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The Cost of Free: Why Consultants Should Think Twice About Discounting Consulting Services


The Price of Free in Consulting


Whether you're independent, working in a boutique consultancy, or part of a consulting powerhouse, chances are you've felt the temptation to offer services at a deeply discounted rate or even for free. There are various reasons why you might consider this: perhaps it seems like the missing piece in a larger puzzle, or it's a chance to gain specific experience. However, regardless of the motivation, providing discounted or pro bono services can result in long-term negative consequences for both you and the practice you represent.


The Value of Expertise

Consultants' rates reflect the skills, experience, and knowledge they've acquired across clients and industries. These experiences not only accelerate the resolution process for clients but also compound the value consultants provide. Personally, I've always valued maintaining a diverse portfolio of clients rather than relying solely on a single long-term client. Exposure to different cultures, personalities, and problems collectively leads to better outcomes for all involved. This variety helps consultants avoid complacency and the tendency to become too aligned with a single client, a phenomenon often referred to as "going native."


As discussed in my book "Small Firm, Big Impact," establishing a pricing model based on the team's skills, experience, and knowledge is crucial for market positioning. This principle holds true for independent consultants as well. Once the rate card is set, it's vital to stick to it and resist the temptation to offer discounts just to secure a "yes."


Consider professions such as medicine and law. Have you ever encountered a doctor or attorney offering a discount to win your business? It's unlikely. They are confident in their worth, and so should you be. It's also important to recognize that once you discount your services, you're effectively resetting your rate and perceived value, and there's no easy way back from that.


Furthermore, consider how clients perceive you and the value you provide. A premium offering commands a premium rate, but the perception of value is equally crucial.

How do you present yourself in consulting engagements? Do you look like you just rolled out of bed or like you're ready for the gym? In-field consultants can command rates of nearly $10,000 USD per day, and in my experience, presenting yourself as someone worthy of that investment is as important as the services you offer. First impressions instill confidence in the investment to be made, so ensure you make a strong one.


Beyond appearance, maintaining rate discipline can also shape clients' first impressions. If a consultant appears desperate for work by offering significant discounts or free services, it can shift the perception from that of a Trusted Advisor to just another "resource."



Financial Implications

It's worth reiterating that I'm not referring to volunteer consulting for nonprofit or civic causes. I firmly believe in the importance of giving back and encourage everyone to contribute what they can. However, offering discounted or free services to potential clients is a different matter.


In the consulting world, billable hours are paramount. By giving away services, you're essentially giving away your most valuable resource: time. Beyond the missed billable hours, offering discounted or pro bono consulting detracts from opportunities to learn, engage in self-care, spend time with family, and pursue more profitable work.


Each hour offered at a discounted rate comes at the expense of time that could be spent on full-paying, more lucrative projects. Resist the temptation to prioritize today's emergency over tomorrow's opportunity.


Relationship Dynamics

When consultants offer initial discounts, they inadvertently set a precedent that can complicate future pricing negotiations and strain client relationships. Clients may come to expect similar discounts for future projects, leading to difficult conversations when rates need to be adjusted to reflect the true value of the services provided. This can erode trust and create tension in the client-consultant relationship, making it challenging to maintain a fair and sustainable pricing structure over time.


In numerous cases, early discounts have resulted in prolonged undervaluation of services. Clients who have become accustomed to discounted rates may resist paying full price in the future, leading to a cycle of underpricing and undervaluation. This can have significant financial implications for consultants, as they struggle to cover costs and maintain profitability while continually discounting their services. Over time, this pattern can damage the consultant's reputation and hinder their ability to attract and retain high-value clients.


Strategic Alternatives to Discounting

Instead of resorting to discounts, consultants can create value-added proposals that demonstrate the unique benefits of their services. This could involve bundling services together to provide comprehensive solutions, offering loyalty benefits to repeat clients, or providing additional resources and support to enhance the client experience. By focusing on the value they provide, rather than simply lowering prices, consultants can differentiate themselves in the market and attract clients who are willing to pay for the quality and expertise they offer.


Another effective strategy for consultants is to build credibility through thought leadership and content creation. By sharing their expertise through articles, speaking engagements, workshops, and other channels, consultants can showcase their knowledge and establish themselves as industry leaders. This not only attracts clients who are seeking expert guidance but also positions the consultant as a trusted advisor whose insights are worth paying for. By investing in their personal brand and reputation, consultants can generate demand for their services without resorting to discounts.


Conclusion

Maintaining price integrity is essential for protecting the value of a consultant's work and ensuring sustainable business practices. By resisting the temptation to offer discounts, consultants can build stronger client relationships, maintain profitability, and position themselves for long-term success. It's crucial for consultants to consider strategic alternatives to discounting, such as providing value-added proposals and building credibility through thought leadership, in order to achieve their business goals and maximize their impact in the market.


Call to Action

  • To learn more about buiulding a boutique consulting practice, check out "Small Firm. Big Impact", by Adam Mattis.

  • To learn more about pricing, check out "Profit Streams", by Luke Hohmann and Jason Tanner.



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