White Papers & Articles

​In this weeks Monday Quickie Recap we talk about our article ‘How to be Successful in the Start-Up World’ and the importance of working outside of the box and your respective job description, as well as the impact good/ bad leadership can have on small companies.

Think back to the last time you experience a moment where during a conversation an elongated pause or silence occurred between you and the other person, inevitably leading you to think in the moment “this is awkward”.

​Perhaps you were in a social setting, on a date, in a debate, or even at work.  Whatever the situation may have been it’s highly likely you did or thought about saying something in moment just to end the awkwardness of the deafening silence between you and the other person.  If in fact you acted and said something in order to break the uncomfortableness of the silence know that you just failed one of the basic lessons taught to many professionals about the art of negotiations.

​Don’t feel bad, it happens to all of us.  Here’s why…

While the situation you were just thinking about may not have had anything to do with a negotiation, the action you took and therefore the outcome is all too reminiscent of a typical negotiation setting.

Did you know many people in a professional ‘buying’ role are trained on how to deal and negotiate with a seller?  Meaning, they’ve been taught a ‘buyers strategy’ on how to negotiate with sellers in order to get an outcome which is more favorable to them as the buyer.

I know this because I’ve been through the class.  Many companies train their key people in decision making positions, such as leadership, buyers, purchasing, contract managers, etc. to use an interesting tactic in negotiations which is the ‘pause’.  It’s a devilish and fairly simple tactic that works like a charm with sellers, especially those who aren’t particularly skilled with negotiations.  Here’s how the ‘pause’ from a buyer works:

Seller: Well Tom, we can certainly provide you with 10k units of ABS molded tubing at $3.85 per meter.

Buyer: Doesn’t say anything in response to the sellers pricing comment; buyer just sits there with a smug look on his face starring at the seller creating an uncomfortable and certainly awkward silence.
Seller (20 seconds into the awkward silence): Actually, you know what Tom, we can probably get that number down to $3.40 per meter if you’re able to sign off on a PO today.

And there you have it.

The art of negotiation at times is nothing more than a pause; flat out no response at all, no reaction.  When an inexperienced seller is confronted with a pause in a negotiation they squirm in their seat to the point where they feel compelled to say something in an effort to get out of the awkwardness and hopefully move the discussion closer towards the sale.  They then break the number one rule of negotiations, “whoever responds 1st loses”, and blurts out another offer.

The buyer may have had every intention to buy the sellers product, they were just trained better in the art of negotiations to know that sometimes patience and not responding to the first offer can get you a better deal.

It happens all the time.

If you’re a consultant the art of negotiation is very much the same.  Many times a client early in a conversation will put a consultant on the spot by asking “what is your rate?”.  Most people and or consultants hate that question, especially if it’s early in the discussion as they haven’t been able to ask enough questions to better understand the client or buyers needs.  As a result, the consultant throws out a figure with limited information which further puts him or her in a back peddling position defending their rate and or service with the client.

If you find yourself in a conversation where the rate question comes out early in the discussion the best way to address it is, yep, you guessed it – use the ‘pause’.

Pauses also work on the sellers side too.

Utilizing a pause, a momentary stalling in discussion, allows you to adjust and think before blurting out an answer.  Peter Bregman’s book ‘4 Seconds’ talks about the power of pause and how even a 4 second pause before responding can dramatically improve your outcomes.

“What’s your rate?”, the buyer asks.

“My rates are based on the work I’m performing, length and difficulty of the project.  For this reason I don’t use a standard rate for my work and would need to understand more details of your project before I can ensure I’m the right person for the job.”

Basically, you’re saying ‘I’m not a commodity, so don’t treat me that way’.  You also didn’t rush into giving them a price which may or may not be reflective of the work the client needs completed.  You ‘paused’ as the seller and backed up in order to reframe the conversation in a way that helps both you and the client learn more about one another’s capabilities.

Key Take Away:
If you’re in a negotiation don’t rush to fill silence with a comment that might work against you down the road.  Stew in the pause, in the silence.  You may find the person on the other side of the table cracks before you do.

