[Exceptional Influence] Value-Based Pricing for Consultants
How to charge your value without burning out.
Most consultants understand ‘value-based pricing’. Value-based pricing is a strategy of setting prices primarily based on a consumer’s perceived value of a product or service. This is opposed to ‘cost-based pricing’, which sets pricing at the costs of the product or services provided plus a bit more.
But even though we understand it, it doesn’t mean that it’s easy to do well. Value-based pricing is one of the hardest things we have to deal with as consultants. And that’s because we don’t always value our own values.
A story of burnout
I have a wonderful client Amy who is hugely successful in her field. She’s kicking goals and having amazing growth. Early on in her practice she started a membership program which allowed her to continue to work with clients on an ongoing basis in a group setting. As part of that she was able to stay connected to her past clients, and continue to help them in their own leadership goals.
She put a price point on it and gave them access to her anytime via WhatsApp, messaging and phone calls. She also met with them as a group for a monthly dinner and drinks, travelled to Sydney for meet ups and gave them access to her online curriculum. It was incredibly good value.
However, when she started to get busier and more in demand, it became more challenging for her to meet all those requirements – particularly the in-person events. But she pushed through because she felt that she had to continue to deliver all that value.
Things came to a head one day when she’d finally pushed herself so hard that she got sick, and couldn’t deliver at an event for a client. While they understood that people get sick, she was disappointed in herself for letting someone down and she knew she couldn’t go on this way.
She was burned out and overcommitted. When we talked I suggested that she would need to scale back her in person events for her membership group. But she felt that this would be diminishing the value that she had to offer.
She couldn’t see that the real value that her membership offered was her expertise and the experience of being with her.
Value-based pricing for consultants
When it comes to pricing yourself as a consultant, there’s a lot of information out there. But in general, you need to do the following:
Benchmark yourself. This involves looking at best practices or others in your field and then analysing them to see how your prices compare to others in the market with the same positioning, body of work and demand.
One of the difficulties my client above had was that she hadn’t benchmarked herself, and that made it hard for her to see her value.
Understand your positioning. It’s crucial to identify where you sit in the market. Do you offer a premium service? Do you want to work with corporate organisations, SMEs, or even individuals? Do you offer large-scale programs or one-on-one coaching?
Each of these will play into where your practice sits in the market and impact your pricing.
Build in your intangibles. As consultants, thought leaders and experts we’re often running everything (or most things!) in our practices. That means we need time and space to do all those things.
Whether you set aside a day of the week to create your thought leadership, work with your team, or you do it throughout the week, those days need to be covered by your pricing so that you can continue to run your business.
Consider what you’re worth. One of the hardest things that we do as consultants is understanding what we’re worth. But start with what the market is willing to pay for YOU. This is different than what the market is willing to pay generally for the type of work you do.
For example, if you’re the leading expert on a subject, if you appear in media and are being asked to comment on events and the like, you are probably worth more than you think!
What holds us back from pricing our worth?
Of course there are pitfalls when it comes to consultants and pricing. And when we fall into these pitfalls is when we’re most at risk for burnout.
Offering too much
One of the first and most important pitfalls to avoid is offering too much. This is the pitfall that Amy found herself in with her membership group.
This is also a pitfall that many consultants fall into because most of us have been taught to believe when we charge more we need to give more. But this is cost based pricing, not value-based pricing. And it’s not what we should be doing as consultants.
Instead, focus on what the value is that you’re giving (in most cases, the biggest value is the problem you solve and your version of solving that problem) and not on what is actually included in the offer. Of course, there’s a balance. But don’t default to the cost analysis, or you’ll find yourself having to work harder and harder to grow – a recipe for burnout.
You don’t have the right support
Another pitfall that many consultants fall into is not having the right people around them. This is about support, certainly, as you need to outsource the right things and bring in the right team around you. But it’s also about who you have around you that can provide examples of what is working well.
Seeing others who are pricing themselves well and delivering to clients without burnout is absolutely vital. Find those people and spend time with them.
You believe you have to work harder
I’ve touched on this earlier, but one of the biggest hurdles you’ll overcome is to stop believing that you have to work harder to make more money. Amy was providing a huge amount of value in her program. Scaling that back didn’t diminish the value – it just meant she didn’t have to give her energy in a way that wasn’t necessarily helping her clients and was certainly leading to her burnout.
When she got sick, her practice was just too full – a clue that the value was already there and that she didn’t need to do more to charge more. Instead, she needed to reevaluate her time and leverage the work she’d already done.
You struggle to give yourself permission
You have to give yourself permission to do less – but if you’re like most consultants, this will feel very foreign to you. The only framing you generally have for any type of scaling back is when you take a holiday. But this is not a holiday.
You’re not suddenly drinking pina coladas. Instead you’re giving yourself permission to shift into growth strategies rather than delivery in that time. You are giving yourself the time to create books, PR initiatives and new programs. In essence, it gives you time to think.
Now your best work can get cultivated. The mental space opens giving you the opportunity to really embrace thought leadership. But you have to let yourself not feel guilty. You have to give yourself permission to take that time.