How to Price Advice?

What Are Your Clients Paying You For? Are they paying you for doing specific things for them (such as a training, an audit, a report, etc.) or are they paying you for being their advisor?

Example: A client wants to set up a training program for her staff. If you are in the business of selling training programs, this is an opportunity, and you will do your best to close the deal and get the client to have the training program. If you are in the business of being an advisor, you won’t see the training program as an opportunity, even if you might eventually end up delivering the training yourself. Instead, you will see a business decision that your client is about to make, and you will focus not on getting her to buy the training program, but on helping her make the best decision in relation to that training program. It may very well be that the best decision is to not have the training program, because the staff does not really need it, or because they won’t be able to apply what they learn because of organizational problems, or because there are other most effective alternatives.

If you are in the business of selling training programs, that is, if you get paid for delivering training programs, but want nevertheless to act as an advisor, advising your client against doing the training program is suicidal. You don’t expect a Mercedes Benz car dealer trying to convince interested customer that they don’t need a car after all and that public transportation is more than enough. If you are in the business of being an advisor, that is if you get paid for giving the best independent advice instead, advising your client against the training program becomes the obvious thing to do. No conflict of interests.

If you are a trusted advisor, your client will pay you for the mere fact of being in an advisory relationship with her. Actually, there is tremendous value for the client in such a relationship. The decision not to make the training may be a very valuable decision (saving time, money and credibility).

The problem is that few clients are willing to pay an advisor just for being in a relationship with them. They may appreciate the value of your advise, but when it comes to paying you, they will look at the amount of training, reports and other products that you delivered to them or the number of hours you have spent “doing things” for them. In the example above, it may have taken 30 minutes max to talk the client away from her training illusion, saving so thousands of euros that would otherwise have been wasted.  Does that mean that the advisor should be paid a sum equal to 50% of this hourly rate? It does not make sense.

As a seasoned, trustworthy advisor determined to make a living as an advisor and not as a seller of products and services, you need to set your pricing model in line with your line of business. It does not make sense to use product-based pricing for delivering value that has nothing to do with products. The value is not in the product or the services, but in the relationship, that is, in the ability for the client to check ideas with you, to test decisions before making them, to get challenged by you. Hourly rates don’t make sense here.

A better way to solve the pricing issue is to agree on a period of time, from three months to one year or so, and agree that the advisor and the client will be in an active relationship during that period. Both parties have the responsibility to be proactive. The client can’t blame the advisor if she never involved him in any discussions. The advisor however has the duty to come up with ideas, make suggestions, share thoughts even when not solicited. Eventually, you need to agree on a fixed amount to be paid for this relationship. It must be large enough so as to be a much better deal for the advisor than billing his time, but it must be small enough so as to offer a nice return on investment for the client. No rules, no formula, but a shared feeling of making a good deal.

Defining an appropriate pricing model for an advisory relationship is a thing, but getting your client to understand it and adhere to it is quite another. Anyway, you won’t be able to convince the client if you haven’t figured out the system yourself first.

Antoine Henry de Frahan

Comments

[Christian louboutin heels]

Congratulations Corey. I remember feeling very similiar when finishing my first novel. I also write late at night and had no one to call. Instead of calling someone, I wrote about how fantastic it felt in my journal. I still look at the entry when I need some spirit boosting.

I look forward to reading your book.

[True Religion Jeans]

I am new to your blog and LOVE IT!!! I used to do double pagers all of the time and then fell in love with single page layouts. I have so many photos that I think I need to go back to doubles. Thanks to you I have some new inspiration.