Value-Based Fees. Alan Weiss
be here.”
Ferrari is a brand that evokes certain immediate understandings on the part of the potential individual buyer:
High cost
Top status
High maintenance
High insurance
High repair costs
Unique image
Personal ego needs met5
You know those things going in, and they are not points for discussion when dealing with a salesperson.
Similarly, McKinsey is a brand that evokes certain immediate understandings on the part of the potential corporate buyer:
High cost (fees will not be negotiable)
Top status (no one can say we're giving this short shrift)
High maintenance (a lot of junior partners will appear)
High insurance (the board can't complain about quality of the help)
High repair costs (they will recommend tough interventions)
Unique image (the cachet alone will raise expectations)
Personal ego needs met (only the best for the best)
You get my point. The mere power of a brand is sufficient to overcome any resistance to fees and, in fact, often elevates fees merely by dint of association with such brand images as quality, reputation, client history, and media attention.
There is no brand as powerful as your name, although strong company brands can also serve quite well. When a potential client says, “Get me Jane Jones” or “Get me the Teambuilder,” that client is articulating a clear imperative: Don't go shopping, don't compare prices, and don't issue a request for proposals; just get me that person I've heard so much about. (That is far superior to the buyer saying, “Get me a great leadership consultant” and your name is one of several in the hat.)
Brands create an upward expectation of both quality and commensurate fees. No one expects an outstanding person to come cheap. You usually have to convince the buyer of that quality through careful relationship building. But a strong brand shortcuts that process considerably. The relationship building still needs to be done (for reasons of commitment, as noted earlier), but the time required is significantly reduced. The buyer wants to be a partner, wants to follow your suggestions, and wants to participate because your credibility has preceded you.
Brands are accelerators of credibility and therefore of relationships. They immediately justify higher fees in the mind of the buyer, and that is the only mind that counts on that matter. Brands are expressions of uniform quality. The ultimate brand for most solo consultants is their name, as in: “Get me Joan James.”
It's not the intent of this book to explore how to create a brand.6 However, it is vital to understand brand importance in the fee-setting process. Like bank loans being hard to acquire when you need them and easy to obtain when you no longer need them, high fees are most difficult when no one has ever heard of you and you desperately need the income and easiest when you're well known and business is rolling in.
Alanism: A brand is how people think of you when you’re not around.
The crime here is that many successful consultants either don't bother to use their past success to create effective brands or have created brands that they don't properly leverage for higher fees. Tom Clancy had never written a book nearly as good as his original, The Hunt for Red October, but he's certainly been paid far more for every subsequent work than for that first effort (and the writers now supporting his brand long after his death). He had been a smart marketer and a hugely successful “brand” (as James Patterson, who's sold a trillion books, seldom writes his own anymore but uses a “co-author”).
Brands create higher fees. And higher fees enable you to solidify the credibility of your brand. That's a great cycle.
CREATING SHARED SUCCESS
Many consultants take the position (out of arrogance or ignorance) of “Let me show you how I'm going to improve things around here.” The success is the consultant's, a sort of largesse provided for the lucky client. There is a certain power in being “the expert” without whom all goes to hell, but there is a huge risk, although not the one that might be apparent.
The apparent risk is that the client might not benefit as desired or, heaven forbid, might actually suffer a reversal of fortune. Remember the physician's sage credo, “First, do no harm.” It's no accident that large consulting firms are being sued right and left in this litigious society. They have not “delivered” the desired results.
However, the greater risk is that even with demonstrable success, the buyer feels alienated, disenfranchised, and apart from it. The fee in this case, despite success, will be paid grudgingly. For one thing, the client is now fearful of long-term dependence and doesn't want to incur huge costs each time the consultant's “expertise” is required to solve another problem. For another, the buyer does not feel the intrinsic ownership and sense of well-being that would emotionally overwhelm any reservations about costs. Third, from an ego perspective, the buyer will feel the need to insert some leverage into the relationship to retain the perceived upper hand and emphasize that the consultant serves at the buyer's pleasure (especially if the results are so visible that others in the organization are talking about them).
True partners never begrudge each other their proper due. In fact, there's an implicit trust that neither partner will take advantage of the other and that agreed-upon terms, conditions, and time frames are innately fair.
Fee pressure decreases with a sense of shared investment, shared accountabilities, and shared success. Figure 1.4 shows the difference between a focus on a buyer and seller (top) who are locked into a battle over costs with only vague benefits established and two partners (bottom) who have agreed on tangible results where the fee is simply an intelligent and economical investment.
When the buyer simply views the consultant as another vendor providing certain expertise, the cost of acquisition becomes the key focus, because this is a commodity purchase (Who can provide the cheapest computer monitors per our specifications?). However, when the buyer's self-image and role are as a partner in the consulting process, the decision becomes one of return on investment, and the clearer the outcomes (under the conceptual agreement discussed earlier) and the more dramatic, the higher the investment that is justified.
This is particularly true when that investment includes the buyer and key organization people in the partnership. Some of the most successful consulting projects I've landed—and the ones most impervious to fee pressure—are those in which a “virtual consulting team” was formed comprising key client resources and myself. No educated buyer will want to underfund or hedge on that investment.
Figure 1.4 Costs from the Expert Versus Investment from the Partner
Alanism: Borrow $100,000 from a bank and you’re a customer. Borrow $10 million dollars and you’re a partner!
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