General Consultant Discussion

Exactly one year ago I picked up a 7 user MAS 90 4.20 orphan client. Last week they asked about billing options. I bill them by the hour, and have always responded to their questions quickly. First two months (when they had a lot of issues to resolve) I billed them an average 15 hours each month. For the next 5 months (thru November) the hours ran between 5 to 9 hours per month. At year end (they are heavy Inventory users) and in the first three months the hours have been 15 - 20 hours. They purchased a MAS 90 warehouse management / bar code scanning enhancement and are preparing to implement this new system. Last month I billed them 30 hours which included a test upgrade from 4.2 to 4.5. They want me involved in setting up and learning the WMS / Bar Code Scanning because I'm a local consultant and the WMS/BCS reseller is long distance. I have not had experience with any WMS or BCS enhancments. They are asking for some type of ""tiered pricing"" like this: less then 5 hours = reg hourly rate; 6-10 hours = reg rate less $15/hour discount; 11 + hours = less $20/hour discount. Has anyone used tiered pricing for consulting services? I want to be fair to the client and to me.

I think on this board you might get admonishments for billing by the hour.

Supporter of fixed pricing do not read further. I have in the past provided tiered pricing when working on large projects. Any rate discounts were applied to hours provided in a single week. This encouraged the client to complete their tasks timely and not drag out the project. Most of my work is on site and I find it more profitable to have three 10 hour days on site at $20 less per hour than 10, 3 hour days at full rates.

I can take it.! As long as they also provide some guidance on how you would fixed price such an open ended project like this?

@DawnAnastasi No admonishments! :)

@MichaelMcDonald That sounds like a topic suited for a Google+ hangout. I think that breaking it down into smaller, separate projects with separate pricing proposals may be the way to go. Especially since you would just be getting started with a fixed price model. As you get more comfortable with a new pricing approach, you will be able to bundle all of these issues into a customized KTA for the customer. From a philosophical standpoint, it really doesn't make sense to me for you to give them a discount when those are the times that your knowledge has the most value to them.

John has some good advice here. Start with small fixed price engagements. Even that large engagements can be broken into smaller pieces and priced individually.

@JohnShaver Would it make sense to say; Create a fixed price project of learning the new WMS/BCS enhancement based on the estimated training hours from the reseller x reduced rate. Because I'm learning along with client employees? Then if I get involved in helping the reseller with customizations to MAS, or training client employees on the new features in 4.5 (paperless office, A/P ACH, Physical Count Card Processing, etc.) price each as a separate fixed price project. Is this an example of what you are suggesting?

So let me get this straight -- if the project goes to hell as defined simply by requiring more hours than planned -- (most likely through no fault of yours -- or at least let's assume so) -- then you should work like a dog and discount those hours? Is that the theory? And I'm with John -- easiest to break it into sub-projects. Or if you have a handle on them and are comfortable quote a $x per month for these common types of projects. This only really works with someone you have a lot of experience. I wouldn't provide it to someone who found me on the web because there's usually a lot of hidden issues yet to uncover.

And these extra hours will likely require you to re-arrange your schedule so that you can meet their needs -- and they should be billed at a discount? Is that the ""lack of customer planning/due diligence"" insurance policy?

Yes, except that I wouldn't base it on a discount or reduced rate. Offering options is important. There may be a lower price but it should include fewer results. In other words, give them a low price that may be somewhat in line with the other reseller but for the customer to get that lower price they have to schedule the training around your schedule, pay for your certification on the new product, and so on. Three options (good, better, best) is a great way to approach it. Most of the time, at least in my experience, folks usually choose the middle option. If that option is the one you really want them to choose, then frame the other two options such that the middle option is the most appealing to them. I'd break down the projects into small enough pieces that you feel comfortable with pricing them. Part of the conversation with them (up front) should be about why you are approaching the relationship this way and why it benefits them. If they are a customer that you want to have a long-term relationship with, I think it makes sense to start bundling projects, support, etc. so that they don't feel like they are having a never ending pricing conversation with you. Although having pricing conversations with customers is absolutely fascinating stuff.

@WayneSchulz - You are correct. The client has no idea how much effort its going to take to implement the new WMS and Bar Code Scanning features. They do know that 1) They will need more of my help and time 2) Between the WMS/BCS reseller and my consulting its going to cost lots of $$$.

@JohnShaver I was at the Firm of the Future Symposium a couple of weeks ago and feel SO much more confident in pricing with options, etc. now. In fact, I had a customer who wanted a quote for a project and I used what I learned to 1) estimate the time required (even Ron Baker said this is a good way to start); 2) add premiums for a. offering a fixed fee, b. different timing options, c. what would be included vs. not; 3) Give them options!! Guess which one they chose? The ""fist-pump"" price (as Ron puts it).

Oops - I didn't make clear in the beginning - I'm not a Sage reseller, I'm a Certified Consultant. Therefore, I'm working WITH the reseller not bidding against him. Also I've scheduled a training session with Ron Baker at Summit 2012 to learn what @ThereseLogeais already knows.

@MichaelMcDonald I have usually been sorry when I've gotten involved with systems that I know nothing about. It's important to be VERY clear in writing what your role will be or ultimately if the project goes off the rails you may become a casualty. One time I had a customer sign to buy $ 100k+ of point of sale terminals. They went on and on about how they were promised the integration to MAS would be seamless. This was a MAJOR reason that they went with MAS 90 (not at our suggestion). I point blank told them it wasn't going to work like they thought. I could have been fired then - however the customer didn't believe me but remembered my warning. When the project came off the rails and the customer asked the POS vendor for all their money back -- I was completely unscathed.

I would give them a discount on the hours if they paid for them up front. Give and get. You give me up front, I give you a discount. You make me work like a dog, without pre-payment, you pay full rate.

I guess we're going to have to admonish @GaryFeldman ;)

@MichaelMcDonald Actually, that's exactly what I thought you meant. The customer sees value in you and the fact that your local to them so price that part accordingly. I meant that maybe a starting price would be something close to what the other reseller is charging for their non-software part of the project.

Admonish away... - If we are talking value based consulting, there should be no mentions of discounts, billing rates, etc. When we value bill, we bundle everything into a number and clearly define the scope. - If we are talking hourly billing rates and discounts, we never discount without getting something in return. If they want to pay less, we ask what scope they want reduced, if they want a discount, we ask for payment in advance (time value of money). Clients need to understand that our time is as valuable (if not more when dealing with our area of expertise) as theirs. During the sales cycle do you thank them for their time in taking your call? Prospects should value your time from the beginning and as professionals we should train them to do so.

I think you'll be better off taking a step and thinking VERY hard about how much $$ you will save/make the customer if you provide your expertise. Break that down into ""deliverable"" chunks. This doesn't meant ""how many fewer hours will they pay for if everything goes well"" -- or the reverse. It means, ""how much do they expect to earn/save by implementing the WMS solution? Then using your knowledge of how things can and do go wrong, find the options. You should be able to talk with the client about this, since you a bit more independent than the Sage partner. Be sure you have a solid idea of what is on the table from the customer's perspective. Now you can look at your project element as a sort of ""insurance"" fee on creating that value. ONLY then do you figure out what your costs (hours) would be to deliver on that promise. As long as the costs are less than the insurance premium, you're good to go, and the customer doesn't need to see a time statement from you at all.

Thanks everyone for your suggestions. Now to go crunch some numbers!

Great answer Jerry. do they view spending for teh WMS system as an expense or investment. Investments hopefully yield measurable returns. Just take a percentage of the return as your comp for helping them realize that return!