and upfront about investment and what each fee levels entails.
  5. Terms of Engagement: Lastly, outline the terms of engagement, payment terms, and any other contractual elements in clear, unambiguous language.

Pricing Strategies for Maximum Impact

Pricing can often be the most challenging part of proposal development. Here are some strategies to consider:

  • Value-Based Pricing: Move away from time-based pricing to value-based pricing. This involves setting prices based on the value or outcome your service provides, such as increasing efficiency, reducing costs, or driving growth. While this is the 'holy grail' it can often cloud you judgement. Don't worry if you can't work out a strategy to charge vlaue based fees. You aren't doing anything wrong. It isn't a strategy for everyone. In many instances you are much better off focusing on project (not day rate) pricing.
  • Competitive Pricing: When facing competition, create a basic service offering at a competitive price but with added value compared to your competitors. This demonstrates that you’re not just competitive on price but superior in value. Then add a tier at around 20-30% more than the entry level price but with a huge amount of added value that makes the entry level decision look like a risk rather than an opportunity.

  • Internal Resource Comparison: If a client is considering using internal resources, illustrate how your services, even at a higher price point, offer greater value and efficiency. How will it be quicker? Can you create 'world class' not just industry standard?

  • Speed as a Premium: If you can deliver results faster than the norm, use this as a justification for higher pricing. Speed can be a significant factor for many clients, and they may be willing to pay a premium for quicker results. Most consultants really mess this up because they are so entrenched in a day rate determination of pricing. If you can do it in 20 weeks and the industry norm is 40, you should be pricing at the 40 week level plus a premium. Not at the day rate determination of what it would be for a 20 week project.

Real-Life Application: Case Studies and Examples

To bring these strategies to life, let’s look at some examples:

  • Case Study on Decreasing Churn Rates: Suppose a consultant is tasked with reducing employee churn rates from 40% to 30%. The consultant might price this service at £50,000, not based on the time it takes but on the value of the outcome – reduced churn rates leading to lower recruitment and training costs and also the realisation of the value those employees would create for the business.
  • Competitive Scenario: If a competitor bids £25,000 for a project, instead of just matching the price, the consultant could offer a basic service at £28,000 but with additional value-added services. This positions the consultant as offering more than just a competitive price. The 2nd tiered option priced at £33,000 with a whole stack of value added additions far in excess of the £5K extra now make the £25K option a major risk - not an opportunity to save money.

Financial Justifications in Proposals

A crucial part of any proposal is the financial justification. This involves demonstrating the return on investment (ROI) that your client can expect from your services. For example, if your service helps a company secure £5 million in grants, show them how this outweighs the cost of your £50,000 fee.

  • Illustrating ROI: Use concrete numbers to illustrate the potential return. If your service is designed to increase a client’s revenue or reduce costs, quantify these benefits in your proposal. For instance, if your consulting service can increase a client's revenue by 10% and their current revenue is £1 million, that's a potential £100,000 increase, far outweighing your consulting fee.
  • Risk-Adjusted Returns: Consider presenting risk-adjusted returns to demonstrate a realistic outcome of your services. If there's a 75% chance of achieving the desired outcome, factor this into your financial projections. This approach shows that you're realistic and have considered potential risks.

Incorporating Client Feedback and Tailoring Proposals

  • Client-Centric Approach: Tailor your proposal to address specific client feedback or concerns. If a client has expressed particular pain points during your discussions, make sure your proposal directly addresses these issues - in their EXACT words.
  • Iterative Refinement: Be prepared to refine your proposal based on client feedback. The best proposals are often the result of an iterative process, where you work collaboratively with the client to fine-tune the approach.

Tips for Effective Proposal Writing

  • Keep It Simple and Clear: Avoid jargon and complex terminology. Your proposal should be easily understandable by all decision-makers, not just those with technical expertise.
  • Focus on Benefits, Not Features: Highlight how your services will benefit the client, not just the features of your services. Clients are more interested in how you can solve their problems and help them achieve their goals.
  • Use Visuals Wisely: While it's important to avoid cluttering your proposal with unnecessary graphics, well-placed visuals can help to illustrate key points and break up text. I prefer plain text but if visuals are going to add value it is likely they will be either 1) Your model of how to operationalise the results in your clients business and/or 2) Your risk adjusted ROI projections.

Proactive Follow-Up: Don't just send a proposal and wait. Schedule a follow-up meeting to discuss the proposal in detail. This shows your commitment and can often help to expedite the decision-making process.

Turning Proposals into Partnerships

A well-crafted proposal and a smart pricing strategy can transform a potential client into a long-term partner. It's about understanding the client's needs, aligning your services with these needs, and communicating the value you can deliver.

Remember, your proposal is more than a sales document; it's the foundation of a future working relationship. By following these guidelines, you can create proposals that not only win business but also build lasting client relationships.

If you want an expert outside perspective on you proposals and client conversion system - reply to this email and I'll take a look at what you've got going on and make some recommendations for you.

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I’m Peter O'Donoghue, a consultant & advisor to consultants. Enter your email below to get my free "Get Consulting Clients Fast" ultimate guide and video training. And you'll also join 2560+ Consultants to get actionable content on building consulting offers, getting clients and building repeatable marketing systems.

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