Action Item:
Read the book by Peter Bregman called ‘4 Seconds’.  It’s a quick read and provides great insight and perspective on how utilizing a pause, even 4 seconds, can dramatically change the outcome of your conversations, actions and even relationships. 

The demand for consulting is up, way up! 

The US consulting marketplace has grown consistently over the past decade.  In the last three years, 2015-2018, consulting services have increased upwards of 25% bringing it to an estimated $68.5 billion U.S. dollars.

Demand is up and so is the desire from the US workforce to provide the service. 

Whether you’re new to consulting hoping to dive in to get a piece of the current demand for consulting services, or you’ve been consulting for years, you’ve inevitably been challenged with the thought…

“How should I charge for my services?”

Here we’ll give into a quick and straightforward guide for establishing your consulting fees and the things which need to be taken into consideration before settling on your pricing approach.

#1: Research the local marketplace – it is imperative you understand what the marketplace yields for the consulting services you plan to offer this way you have an understanding of how you fit in with your competitors and their respective offerings. Best way to obtain this information is to ask others in the business, attend events and get quotes from others in similar lines of work.  While you always want to make sure you’re getting paid for what you’re worth, you also need to be cognizant of pricing yourself out of the game.

For example, in Irvine, CA there is a large supply of people offering mechanical engineering design services. Baring any unique or niche expertise the average mechanical engineer consultant charges anywhere from $50-80/hr.  If you’re charging $125/hr for similar services you may find yourself missing out on projects with potential clients because the end user, or client, has too many other reliable and capable consultant options to choose from at rates cheaper than your offering.

#2: Fixed cost vs. time & materials – you’ll need to decide up front what type of pricing strategy you’re going to use.  Fixed cost is when you charge a flat fee or a ‘not to exceed’ fee for work you’re performing regardless of the amount of hours it takes you to get the job done.  Time & materials pricing structures price based on the amount of hours it takes to complete the job.  Read more HERE.

#3: Long game mindset – your pricing should reflect both your experience, capabilities but also your willingness to get repeat business from your clients.  If your rate is higher than the average marketplace rate for similar service you may still be able to get work, however you may find the client doesn’t pick you for additional work or longer projects.  Remember, the higher your rate the higher the clients expectations will be on your performance and the further scrutiny you will receive on your work output. 

#4: Know your profit margin – it’s important you understand what potential profit you stand to make for each project.  Profit is what keeps you growing and stable long term.  If you’re constantly breaking even you leave yourself at risk for unexpected downturns and other things out of your control.  Establish an ideal profit margin per project you want to achieve and incorporate that into your pricing.  Learn how to establish a profit margin HERE.

#5: Flexibility is key – clients like working with consultants that are flexible; if you’re too rigid with your pricing you may find you’ll lose out on opportunities in the long run.  Try pricing your work based on the difficulty of completing the task.  Perhaps you have a minimum threshold you’re going to charge per hour (say $100/hr) and then based on the work you’re potentially taking on you will scale your price upwards by 25%.  It’s not uncommon for consultants to have a pricing menu based on the range of their capabilities and difficulty to perform the work at hand.  We suggest not using a ‘one size fits all approach’ for pricing your services.

#6: Know what you need – while you should never price your consulting practice based on your personal lifestyle (clients don’t care how big your house is, what car you drive or what your bills are so they certainly aren’t going to pay you more just because your lifestyle requires it) it is important to know what you need to be charging in order to meet your personal financial obligations.  Once you know this number go back to step #1 in this article to see if your pricing number is in line with the general market.  Don’t charge more just because you need more to live.  Clients can smell that from a mile away and it’s a big turn off. 

Key Takeaway:
​
Pricing should be based solely on the value you provide.  Your consulting price should have flexibility built into it while keeping in mind the difficulty of the work being performed.  Ensure you know how the marketplace is operating and what others are charging for similar services so you can be competitive with your offering.

Action Item:

Meet 3-5 people in the consulting space which is similar in nature to yours.  Learn about their offerings, how they go about pricing their service and what challenges they’ve had with clients specific to pricing.  The more you can learn from them ahead of your own efforts the better off you’ll be when it comes time to present your price in front of a potential customer.
​