Of all the pricing models an independent consultant can consider, value-based pricing is the one to pay the most attention to, learn, and practice. Most people who offer consulting services do not leverage a value-based pricing model. This is because they either haven’t been exposed to it, don’t understand it, or it’s just too hard to execute. A value-based pricing model is the most effective way for an independent consultant to make more money and deliver more value to their client. It’s the best win-win pricing model that you can adopt and leverage for your practice.
There are a few reasons why most people offering consulting services do not leverage a value-based pricing model. First off, they haven’t been exposed to it. Secondly, they don’t understand it. And third, it’s just too hard and they don’t have the skills required to execute this pricing model. Incorporating this pricing model requires skills in sales, negotiating, pricing, math, and communication. From my experience in training people to become consultants I’ve found that more than having the these skills, the one thing that separates those who are successful with it vs. those who aren’t is practice. Like learning to ride a bike, it takes a little time.
Value-based pricing is the most effective way for an independent consultant to make more money. There are three reasons for this. First, it focuses all of your energy on what is necessary to achieve the outcome the client desires. Second, it creates a phenomenal incentive for the consultant to be efficient. You are now on your own to take as little or as long as you like to deliver on the promise. If you can align with continuous improvement, you’ll get better and faster. Third, you’ll get great clients. The best clients I’ve had - the most courteous, respectful, and pleasant - are usually the highest paying.
Value-based pricing is the most effective way for an independent consultant to deliver incredible value for their client. There are three reasons for this. First, with value-based pricing you and the client have agreed to collaborate to achieve an outcome. With hourly pricing models the client has hired the consultant for who they are. I’m well aware that most of my clients do not want to hire me (no one wakes up in the morning and shouts, "I need a consultant!"), they want to achieve an objective, or get a desired result. I never allow hiring me get to my head so I can focus on the agreed upon outcome. Second, projects are nuanced and I can address the challenges they face and answer the question they are asking: “What’s in it for me?”. By deploying value-based pricing I have the space to craft my response tailored to their exact needs. Third, the ROI is high. As a consultant leveraging value-based pricing I've delivered 5X, 10X, and 20X returns and built incredible relationships in the process. Ask yourself this: where else in their business are they getting that kind of return?
Getting your practice aligned around value-based pricing is critical to your success. Here’s a quick play-by-play on how to get there:
- Reorient your mindset to be helpful. Remember sales = help.
- Develop powerful questions that help you understand the condition to improve and the ideal outcome desired. This is critical to the value-based pricing model.
- Find clients who want to collaborate to achieve an objective.
- Continue to refine how you achieve the results you promise
Almost every consultant I’ve met, or taught hates the idea of trading time for money. Most consultants in market leave huge amounts of value for them and their clients by ignoring value-based pricing. Not using value-based pricing harms you financially and it harms the client from unlocking the full potential of your partnership.
Value-based pricing is built in to the trainings offered by Consulting Club.
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