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Your Fees May Be Too Low Because Your Metrics Are Too Weak

In my work with other consultants and consulting firms, I’ve discovered an interesting phenomenon: Fees are often too low because the consultants have not established adequate metrics for the project.

By that I mean that the client has not been “educated” about the true savings being derived (or improvements being generated) so that the worth of the project is not accurately understood. Consequently, the client can’t possibly make a reasonable return-on-investment calculation, because the client doesn’t really understand the return. The client does know what the deliverables are, and what tasks have been performed, and perhaps even how frequently the consultant has been on site, but the client does not know what the salutary short- and long-term effects on his or her operation are.

And therein lies the rub.

If a client is only crystal clear on the cost-the fee-but is vague about the results-the return-then the scale will inevitably tip toward a lesser ROI. Consequently, it is incumbent upon the consultant to provide the client with the proper metrics with which to measure results and convert those results into calculable returns.

I believe there are three types of metrics, two of which you must prepare before you attempt to achieve conceptual agreement with a prospect (and, therefore, well before any proposal is submitted):

  1. Short-term measures. These would include weekly sales reports, monthly attrition reports, customer feedback forms, etc.
  2. Long-term measures. These would include departmental goals achieved, executive behavior change, changes in public image, etc.
  3. Client-specific measures. Virtually all clients will have some measures unique to their particular culture and business. These might include additional business sold by a call center, reduction in repetitive repair calls by an appliance company, renewed policies by an insurance firm, etc.

Picture a traditional apotheycary’s scale (such as the symbol of justice holds). On one side are impediments to the proposed project, such as cost, disruption, political undercurrents, and so on. On the other side are value propositions and worth, which must ultimately outweigh the impediment side. Impediments are readily measures (and, worse, exaggerated) so it’s important to place as much “weight” as possible on the value side to counterbalance impediments. These are most easily accomplished when you have clear metrics which you provide for the client to readily judge progress and accomplishment.

Bear in mind, too, that those metrics can extend annualized benefits for some number of years. In other words, a 10% increase in client referrals this year will lead to 14% next year on a larger client base. Similarly, $140,000 in cost reductions this year also applies to every year thereafter that those procedures are in effect.

Consider building a template of 19 metrics (or 26 or 31) which you include in your materials for discussion with every prospect. Perhaps only 80% will apply, but that’s fine, too. (A surprisingly large number of clients do not have effective metrics for even sensitive areas of their business.) You can even build this into your own value proposition: You enter a client relationships with a template of 26 measures of success which enables the client to monitor progress and assess project efficacy.

And, in the long run, even if the client says, “I know we have the metrics, but I’m having a hard time believing that you, alone, are responsible for the $450,000 in savings of reduced meetings and failure work,” you can respond, “All right, let’s be conservative and claim that half is due to us. That’s still a quarter of a million we saved you on this single metric.”

As the late Senator Everett Dirkson pointed out, “A billion here, a billion there, and pretty soon you’re talking real money.”